According to the Africa Infrastructure Country Diagnostic (AICD), the infrastructure need of Sub-Saharan Africa exceeds US $93 billion annually over the next 10 years. To date, less than half that amount is being provided thus leaving a financing gap of more than US $50 billion to fill. The poor state of infrastructure in Sub-Saharan Africa – its electricity, water, roads and information and communications technology (ICT) – cuts national economic growth by two percentage points every year and reduces productivity by as much as 40 per cent.
Understanding that the continent is in need of both soft and hard infrastructure and well as specific/targeted support to fragile states (states either burdened by war, for example,would need to dedicate over a third of their GDP to overcome the infrastructure gap), the Bank’s Infrastructure Finance aims to increase finance for sustainable infrastructure and public-private partnerships (PPPs) in Africa, on a regional basis, and within individual Regional Member Countries. For this purpose, it provides support directly to corporate entities and projects, as well as through specialized intermediaries such as private equity and venture capital funds.
To sustain economic growth and build sustainable development in Africa, building infrastructure to bridge this gap is vital. In 2011, the AfDB approved 184 operations totaling US $9 billion, infrastructure accounted for 38 per cent or US $3.4 billion over which US $2.25 billion under the private sector window.
The transport group in the infrastructure finance division is responsible for the origination, structuration, and financial closures of all road, ports and airports project. The Bank has been instrumental is bring key transport project to fruition. Projects such as Lomé Container Terminal, the Lekki Toll Road in Nigeria and the Dakar Toll Road, to name a few. With most heavy transport infrastructure in Africa becoming obsolete, the Bank anticipates that over the next decades most colonial-era airports and ports will need to be modernized.
In July 2011, the Bank has approved a US $40-million loan to finance the Rift Valley Railways (RVR). The five-year US $246-million capital investment program involves two concessions over a rail network running from Mombasa in Kenya to Kampala in Uganda.
The AfDB loan to RVR supports the region’s plan to shift from road to rails to ease the burden on the roads, as well as enhance the Bank’s efforts to contribute to major infrastructure development in the region.
The refurbishment and operation of the RVR is expected to simultaneously improve the quality and lower the cost of rail freight services in East and Central Africa. For example, the volume of goods transported is expected to more than double to 3.3 million tons per annum by 2015, while marginal costs are expected to drop by up to 30 per cent. In the next 15 years, the project is expected to generate significant revenue for the Kenyan and Ugandan governments and have positive environmental effects by reducing the volume of goods transported by more polluting trucking services.
The loan to support the rehabilitation of the Rift Valley Railway is a top development priority for both Uganda and Kenya. The project aligns explicitly with the Bank’s assistance strategies for both countries as well as the Bank’s regional integration strategy for Eastern Africa. It is in harmony with the Bank’s strategic priority to expand Africa’s economic infrastructure as well as current efforts to increase financing from the Bank’s private sector window in low-income countries.
Africa has huge energy potential – much of it untapped and much of it renewable. The AfDB works across the power sector to help African countries reduce their dependency on oil imports and meet growing demands for power. With regard to energy infrastructure, more than US $400 million were approved in 2011, including US $25 million for the KivuWatt Project in Rwanda, US $64 million for Kribi Power in Cameroon, and US $38 million for Thika Power in Kenya.
Located at Lake Kivu in Rwanda, the KivuWatt project is an integrated methane gas extraction and production facility and associated 25 MW power plant. When completed, the project will raise and process methane gas trapped deep in the waters of Lake Kivu for use as fuel to generate critically needed electricity for the people of Rwanda, while simultaneously safely removing harmful lake gases. KivuWatt greatly mitigates the environmental hazards associated with the natural release of these gases, reducing the risk to the two million people who live around the lake. Phase I of the project will cost approximately US $142 million to complete. The effort represents the first large-scale use of the gas and will be followed by three more phases reaching 100 MW.
