Asset recycling is emerging as a potentially valuable source of revenue for African governments facing limited access to capital, high financing costs and rising debt burdens in an increasingly volatile global environment.
The model offers an innovative framework for financing infrastructure, which often struggles to secure sufficient public investment in countries where government budgets are heavily weighted towards social spending. At its core, asset recycling involves a government receiving an upfront payment in exchange for granting private-sector operators the right to generate returns from an existing public asset for a defined period. In return, the private operator takes on responsibility for improving the asset's efficiency, performance and commercial returns.
The proceeds can then be channelled into new infrastructure, potentially crowding in development finance institutions (DFIs), domestic pension funds and private equity without creating a direct liability for government.
At the same time, asset recycling can relieve governments of the day-to-day operational burden of underutilised or poorly managed assets, transferring commercial and operational responsibility to private-sector operators. The objective is to unlock value through improved efficiency, stronger performance and additional investment, while retaining public ownership of the underlying asset.
Originally published by African Business.