• Thursday, March 28, 2024
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African governments require bankable projects to attract private partners, close infrastructure gap

AfCFTA: African Development Bank proposes industrial hubs to drive jobs

Africa’s absolute and relative infrastructure deficit points to the existence of untapped productive potential that could be unlocked through scaling up investments in the sector but African governments require bankable projects to drive public-private partnerships and speed up intra-continental trade.

New estimates by the African Development Bank (AfDB) suggest that the continent’s infrastructure needs amount to $130 – 170 billion a year, with a financing gap in the range $68 – $108 billion.

These figures are by far higher than previous estimates of $93 billion in annual needs and annual financing gaps of $31 billion published by Agence Française de Développement and the World Bank 10 years ago.

Inclusive wealth creation and prosperity in Africa entails rapid industrialisation to end poverty and to generate employment for the 12 million young people who join its labour force every year.

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One of the key factors retarding industrialisation has been the insufficient stock of productive infrastructure in power, water, and transport services that would allow firms to thrive in industries with strong comparative advantages.

According to Sanjeev Gupta, executive director for financial services at Africa Finance Corporation, a pan-African multilateral development financial institution, African governments cannot be expected, and are indeed in no position, to take early-stage project risks, although they should be. “This risk arguably resides better with the private sector, to better realise commercial aspirations,” he said at the just concluded Indo-Africa Summit for strong public-private-partnerships (PPPs) to close Africa’s infrastructure gap and strengthen trade.

The Indo-Africa Summit 2020 was organised by ABN, owners of CNBC Africa and the IMC Chamber of Commerce and Industry to explore bilateral economic and business opportunities between Sub Sahara Africa and India.

Gupta drew attention to the need to develop bankable projects to attract private sector players. The three-day event drew lessons from India’s public-private partnership experience, which some speakers described as a good model for Africa.

PPPs have been used to address Nigeria’s infrastructure deficit. The recently completed Azura-Edo power plant which provides 450 megawatts (MW) for on-grid power is an example of the power of PPPs in infrastructure.

Hafez Ghanem, the World Bank vice president for Africa said the Bretton Woods institution can, together with the private sector, leverage government resources to bridge infrastructure gaps in Nigeria.

“We have supported and seen success in transport, energy and power sectors using public-private partnerships (PPPs) models. The Azura power project is an example of how we have attracted private sector investment in the power sector,” Ghanem said.

Solomon Quaynor, the African Development Bank’s vice president for Private Sector, Infrastructure and Industrialisation said the bank had created Africa50 as a key leader for private sector-led project preparation in Africa.

“In partnership with Africa50, we continue to innovate, including on infrastructure asset recycling opportunities, in order to attract later-stage private infrastructure investors into brownfield projects, thereby releasing capital for governments to invest in new infrastructure PPPs in their infrastructure development plans.”

He said COVID-19 recovery plans should incorporate the opportunities presented by the African Continental Free Trade Area.

Furthermore, Dinesh Joshi, chairman of the India-based IMC Chamber of Commerce and Industry, observed that India has shown the world how a successful PPP could be carried out in various sectors. “India has paved the path for success,” he said.

India had made strong progress with digital infrastructure narrowing the digital divide, a model for African countries, Shailesh Pathak, CEO, Larsen & Toubro Infrastructure Development said in a panel discussion at the Indo-Africa Summit.

India and Africa have been projected as growth leaders in the coming years. The drivers of growth have been identified across power, road and rail transport, while Information Communication Technology (ICT) infrastructure is on a better footing.

For the Indian economy, the infrastructure sector is also a key driver, responsible for propelling the country’s overall development – including power, bridges, dams, roads, and urban infrastructure development.