AFDB: Africa needs to accelerate private sector investment in infrastructure
By Houmi Ahamed-Mikidache
The Kenyan Urgent call
President Uhuru Kenyatta has made an urgent call for developing and funding bankable infrastructure projects to drive Africa’s growth agenda during the Africa50 General shareholders Meeting held in Nairobi, Kenya.
President Kenyatta said support for bankable projects in energy, transport, ICT, water and sanitation provide unprecedented opportunities for private sector participation.
“The private sector must step up and help us close the infrastructure gap on the African continent. Public funding is limited, and there are competing priorities,” he said.
Kenyatta announced Kenya would double its current shareholding investment in Africa50 to US$ 100 million. “We must have the confidence to trust and invest in our own infrastructure. Let us grow our partnership and make Africa50 a success.”
” A financing gap of US$ $68 – 108 billion”
According to statistics provided by the African Development Bank (www.AfDB.org) the continent’s infrastructure funding requirements stand at close to US$ 170 billion a year, leaving a financing gap of US$ $68 – 108 billion.
African Development Bank President and Chairman of Africa50, Akinwumi Adesina, said, “We need to act with speed and urgency. Our people expect nothing else.” He emphasized the importance of tackling factors that inhibit private sector infrastructure investments, including high costs of financing, weak regulations, lack of cost reflective tariffs, low profitability, and weak regulatory frameworks for public-private partnerships.
Private sector infrastructure financing in Africa remains low, averaging US$ 6 billion per year. In 2016, the figure dipped to US$ 2.6 billion.
Adesina said Africa requires new models of financing infrastructure. “We must work smart to attract greater levels of investment financing for infrastructure development in Africa. Globally, there is approximately a US$ 120 trillion pool of savings and private equity. Africa must creatively attract some of this into the continent,” he said.
In response to Africa’s infrastructure finance deficit, the African Development Bank has launched the Africa Investment Forum (AIF) set to take place in South Africa in November 2018. The transaction-based forum is expected to be a gathering of global pension funds, sovereign wealth funds and institutional investors, and key private sector players.
Adesina commended President Kenyatta for the country’s bold commitment to and investments in infrastructure development over the last 5 years. Infrastructure accounts for 77% of the Bank’s Kenya portfolio.
“Mr. President, you were one of the first African leaders to support the creation of Africa50, which I am honored to chair,” said Adesina. “The African Development Bank, of which I am President, helped create Africa50 because we believe new institutional models are needed to close Africa’s huge infrastructure financing gap. Africa50 will be a game changer on infrastructure financing.
He urged countries that have not yet become shareholders of Africa50 to do so. Africa50 currently has a shareholding base of 25 African states.
Africa50 Chief Executive Officer, Alain Ebobissé, said his organisation was committed to ensuring the speedy execution of African infrastructure projects.
Three years after its founding, Africa50 has become a key player in driving infrastructure investments, with commercial rates of return in Africa. It has mobilized over $850 million in infrastructure investments and expects to mobilises uptp US$3 billio through its private sector window. Africa50 has made major investments in a number of shareholder countries, including Egypt (400 MW solar power plants), Nigeria, Senegal and Kenya, among others.
In may 2018, on the margins of the African Development Bank annual meetings, the heads of Africa50, the Green Climate Fund (GCF), and the African Development Bank (AfDB) signed an agreement to collaborate on the Desert to Power Program for solar projects in the Sahel.
“This agreement allows us to leverage our project development capabilities and build a bigger pipeline of bankable projects that will provide millions of people and businesses on the continent with clean and affordable energy,” explained Mr Ebossissé.
Adding that clean energy is one Africa50’s priorities, he noted that two of the fund’s recent projects are for solar plants, partnering with Norfund and Scatec Solar to provide 400 MW of power in Egypt and 100 MW in Nigeria.
The Desert to Power initiative led by the AfDB aims to turn Africa’s deserts into new sources of energy. By working with partners to develop 10,000 MW of solar power systems across the Sahel, it will provide electricity to 250 million people, including 90 million off-grid. The initiative will also help protect the Great Green Wall of trees established as a buffer against desertification from being cut down by energy-poor households.