There is an urgent need for Africa to deploy a regional infrastructure that speeds up the full implementation of the African Continental Free Trade Area (AfCFTA) as many of Africa’s development challenges require cross-border solutions.
This assertion was made by Alain Ebobissé, CEO Africa50, in the Foresight Africa 2021 report published by African Growth Initiatives of the Brookings Institution, a non-profit organization devoted to independent research and policy solutions.
According to him;
- ”The Infrastructure Consortium for Africa found that in 2018, of a total of about $100 billion invested in African infrastructure, only 2 percent was for regional projects–simply not enough.
- “Unfortunately, financing becomes scarcer during crises, so what can leaders do? One strategy for securing financing is to encourage lenders to forgive or restructure public debts to give governments some fiscal space.
- “Another is asset recycling, which enables governments to unlock the capital they invested in profitable infrastructure assets, such as toll roads, power plants, airports, and fiber optic networks, by offering them to private sector investors under a concession model.
- “The freed-up capital can then be redeployed to fund stimulus plans and new infrastructure for the recovery phase, including in the health sector.
Why this matters
- Regional infrastructure and regional integration can raise growth and productivity through increased trade and investment, and hence increase competition as well as channels for productivity spill-overs.
- According to Alain Ebobissé, “Assets under management by African institutional investors alone are expected to rise to $1.8 trillion by 2020, so if we can tap even a fraction of this, we could substantially close the infrastructure gap.
- The capital flight brought about by the pandemic needs to be appropriately reversed by better-developing infrastructure projects that would attract investments and offer attractive risk-adjusted returns.
- No doubt, most investors want to be sure that they will be paid a fair price, can freely operate infrastructure assets and meet service level targets and can repatriate their profits when due.
- Development finance institutions can also leverage the opportunity therein by providing risk-hedging instruments and credit enhancements, as well as supporting local currency financing to strengthen local capital markets.
Follow us for Breaking News and Market Intelligence.
Africa urgently needs to deploy a regional infrastructure that would speed up the full implementation of the AfCFTA. This is a nice idea