Africa turns to private sector for infrastructure funds

Africa needs funds to finance infrastructure projects in sectors like transport, ICT, water and sanitation. PHOTO FILE | NATION  

In Summary

• The African Union is pinning hopes on institutional investors for finance as it struggles to close a $68 billion infrastructure gap.
• The infrastructure gap is reported to currently be consuming an estimated two per cent of GDP growth every year from African economies.
• infrastructure projects

By MOSES K. GAHIGI
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The African Union is pinning hopes on institutional investors for finance as it struggles to close a $68 billion infrastructure gap. The AU is targeting to raise five per cent of that amount from the private sector.

The five per cent agenda campaign was unveiled at the NASDAQ — an American stockmarket — a week ago, where officials from NEPAD and the African Union’s Economic Development Programme spoke to international investors and CEO’s of top businesses about investing in infrastructure projects in the continent.

The World Bank estimates that the continent needs to spend $93 billion annually until 2020 to bridge its infrastructure gap in the energy, water and sanitation, transport, ICT and irrigation sectors.

The infrastructure gap is reported to currently be consuming an estimated two per cent of GDP growth every year from African economies.
African countries only managed to close 158 project finance deals with debt totalling $59 billion between 2004-2013.

“We invite investors to take advantage of the wide-ranging opportunities Africa has to offer and to move forward with what can only be a win-win partnership,” NEPAD chief executive officer Ibrahim Assane Mayaki, said on September 18 in New York at the launch of the funding campaign.

The launch builds on efforts of the Programme for Infrastructure Development in Africa established by the African Union Summit in 2012, which aims among other things to fast-tracks 51 cross-border infrastructure projects.

The private sector has been viewed as a reliable option for unlocking Africa’s infrastructure investment needs. However, data shows the model is not working well for Africa so far.

A 2016 McKinsey report showed that institutional investors and banks have $120 trillion in assets that could provide financing options for Africa.

infrastructure projects
Akinwumi Adesina, president of the African Development Bank, said the continent needs to de-risk infrastructure investments if it is to attract substantial funding.