This article was written with support for Auda Nepad
Africa's infrastructure development has long been a critical issue for continental growth and sustainability. In February, the New Partnership for the New Partnership of the African Union Development Agency (Auda-Nepad) and the African European Foundation, in collaboration with the African Climate Foundation, published a comprehensive report on African infrastructure finance, particularly for the insights of Nardos Bekele Samas, a key figure in African development. The CEO of Auda-Nepad Bekele-Thomas has helped shape the agency's approach to development, and her leadership and strategic direction played a key role in the findings and recommendations of this report.
The Auda-EU collaboration stems from a common commitment to addressing infrastructure gaps that hinder economic and social development in Africa. Infrastructure is its various forms of energy, transport, water and digital connectivity – the backbone of any economy. However, Africa faces major challenges in raising funds for large infrastructure projects. These challenges are exacerbated by limited domestic resources, a lack of foreign investment and a lack of technical capabilities to plan, prepare and implement, according to the report. The preparation stage is important. This is because bankability issues are often a place that hinders private sector finances.
Bekele-Thomas pilots Auda-Nepad towards fulfilling the mission assigned to be the implementing agency of African Union Agenda 2063. Under her leadership, Auda-Nepad has established herself as a central player in mobilizing resources and leading African countries to independence in infrastructure development.
The infrastructure gap in Africa is estimated at between $130 billion and $170 billion a year, with only about $800 billion invested annually.
Important findings on the gap between funding and investment
The African government has donated more than 40% of total infrastructure finance. However, despite these efforts, they can only address a small portion of their total needs. The role of donors, which accounts for 35% of total commitment, has been significant, but has declined, particularly as China's involvement in Africa increases. China's fundraising offers a model that reconstructs the African infrastructure landscape, particularly through loans, and provides lessons to Western funders.
The private sector is playing an increasingly important role in infrastructure development, but important barriers remain, including high risks and long timelines associated with infrastructure projects. As global funding conditions become more stringent, finding innovative private capital sources has become essential.
Bekele-Thomas emphasizes that Africa needs to strengthen its domestic resource mobilization to close the funding gap. Enhanced remittances also provide untapped opportunities for external funding. Foreign direct investment (FDI) is under pressure worldwide, but remains a potential source of funding in attractive, bankable projects, particularly green energy.
A strategic framework for infrastructure development
An important policy framework for guiding Africa's infrastructure development is the African Infrastructure Development Programme (PIDA), launched in 2010. PIDA serves as a roadmap to strengthen the continent's competitiveness and global economic integration. It is crucial in building infrastructure development efforts and includes two prioritized action plans (PAPS). The first Pida Pap 1 (2012-2020) covers 51 programs and over 400 projects, spanning energy, transportation, water and communications technology (ICT). In 2021, the Pida Pap 2 was adopted to prioritize integrated corridors, gender-sensitive policies, and projects with a total cost of $160 billion for 2021-2030.
Bekele-Thomas argues that to be effective, these plans need to be more closely aligned with the funding realities and ensure that integration of infrastructure projects, social objectives, and broader development agendas is prioritized.
Global Gateway and Team Europe Initiatives
The European Union's Global Gateway Initiative and Team Europe approach represent an evolving model for pooling resources for large-scale infrastructure projects in Africa. The EU has committed 300 million euros worldwide through the Global Gateway, with 150 billion euros allocated to Africa. The initiative aims to increase the quality and impact of infrastructure projects across the continent, with an emphasis on sustainable development, climate resilience and social outcomes.
Bekele-Thomas notes that despite active political integrity and a strategic focus on infrastructure, there is a mix of implementation of these initiatives. In particular, reliance on hard infrastructure investments such as transportation and energy projects obscures the need for complementary “softer” elements, such as regulatory frameworks, labor training and facility capacity building.
Key stakeholders, including African governments, local businesses and international partners, must work together in full to ensure that the project is impactful and sustainable.
The role of multilateral institutions and Africa's debt concerns
One of the main sources of Africa's infrastructure finance is multilateral development banks such as the African Development Bank (AFDB), which has invested more than $50 billion in infrastructure projects over the past eight years. But one of the most pressing concerns is increasing the debt crisis in Africa.
Increased involvement of foreign lenders, particularly China, poses a real risk of exacerbating the continent's debt burden. Therefore, investments should be designed to promote economic growth while ensuring a ratio of debt to GDP in African countries.
Competing global incentives and regional coordination
Competing global incentives, such as the US Inflation Reduction Act, have threatened to divert funds from infrastructure projects in Africa. To address this, Bekele-Thomas advocates for global solutions that ensure an equitable investment distribution and improve the global financial framework. The key to this is streamlining the project preparation process, establishing uniform funding requirements, and developing projects that provide substantial economic, social and environmental benefits.
At the regional level, infrastructure investments are usually more effective at the national level due to regional and political dynamics. However, the importance of local projects, particularly cross-border projects, should not be overlooked. These multi-country projects are essential to achieving Africa's broader development goals.
While national interests that compete with coordination challenges often hinder the success of local initiatives, Bekele-Thomas argues that stronger integrity and joint ownership among African stakeholders and local organizations such as the African Union and local economic communities can achieve lasting impacts.
African Continental Free Trade Areas and Transforming Infrastructure
The African Continental Free Trade Area (AFCFTA) offers transformative infrastructure financing opportunities. By strengthening regional integration and promoting product, services and people's movement, infrastructure development plays a central role in the success of AFCFTA.
According to Bekele-Thomas, there are four potential benefits to supporting AFCFTA through infrastructure development. First, it can bring great economic benefits to both Africa and Europe.
Second, it has received strong support from African governments and citizens who recognize the need for improved infrastructure to enhance regional integration. Third, the AFCFTA offers important non-economic benefits, including peace and stability.
Finally, the European Commission's expertise in promoting regional economic cooperation has become an ideal partner to support the development of regional infrastructure and create mutually beneficial relationships.
Conclusion
While the infrastructure gaps in Africa are huge and progress is unfolding, major challenges remain in terms of funding, coordination and implementation. Bekele-Thomas emphasizes that filling the gap requires a multifaceted approach that includes strengthening domestic resource mobilization, improving the efficiency of foreign aid, increasing the efficiency of private sector funding, and aligning the project with Africa's long-term development goals.
Focusing on strategic partnerships, effective coordination and sustainable and impactful projects, Africa can address infrastructure needs and promote regional integration and economic development. Bekele-Thomas is also encouraging stakeholders to work together to implement the report's recommendations ahead of the upcoming 7th AU-EU summit to encourage Global Gateways to more effectively and support Africa's long-term development goals. ”
