2010: AfDB Confirms Priority Support to Infrastructure Sector

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In 2010, the African Development Bank (AfDB) Group operations approvals by sector continued to reflect the institution’s 2008-2012 Medium-Term strategy, which set infrastructure sector as its operational focus, along with governance, private sector, higher education and technology. In 2010, the AfDB's investments in the infrastructure sector should account for two thirds of its total operations.

As it targets infrastructure, the AfDB shows proof of its focus on high impact projects conducive to ensuring a private investment-friendly climate, strengthening competitiveness and productivity, creating jobs and promoting sustainable growth. In so doing, the Bank is well positioned to contribute more effectively to the wider development objectives of the continent's agricultural development, food security, human development and regional integration, and to cater to the special needs of fragile states and middle-income countries. It can also better cope with environmental challenges and play a leading role in addressing the impact of climate change.

The AfDB, with a solid financial base backed by an excellent rating in Africa, is in a unique position to achieve these goals. In light of its excellent track record during the financial crisis, the AfDB has been called upon by its partners, specially, to increase its operations aimed at reducing the infrastructure gap in Africa. This gap results in increasing transaction costs on the continent by 30 to 40%.  In the power sector, roads, railways, seaports or airports sub-sectors, current infrastructure deficit in Africa results in economies with 7% growth rate per year being unsustainable.

Speaking in Paris in early December 2010, the AfDB President, Donald Kaberuka, recalled that for the current infrastructure gap to be closed, "substantial financial resources are needed." The Bank should "add its own resources to those of other public, private, traditional and new partners in the framework of sustainable partnerships."

Large scale projects

The Bank invested about USD 2 billion, including USD 500 million in public-private partnerships in the transport sector in 2010. Four projects, approved during the last quarter of 2010 to Kenya, Central African Republic, Morocco and Senegal amounted to USD 900 million. In Morocco, USD 400 million were allocated to the Tangiers-Marrakech Railway Reinforcement Project. In Senegal, USD 92 million will help finance the proposed new airport project, east of Dakar.

In 2010, nearly USD 700 million were allocated to safe water supply and sanitation services projects.

In the telecommunications sector, the AfDB invested in “Project 03b”, "the other 3 billion", i.e. "the other 3 billion" people not connected. This proposed satellite constellation supported by ground infrastructure will help expand internet access in emerging countries in Africa.

Regarding energy, about USD 1.2 billion were approved in 2010, including USD 1 billion allocated to the DRC, Ethiopia, Kenya, Tanzania and Egypt, where a USD 550-million loan is the largest ever approved for the country. The loan will help build a steam power plant using the abundant natural gas resources to reduce Egypt’s dependence on oil.

The number of investments similar to the Egyptian clean energy project is increasing. The AfDB is demonstrating its commitment to reduce the hazards of climate change on the continent. Costs imposed on Africa by the impact of climate change are still high. In this regard, members of the Advisory High Level Panel on Climate Change Financing, established by the UN Secretary General, Ban Ki-Moon, with the AfDB President as a member, concluded that collecting the funds needed for low-income countries to address the adverse effects of climate change was feasible.

However, a strong political will is needed for the proposed funding mechanisms to be operational.

In this regard, in December 2010, the AfDB President supported by African leaders at the Conference on Climate Change in Cancun, Mexico, stressed the importance of setting up an African Green Fund.

The design and implementation of the proposed Green Fund for Africa are based on the AfDB’s experience in hosting and administering special funds that cater to the needs and characteristics of African countries. This is not an AfDB fund, but an Africa Fund, which will leverage the Bank's capacity in this area. African leaders are urgently calling for a mechanism to ensure that, whatever multilateral instrument is in place, (a Global Green Fund or preferably an African Green Fund), a particular amount will be set aside to respond to, and meet Africa’s needs.

The AfDB in 2010 reaffirmed its commitment to infrastructure. But the gap still remains huge. To close it, there is a need to invest twice as much as all current cumulative investments in infrastructure. Beyond its operations, the Bank, together with partners, continues to seek innovative financing sources in this area.