Africa infrastructure investments hinge on reforms

African Financial Markets Initiative coordinator, Cédric Mbeng Mezui Africa's massive infrastructure needs present a huge opportunity for the private sector, but governments will need to improve the regulatory environment and strengthen regional markets to lure companies. "Africa's annual infrastructure needs are estimated at USD 93 billion, i.e. 15% of Africa's GDP," according to Arnaud Dornel, lead financial sector specialist at the World Bank.
"Actual investments in infrastructure total USD 45 billion annually, with more than half funded by the public sector. About a third of the infrastructure gap can be met through operational optimization, reducing the gap to USD 31 billion, i.e. 5% of GDP."
The USD 31 billion figure might be mouth-watering for the private sector, but there are a number of obstacles in the way including political risks, lack of regulations and weak domestic capital markets.
Currently, much of the infrastructure investments are driven by African governments either directly or through bonds or state-owned enterprises, which often crowd out not just international firms but also the domestic private sector.
Clearly, though, governments alone cannot resolve the yawning infrastructure financing gap.
Lack of infrastructure costs the African continent around USD 40 billion annually, depriving more than 15 million Africans of jobs every year, according to Cédric Mbeng Mezui, coordinator, African Financial Markets Initiative at the African Development Bank, in a March presentation on infrastructure development.
If African nations had spent USD 12 billion more on road repair in the 1990s, they could have saved USD 45 billion in subsequent reconstruction costs, according to an estimate by McKinsey Global Institute.
Today, only 34% of rural Africans live within two kilometers of an all-weather road, only 25% have electricity and only 61% have access to improved water sources. The World Bank estimates that on current trends, universal access to sanitation and improved water is more than 50 years away in most African states.
Source: Zawya