There’s a new bag of money for Africa’s daunting bill of infrastructural development; Africa50.
Described as an Investment Bank for Infrastructure in Africa that focuses on high-impact national and regional infrastructure projects, the initiative had by last week mobilized over US$700 million that will fund vital projects in energy, transport, ICT and water.
"I would like to express my sincere gratitude to those countries that have contributed; I also hope that other countries will join us in the near future,” said Dr. Donald Kaberuka, outgoing President of the African Development Bank (AfDB) during the Bank’s 50th annual meetings in Abidjan.
Africa50 has a very short history; actually, it was conceived after a 2012 declaration by African heads of State on the Program for Infrastructure Development in Africa (PIDA) that called for innovative solutions to facilitate infrastructure delivery.
The AfDB says Africa50 is that vehicle, established, reportedly, after broad consultations with African stakeholders which is why one would expect its membership to be more than the fifteen countries that have so far signed up to the initiative.
"For a long time, we have relied on external financing to fund our infrastructure, now is the time to mobilize sovereign African savings to build the Africa of tomorrow,” said Kaberuka who is also Africa50’s Board Chairman.
During the just concluded AfDB annual meetings, in many sessions, infrastructure was singled out by experts as the key element needed for the continent to sustain the impressive economic growth in several African countries today.
The problem is, it was observed, that there are too many regional and sub-regional infrastructure funding initiatives across the continent, which is a good thing in itself, save for the fact that they are fragmented and therefore unable to reach the necessary critical mass.
It’s now believed that Africa50 offers the much needed continent-wide alternative to mobilise funds in a more agile manner.
A billion target
Kaberuka told the Sunday Times that although the continent has a US$42billion annual infrastructure funding deficit, it’s really nothing compared to the pool of money out there with investors looking for bankable areas to invest it.
In fact Africa50 is targeting to have a billion dollars on its account by the end of next month, money raised on the continent; that will be a record feat that can only mean one thing, it’s possible to fund African infrastructure with African money.
On the opening day of the AfDB annual meetings, the founding members of the Africa50 initiative held a meeting during which they discussed progress made since the launch of its capitalisation process on April 8, 2015.
The meeting was attended by several African ministers and other government representatives.
The founding shareholders in attendance set a deadline of June 15, 2015 for submission of firm commitments and the associated minimum payments, this reflects the fact that several countries are currently at an advanced stage of the official approval process.
Fifteen countries have so far made firm commitments and when combined with the AfDB's contribution to the fund, the total rises to more than US $600 million and at that sort of pace, Africa50 is said to be on track to achieve its US $1 billion capitalisation target.
Tas Anvaripour, the Chief Executive Officer of Africa50, believes that although African infrastructure projects have the full attention of investors, the number of bankable infrastructure projects brought to market is still insufficient, even though they offer an excellent way to diversify investment portfolios.
Launched during its 49th annual meetings that were held in Kigali, Rwanda, Africa50 will become AfDB’s flag money bag for infrastructure financing if it can successfully set up structures and meet its capitalization targets.
With a capitalisation of US$100billion, AfDB is expected among many countries in Africa to help leaders make a big push for things such as infrastructure development seen as the Achilles-heel for the continent’s development.
Over the last ten years, the Bank has committed US$28 billion to infrastructure of which US$11 billion was invested in energy, US$11 billion in transport, US$4 billion in water and US$2 billion in the ICT sector.
That’s seen as substantial but compared to the existing gap, quite insufficient and the Bank hopes to have more resources at its disposal to meet the ever growing demand for loans to finance new projects.
In East Africa, that demand is very high with projects such as the Standard Gauge Railway (SGR) on the Northern trade corridor needing over a dozen billion dollars to be completed.
There are other regional projects such as the refineries and oil pipelines that all require funding to the tune of billions of dollars and their account managers are looking at the emerging potential of Africa50 as a key source of their financing.
As advice to East Africa and other regions that need billions in infrastructure funding, Innovation, getting projects ready and de-risking them to attract additional private capital is the way to go.
In practice, Africa50 will be "as a developmentally-oriented" but "commercially operated entity."
Shareholders in the Fund will benefit from interests raised in the financing mechanisms while critical infrastructure projects will be funded in the process to uplift millions of Africans out of poverty. The expectations in the fund are high and its own objectives set last year after its establishment, don’t help matters; one of the Africa50’s immediate objective is to shorten the time between the conception of a project and its financing-from the current average of 7 years.
It’s hoped that once the fund is fully operational, seven will reduce to less than 3 years, thereby implementing a large number of infrastructure projects in Africa in the short-to-medium term.
Seen in the narrative of the popular mantra ‘Africa Rising’ it’s a pity that the continent is doing so on borrowed external resources and like Kaberuka said in Kigali last year; "a future that is dependent on foreign goodwill is no future."
In Africa50, the continent has an opportunity to own its destiny through mobilizing resources locally to fund critical development projects.
At the end of June, Africa50 will hold an extraordinary general meeting in Casablanca, Morocco, with a view to officially approving the capital increase and to discuss other issues.