Introduction

In this article I will take a moment to reflect on the evolution of infrastructure investment and consider where we might be heading next.

The liberalisation of infrastructure delivery over the past century has laid the foundation for waves of financial innovation. Over the past decades, two mechanisms have come to define the evolution of infrastructure investment: Public Private Partnerships (PPPs) and Private Finance Initiatives (PFIs). Introduced in the 1990s, these frameworks reflect a shifting dynamic, one in which governments, increasingly constrained by budgetary pressures, turned to the private sector to bridge funding gaps and assume some degree of development and operational risk.

At the heart of PPPs and PFIs lie two critical insights: the state's mounting demand for capital, and a growing interdependence between public and private actors in delivering essential infrastructure. While these models have not been without their shortcomings, particularly in areas such as accountability, complexity, and long-term costs, their global adoption is undeniable. They have become the prevailing orthodoxy in both developed and developing economies, signalling a broader shift.

Governments are more open than ever to innovative approaches, provided they preserve control and deliver results.

This openness paves the way for the next leap in infrastructure investment. With global infrastructure needs soaring and the financing gaps widening, particularly across emerging markets in Africa, we must begin to look at models that not only mobilise capital more efficiently but also enhance accessibility. Noting this, the potential of blockchain to democratise access to capital and restore transparency has never been more necessary.

The Liquidity Problem: Infrastructure As a Lumpy Asset Class

Historically infrastructure investments have been notoriously illiquid, characterised by high capital requirements and lengthy holding periods. Traditionally, this has restricted participation to institutional investors capable of absorbing substantial upfront investments and enduring prolonged financial commitments.

The classifying of infrastructure as an “asset class” frequently sparks debate, especially given infrastructure's inherent role as a public good. Nevertheless, the rise in private sector participation has made this classification increasingly unavoidable. With the growing global mandate for Sustainable Development Goals and the Environmental Social Governance criterion to underwrite such ambitions, the central challenge now becomes aligning private incentives with public value. Democratising infrastructure investment isn't merely desirable - it is a necessity.

Blockchain technology offers precisely this democratisation through tokenisation:

The transformation of real-world infrastructure assets into digital tokens representing fractional ownership.

At first glance, tokenisation might appear like traditional equity shares, but the critical distinction lies in its accessibility. Most infrastructure investment transactions are conducted in primary markets, meaning the acquisition of shares typically require considerable upfront capital and rely heavily on costly intermediary brokerage services. Tokenisation substantially lowers these barriers by removing the need for such costly brokerage services, through its native peer-to-peer technology. This gives rise to secondary market opportunities, enabling both institutional and retail investors to directly, transparently, and affordably engage in investment through digital currencies, such as stablecoins - digital assets pegged one-to-one to traditional fiat currencies.

In recent weeks I have spoken with several enterprises who, I believe, are paving the way towards novel approaches for the ‘financialisation’ of infrastructure, in other words, the re-engineering of infrastructure as an asset class. Take, Energize Africa for example: a crowd funding enterprise centred on impact investment. Their philosophy? Connecting everyday people with pioneering renewable energy projects across Africa in need of affordable working capital.

Their approach? Connecting profit for purchase businesses with retail investors. Since inception they have raised £32 million for micro-sized enterprises after amassing a whitelist of 4500+ investors. Whilst Energize Africa are not currently utilising blockchain technology for fundraising, principally, they are following the same logic one could argue for infrastructure tokenisation:

There Is a Growing Retail Appetite for Infrastructure Investment

You might ask, if these sorts of platforms already exist, why do we need blockchain? The answer… market capitalisation. Like it or not the sacrilegious cryptocurrencies are here to stay. At its height, the total market capitalisation for cryptocurrencies has reached c$4 trillion and continues build momentum; so, it is no wonder global institutions & governments like Blackrock & the United States government are positioning themselves with strategic cryptocurrency reserves - a subtle nod for market legitimacy. 

I don’t think it’s too much of a stretch in imagination to consider what this could mean for Africa and emerging economies at large. Africa currently ranks #1 globally for the youngest population in the world, a demographic that is inherently primed for next leap in humanity:

The Technological Revolution

The issuance of blockchain-based tokens presents a big opportunity for domestic investors, diaspora communities, or even global climate funds. These tokens could be traded on compliant exchanges or platforms, offering much-needed liquidity while maintaining transparency via immutable records recorded on the blockchain.

Tokenisation doesn’t just offer a more efficient and transparent way of investment; it also opens the doors to liquidity to an untapped investment market.

In my next article, I’ll begin to unpack the technical mechanics of tokenisation as they apply to real-world infrastructure investment, exploring emerging frameworks and early-stage case studies that signal where this movement could be heading.

Top photo: (Source | Pixelplex)