The African Development Bank, AfDB is taking critical steps to see the possibilities of closing over $170 billion infrastructure deficit in the continent.
The Bank said that with an estimated financing gap of between $68 billion and $108 billion a year, proactive steps are required to address the gap.
The Development Bank is primarily looking at strengthening public private partnerships to channel more money into investment in infrastructure development in Africa.
The AfDB recently hosted discussions on how the bank can strengthen support of Public Private Partnerships (PPP) and channel greater investment towards economic and social infrastructure.
The digital workshop, Designing the African Development Bank’s PPP Framework, took place against the backdrop of an ongoing global pandemic which has caused economic slowdowns that have sharpened the already urgent need for investment into the African continent.
Five African countries account for more than half of all successful PPP activity between 2008 and 2018. These are South Africa, Morocco, Nigeria, Egypt and Ghana. Several other African countries are in the process of developing multiple PPPS – Burkina Faso has 20 in the pipeline, Botswana, 8.
AfDB Vice President Solomon Quaynor pointed out in his opening remarks that African infrastructure was already struggling to structure projects tailored to the private sector which balanced value for money for the public sector against affordability for the user, before COVID-19 struck.
“It is therefore imperative that hybrid solutions such as PPPs must be seen and promoted as a way of building back better, stronger, greener, by clawing back private capital to infrastructure while creating much need fiscal room for governments to address multiple other demands, including building health systems resilience,” explain Quaynor.
The AfDB estimates the continent needs up to $170 billion to address its infrastructure needs, with an estimated financing gap of between $68 billion and $108 billion a year.
The PPPs are regarded as a way to narrow this gap by crowding in private sector investment into infrastructure development and the AfDB is trying to scale up that effort.
AfDB director of infrastructure and urban development Amadou Oumarou presented several rationales for the bank’s effort to develop a PPP framework, including its Ten-Year Strategy (2013-2022) and a recommendation from the bank’s independent evaluation unit to scale up PPP interventions.
The Workshop participants expressed their desire for the AfDB to play a greater role in supporting PPP development in Africa through strengthening policy and regulatory frameworks and building government capacity;project structuring and advisory services; provision of financing instruments such as de-risking, guarantees, credit enhancements and local currency financing.
Shoubhik Ganguly of Rebel Group International, which partnered with the Bank to develop the framework, said African countries need to learn from each other’s achievement and mistakes: “They need to have standard documents and checklists that will guide institutions in these countries through the PPP lifecycle.”
AfDB division manager for sub-Saharan Africa for the International Finance Corporation Michael Opagi: “One of the challenges regional member countries are faced with is selecting the right project for implementation. Therefore, support should start from there, then going through to actual project preparation makes it a lot easier.”
Private sector participants in the workshop said Development Finance Institutions (DFIs) are indispensable to securing financing for PPP projects in Africa. On example cited of a successful PPP project was the Kigali Bulk Water project, which received significant backing from the AfDB, the World Bank and private sector participants.
Private Infrastructure Development Group CEO Phillipe Valahu said the Kigali Bulk Water project was a perfect example of integrated support to a PPP project which used the three pillars proposed in the AfDB’s PPP Framework.
That project benefited from debt funding from PIDG alongside the AfDB, with each providing $19million of senior debt on commercial terms.