January’s FONER and Essor items show how the funding route decides what gets built.

By Kanisa Magazine · January 2021

Congo’s infrastructure problem in January 2021 was less a shortage of announcements than a gap between money allocated and money spent. The road-maintenance fund FONER had a 2020 budget of CDF 438bn but, according to Zoom Eco’s report of 29 January, paid out only about CDF 123bn for actual road work. For 2021 it is due to receive CDF 234.2bn.

Two other January items show different routes from money to concrete: a rural electrification fund and a 25-year private concession. How each route carries cash is a better guide to what will get built than the size of any budget line.

The budget line: allocation is a promise, release is the event

FONER spent roughly 28 per cent of what it was given, so the 2021 allocation is a ceiling, not a forecast.

The ratio is simple: CDF 123bn on CDF 438bn is 28 per cent. At the budget’s planning rate of CDF 2,067 per dollar, the 2021 allocation is about US$113m, against about US$212m budgeted for 2020 and about US$60m actually spent. The same report puts the road network at 153,209 km, of which 58,509 km are roads of general interest, with only about 3,000 km of the main roads paved. A maintenance fund that releases a quarter of its money leaves a lot of tarmac to the weather. Domestic bank credit cannot cover for a slow Treasury.

According to the Banque Centrale du Congo digest of 27 January, credit to the economy was CDF 6.54 trillion at the end of December, about US$3.3bn at the end-December rate of CDF 1,971.80. The 2021 budget is US$6.886bn, as Deskeco reported. Local banks are lending less in total than the Treasury intends to spend, and they lend mostly short. A contractor waiting for a Treasury payment cannot easily fund the gap from a local bank at 23 per cent a year, so a late release stops the site.

The earmarked fund: a seed, not a pipeline

Mwinda opened with CDF 10bn against a target of doubling electricity access.

On 28 January the president activated the Mwinda fund, a rural and peri-urban electrification vehicle run by the ANSER agency, with a CDF 10bn government contribution. The fund’s stated aim is to take electricity access from 15 per cent to 30 per cent by 2024. The seed is small beside that ambition, so the design assumes donors, bilateral partners and private operators will add money, which is a different bet from relying on the budget alone. The fund will show its worth only when the first mini-grids are connected and billing, so the milestone to watch is commissioned capacity, not the size of the pledges.

The concession: execution risk moves to the investor

Eranove’s Essor project asks a private group to finance, build and run for 25 years.

On 27 January the government selected Groupe Eranove, working with AEE Power Ventures and the CDC-backed Gridworks platform, for the Essor mini-grid project in Gemena, Bumba and Isiro, covering about 460,000 residents. The package covers design, financing, construction, operation and maintenance for 25 years. Here the investor carries the cash gap and the revenue risk, and the state’s job is to keep the rules steady. The funding source was not specified in the announcement.

What this means for a contractor or investor

Price the funding route before you price the project.

A contractor on a budget-funded road should build in a payment-delay premium, shorten milestones and insist on a dollar-indexed contract. The Essor concession shows the other model, where the investor, not the Treasury, carries the timing risk. An investor should prefer concessions and donor-financed lots, where cash does not wait on a monthly Treasury release. Lenders weighing exposure to Congolese infrastructure should ask a second question after the first, which is how the project’s cash reaches the contractor and what happens to it when the Treasury runs late. A senior lender can accept slow payment if a donor guarantee or an escrow stands behind it, but not if the only support is a budget line. Watch FONER’s 2021 execution rate: anything above half of its allocation would show the system is releasing cash faster.