Africa Center Visiting Fellow Aubrey Hruby cowrites for the Financial Times on the need for innovative financing mechanisms to fund critical infrastructure investments in Africa:
Poor and insufficient infrastructure remains one of Africa’s starkest development challenges. Despite the continent’s sustained growth and rapid urbanisation rates, its infrastructure investment deficit remains staggeringly high: $50bn annually, according to the African Development Bank. The gap applies mainly to energy, transport, water and sanitation, but the region is also struggling to construct enough education, culture, tourism and healthcare infrastructure for burgeoning populations. This gap impacts Africa’s businesses, entrepreneurs, and young people. A new report from the Center for Global Development reveals the high importance placed on infrastructure by Africans across the continent relative to jobs and income related issues. In order to increase the pace of critical infrastructure investment, innovative financing mechanisms must be studied and scaled up.
Lack of financing is the principal constraint. Many African governments do not have the budgetary strength to make significant inroads in their infrastructure deficit without external assistance at all stages of the development. The recent weaknesses in commodity prices has strained resources even further and, although China continues to be the primary source of external funds for infrastructure projects, it is unlikely that such funding will be sufficient to bridge the gap, especially given the slowdown of the Chinese economy and challenges in its banking system.