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Business

African Union to set up infrastructure fund for Africa

The AU has commenced plans to set up a fund for the development of infrastructure across the continent.

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The African Union is planning to set up a fund to finance the much-needed infrastructural facilities in Africa, which includes the construction of much-needed roads, railways and power plants, according to its Head of Infrastructure, Raila Odinga.

Speaking on the much-anticipated AU project, Odinga said;

  • “Africa is financially starved as far as the need for infrastructure development is concerned. Talks with the funds are going on and the AU’s experts are setting up the legal and financial structure for the infrastructure fund, which will be administered by the newly formed African Union Development Agency.
  • “The drive to find new ways of funding the construction of roads and railways and other utilities comes as Africa seeks to bring together 1.3 billion people in a $3.4 trillion economic bloc known as the African Continental Free Trade Area (AfCFTA).
  • “This infrastructure is urgent for the realization of the AfCFTA, otherwise it is just going to remain on paper. It was critical to connect landlocked nations to ports on coastlines, and complete missing links for transcontinental highways, to facilitate the free flow of goods under the AfCFTA and lift people out of poverty.
  • “Africa needs to trade with itself as intra-African trade is just 15%, compared with intra-European trade levels of 70% and 50% in Asia.”

READ: AFC secures $250 million capital loan from International Development Finance Corporation

What you should know

Africa has an estimated annual infrastructure financing deficit of $60 billion-$90 billion – which is considered a big challenge in integrating the disparate individual markets into a single, free trade area.

The African Union is now turning to sovereign wealth funds, insurance and retirement funds in countries like South Africa, Angola, Nigeria Morocco, Egypt and Kenya, to raise the needed funds to undertake the projects.

According to Odinga, “The funds will be invited to invest about 5% of their holdings, which is actually going to be more lucrative for those institutions, rather than having funds lie idle”.

READ: FG outlines steps to be taken by businesses to export to AfCFTA countries

Johnson is a risk management professional and banker with unbridled passion for research and writing. He graduated top of the class with B.sc Statistics from the University of Nigeria and an MBA degree with specialization in Finance from Ambrose Alli University Ekpoma, with fellowships from the Association of Enterprise Risk management Professionals(FERP) and Institute of Credit and Collections management of Nigeria (FICCM). He is currently pursuing his PhD in Risk management in one of the top-rated universities in the UK.

1 Comment

1 Comment

  1. David W. Nerubucha

    February 22, 2021 at 9:22 pm

    The facilitation of critical aspects in infrastructure development on the African continent, is the first and most significant criterion for economic unity

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