Report urges ‘strategic coordination’ of infrastructure investment for Africa

Brookings’ ‘Foresight Africa 2015’ report said infrastructure investment, had been “a key focus” for sub-Saharan Africa (SSA) in 2015 and has been “rising rapidly since 2006”.

“This trend of investments is great news, but the emphasis should now shift to ensuring that this funding is strategically and effectively applied across the continent,” the report said. “As the world considers new and better ways of financing for development, infrastructure investments should be a vital part of that discussion.”

According to the report, official development finance (ODF) from institutions such as the World Bank represents a “still-significant but shrinking share of this funding”, while private capital (PPI) and “non-traditional bilateral sources, such as China, have grown in importance”.

While there is coordination among the traditional members of ODF, “this collaboration has tended to exclude the growing non-traditional sources,” the report said.

Infrastructure investment expert Akshai Fofaria of Pinsent Masons, the law firm behind Out-Law.com, said: “Inefficiencies in project management can be highly detrimental to completing projects and tackling the infrastructure funding gap across Africa. In many ways, it isn’t just about the money. Success in infrastructure development is heavily dependent on the commitment of the people involved and a country’s business outlook. Both must be dedicated to avoid infrastructure investment being wasted.”

The report said that with the BRICS (Brazil, Russia, India, China) Development Bank and the China-backed Asian Development Bank “on the horizon”, in addition to other regional and global initiatives, “there is little need to create additional or new institutions, but rather to adapt the existing ones to be more inclusive and collaborative with these non-traditional sources.”

The report said “substantial efforts” by member states of the Organisation for Economic Co-operation and Development (OECD) and multilateral agencies have been made “to mobilise private capital and to develop instruments and guarantees that leverage private funding”. “Despite the rhetoric, however, PPI has been highly concentrated in information and communications technology (ICT) investments.”

“In fact, the number of SSA countries receiving PPI (from 2009 to 2012) drops from 40 to 21 when ICT commitments are excluded,” the report said. “The positive news is that PPI for other sectors, especially energy, has recently grown, but it has been greatly concentrated in a few countries.”

Agencies offering guarantees and other risk mitigation measures “should ensure that these initiatives are targeted to help broaden access to private finance across sectors and countries that have not benefitted from such financing in the past”, the report said.

Of the projected $93 billion required annually to address SSA’s infrastructure gap, the report said the World Bank has estimated that $17bn “could be saved through efficiency gains from measures such as better maintenance, pricing reforms, better expenditure management and appropriate regulatory policy”.

“Although there are reform efforts being undertaken across each of the infrastructure sectors, the bulk of the reporting and monitoring has been directed at project financing, at the specific transactions,” the report said.