African infrastructure investment commitments increasing, says report

The ICA said in its annual report for 2013, commitments reported by its members, including the G8 nations, South Africa, African Development Bank (AfDB), Development Bank of Southern Africa, European Commission, European Investment Bank and the World Bank Group, were up 35% compared with 2012, reaching a record level of $25.3 billion.

According to the ICA, the increase was “substantially helped by $7bn of commitments by US government agencies under President Barack Obama’s ‘Power Africa’ initiative.

Total external funding commitments of $52.9bn were made in 2013 by the private sector, non-ICA members including China, India, the Arab Co-ordination Group of funds and institutions and other European countries. The ICA said this “reinforced a trend of growing support for Africa’s infrastructure”, which recorded $34.3bn and $46.6bn total external funding in 2011 and 2012, respectively.

“The signs are that the rise in commitments has continued in 2014 as ICA members have lined up to support initiatives including Power Africa,” the ICA said.

Additionally, the ICA said its report “indicated sustained growth in African national governments' spending on infrastructure”.

The ICA said: “In the African countries for which data was obtained, while overall budgets increased by 3% in the 2011-13 period, budget allocations for infrastructure increased by 8% in the same period with 21 African countries reporting budget commitments of approximately $46bn.”

The ICA said its members “made by far their largest commitments” in 2013 to the energy sector ($13bn representing 51.6% of the total), followed by transport ($5.3bn) and water ($5bn). The largest share of commitments by region was made to West Africa ($8.5bn, equivalent to 34% of the total), followed by East Africa ($6.9bn), the ICA said.

However, the ICA said disbursements by its members, which should not be compared directly to commitments in 2013, reached $11.4bn, 11% lower than reported in 2012. “ICA members identified the enabling environment as the biggest challenge in project preparation, including ensuring the right attitudes, policies and practices with stakeholders,” the ICA report said. “Critical issues included determining a project’s financial structure.”

The report said: “The extent that international focus is shifting towards solving the problem of gaps in Africa’s infrastructure is underlined by the attention now given… by senior leaders. It is reflected in an ever-growing number of initiatives, from the innovative Africa50 fund to help underwrite commercial infrastructure projects developed by the AfDB and the African Union’s potentially transformative Programme for Infrastructure Development in Africa to the US Power Africa initiative, a range of EU programmes and funding from China and other non-ICA member states, plus the United Nations-led global Sustainable Energy for All initiative.”

“China remains the largest bilateral investor in infrastructure on the continent,” the ICA said. “Lending reached $13.4bn in 2013, almost the same as in 2012, although somewhat less than in 2011, and all directed at sub- Saharan Africa”.

The number of foreign direct investment (FDI) projects in Africa grew 27% from 2010 to 2011 and the trend is set to continue, according to a report published in 2014 by consultancy Ernst & Young (EY).

EY’s report on market attractiveness in Africa (80-page / 2.4MB PDF) said that despite this growth “there remain lingering negative perceptions of the continent, but only among those who are not yet doing business in Africa".