In the last six years, Africa’s premier infrastructure financier, The African Development Bank (AfDB), has spent over $44 billion on infrastructure, including transport, sanitation, water, and energy. However, according to the African Development Bank Group President, Akinumwi Adesina, Africa still faces an infrastructure financing gap of $68 billion to 108$ billion every year.
Adesina disclosed this during a round-table event convened to discuss the boosting of infrastructure financing, organized in President Biden’s initiative of Building Back a Better World Plan.
During the round-table, Adesina ailed the Biden administration for their efforts in mobilizing resources to improve infrastructure financing, which is crucial for Africa and other third world countries.
Speaking at the round-table, Adesina proposed eight solutions that could help bridge the infrastructure finance gap in Africa. The solutions include mobilizing institutional investors, preparing for projects, and attracting the private sector.
Other solutions include boosting public infrastructure financing, dealing with risks, mobilizing the funding for green infrastructure, using the local currency for infrastructure financing, and stretching the balance sheet of multilateral development banks.
According to Adesina, among the main challenges in developing infrastructure projects is pushing them to a financial close; hence project preparation is crucial to infrastructure development.
Mobilizing institutional investors had enough resources to boost the infrastructure financing to trillions of dollars. Institutional investors included insurance companies, pension funds, and sovereign wealth funds.
Adesina disclosed that commercial banks and institutional investors accumulated $103 trillion in assets, a pool big enough that up to 0.04% of it could bridge the infrastructure financing gap in Africa.
Adesina called on governments to improve the efficiency of public financing as they offered the largest share of infrastructure financing. Governments must encourage timely execution, high-quality project design, a competitive procurement process, and better maintenance culture.
The AfDB President further called on governments to improve the legal environment and policies to encourage private sector investment in infrastructure.