Wednesday, June 24, 2015

New Airport PPP Project at Bugesera, Rwanda

Since early 2000s, Rwandan economy has grown at an average of around 8 percent, much above the regional average. Per capita income has increased over three-fold, and regulatory norms have eased rapidly. In fact, according to Doing Business 2015, Rwanda is ranked 3rd in Sub-Saharan Africa, after Mauritius and South Africa, and 46th rank globally, in ease of doing business ranking.
Infrastructure Gap: However, the country continues to face huge infrastructure deficit in sectors such as road, railways and airports, among others. Even though development of the country is strongly driven by political willingness and mass participation, the country has limited resource base as well as technological gap, and limited expertise to keep in place necessary infrastructure.
International air transportation in Rwanda is limited to the Kigali International Airport (KIA), which has experienced significant growth in traffic across years. In 2010, KIA handled 14,766 aircraft movements including 11,174 passenger and combination aircraft, which transported 314,230 passengers and 6,352 metric tonnes of international cargo.  According to a Study by African Development Bank, medium-term growth of traffic volumes in Rwanda are estimated at about 1.3 million passengers, 15,500 tonnes of cargo and 17,712 aircraft movements per year by 2025. The current  infrastructure set up would not be able to support such massive growth, and need to adapt to growing demand and changing technology.
Identification of the Project: One of the projects which Rwanda has identified is a new airport at Bugesera District, which is located at around 40 kms away from Kigali city, the country’s capital.  The project cost is estimated at US$ 750 million.
The new airport at Bugesera will not only make Rwanda a world class gateway, but also provide the flexibility to expand and develop to become a key hub airport within the East Africa region, with higher handling capacity, both cargo and passengers.
Plan of Construction: Keeping in view Rwanda’s situation, this project could work best within a PPP framework. It could be developed under Build Own Operate Transfer (BOOT) Model, with a concession period of 30 years. The ownwership would be transferred back to GoR after the concession period.
Construction of the airport, under PPP framework would be in phases. Phase 1 would involve construction of passenger and cargo terminal buildings, 4.2 km long runway (which could even handle largest commercial aircrafts), airfield and other infrastructure to support the operation of an international airport, including air traffic control tower building and an airport rescue and fire fighting facilities, among others. Phase 2-4 would provide for further expansions with the ultimate phase involving the construction of additional runway and another passenger and cargo terminals.
Sources of fund (debt and equity) would be beyond GoR’s funds, and would, therefore,  include other stakeholders like airport operators, banks and other investor groups. GoR would acts as a shareholder / equity sponsor along with private parties in the Airport Company (Private Agency).
Risk Sharing: As regards risk sharing, project would be allocated to private entities as they are best equipped to manage those risks.  The Private Agency would be responsible for planning, project design including environmental and social impact assessments, quality control and assurance, and maintenance during the concession period. This would ensure long-term value-for-money (VFM) as appropriate risks are being transferred to the private sector over the life of the project – from design/ construction to operations/ maintenance. 

The cost incurred in airport development would be recovered through collection of user fees. User fees are decided based on user affordability, their willingness and public authority’s value for money requirement.
The Government of Rwanda (GoR) would ensure the following to make PPP work:
  • Land acquisition for construction of the new airport
  • 6 or 4-lane road infrastructure (Self financing Toll Expressway) from the new airport to Kigali city, and 4-lane road with other major township
  • Necessary legal frameworks safeguarding both pubic and private sector's interest
  • Close monitoring of implementation of projects by Private Agency as per agreements, and if necessary, with penalty

The key features of this proposed PPP, which also provide strong case for attracting private players, would include:
  • Strong Government's commitment and support for the development of aviation sector, ensuring political willingness and support in the PPP project
  • Law governing civil aviation sector in place, a strong case for legal and regulatory support
  • Continued growth in tourism, ensuring flow of revenue stream in the long run
  • Potential for increase in travel in the  region, and to emerge as regional aviation hub, catering to population base of over 153 million East Africa Community (EAC), as well as international tourism
  • Availability of aviation colleges for training airline staff
  • Creating employment opportunities for Rwanda citizens in the aviation industry
  • Conducive investment climate


African Development Bank Group, 2013, Rwanda Transport Sector – Review and Action Plan.
World Bank Group, 2014, Doing Business 2015: Going Beyond Efficiency.

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