The President of the African Development Bank Group, Akinwumi Adesina, has said that Africa faces an infrastructure gap of between $68bn to $108bn annually.
According to him, the bank had committed over $44bn to infrastructure across the continent in the last six years in areas of transport, energy, water, and sanitation. He disclosed this when the United States Treasury Secretary, Janet Yellen, hosted G-7 Ministers, and heads of multilateral development banks.
The event was to discuss the scaling up of infrastructure financing and was moderated by the US Assistant Secretary for International Trade and Development, Alexia Latortue.
In a statement obtained from the bank’s website, Adesina said, “the AFDB, the premier financier of infrastructure in Africa, has committed more than $44bn to infrastructure across the continent in the last six years alone, in such critical areas as transport, energy, and water and sanitation.
“Despite collective efforts, Africa still faces an infrastructure financing gap of $68 to $108bn annually.”
At the event, Adesina proposed eight solutions to Africa’s infrastructure finance gap. According to him, project preparation facilities were critical to developing bankable infrastructure projects since one of the major challenges of infrastructure projects was moving commercially viable projects to financial close.
He added that institutional investors including pension funds, sovereign wealth funds, and insurance companies had enough resources to scale up infrastructure financing from billions to trillions of dollars. He said, “This pool of capital is so vast that what is needed is only 0.03 per cent or up to 0.04 per cent to bridge the infrastructure financing gap for Africa.
“Multilateral development banks should take early-stage investment risks in the project development phase.”
Adesina said since the government provided the largest share of infrastructure financing, it must improve the efficiency of public financing for infrastructure.
According to him, governments must focus more on attracting the private sector to infrastructure financing by improving the policy, legal and regulatory environment to support public-private partnership investments in infrastructure.
He added that there was a need for use of local currency for infrastructure financing. Adesina explained that because foreign loans financed the bulk of infrastructure and the revenue streams were in local currency, this presented a high financial risk to investors.