In 2012, the AfDB targets achieving 10 energy projects financed by the private sector, including combined cycle projects, hydropower projects, waste-to-energy projects, and –with generation capacity of 300MW – Africa’s largest wind farm: the Lake Turkana Wind Power Project. AfDB will invest around US $400 million from its own resources to make these projects happen. The total project cost will be over US $2 billion and the generation of power will dramatically change people’s lives throughout the continent.
Energy: the Platform to AfDB’s Private Integrated Infrastructure Approach
The Sendou Power Project in Senegal constitutes the backbone of the AfDB’s Integrated Infrastructure Approach in the country. Responding to Senegal’s immediate energy needs, the Bank invested 55 million euros for the development of a 125 MW coal-fired power plant. The project stands to provide energy to key and inter-dependent infrastructure investments, including a toll road, a deep sea port, and the new Dakar airport.
Sendou Power will generate 925 GWh of electricity annually, roughly 40 per cent of the amount consumed in 2008 by Senegal, reducing energy costs, lowering carbon emissions and improving the country’s competitiveness. Previously, Senegal relied almost exclusively on expensive oil imports for its energy needs. Having invested in the country’s energy backbone, the AfDB is now looking into renewable energy sources, namely wind energy.
Optimizing the African Renewable Energy
Assisting Gabon in Tapping Its Renewable Energy Potential
The hydroelectric potential of Gabon is estimated to amount to between 5,000 and 6,000 MW, the fifth-largest hydroelectric capacity in Africa. However, Gabon’s current hydroelectric capacity is about 150 MW, less than 1/35 of its potential. The project involves the construction of two run-of-river hydro projects, Chutes de l’Impératrice, a 70 MW plant on the Ngounie river in Ngounie Province, Gabon, and Chutes de FE2, a 56 MW hydro project located near the town of Mitzic in North Gabon.
The AfDB will provide a 15-year senior loan of up to 50 million euros and a subordinated loan of up to 7.5 million euros. The Bank is the arranger for the DFI debt provided by FMO and DEG. The Project will: (i) Help to fill the power gap by providing reliable power at about 25 per cent of current prices; (ii) Reduce the need for environmentally unfriendly diesel power generation; (iii) Have low environmental impacts for a hydro project because there is no dam to be built or people to be resettled; (iii) Address poverty reduction through the provision of jobs and training, increase economic growth and demand for goods and services principally by providing cheap, clean reliable power to a wider geographical area including rural areas of Gabon.
Lake Turkana Wind Project: Investing in Africa’s Largest Wind Farm
By 2020, Kenya will require an additional installed energy capacity of 2,400 MW from its current base of 1,340 MW to keep up with economic growth. As if this was not enough of a challenge, the country also needs to diversify its energy sources away from hydropower, as the prevalence of drought increasingly subjects the local population to blackouts. In Kenya, the contribution of hydropower to the energy mix decreased from 65 per cent in 2007 to 40 per cent in 2009. To address this situation, the AfDB is investing US $100 million to develop Africa’s most important wind energy initiative, the Lake Turkana Wind Project.
With a generation capacity in excess of 300 MW, the project will provide clean and affordable energy to allow the country to benefit from its growth prospects. Located in a poor and remote area, the project will develop much-needed infrastructure and provide a significant source of employment. It is estimated that the project will save about 16 million tons of CO2 emissions (as compared to fossil fuel fired power plants of similar capacity).
Internet access rates in sub-Saharan African are the highest in the world; however, potential demand is huge. The International Telecommunication Union (ITU) and the World Bank hold that the cost of a broadband connection is, on average, about US $110 for 110 kilobits per second. In Europe and Central Asia, the same type of connection costs US $20, while in Latin America and the Caribbean, it is US $7. The Middle East and North African countries pay less than US $30.
To respond to this huge demand, the Bank’s private sector operations mobilize resources and partnerships to connect Africa to the rest of the world.
In October 2009, the African Development Bank has been awarded “Sponsor of the Year” Award by Africa Investor magazine, in South Africa, in recognition of AfDB’s support to Main One cable project, a fiber-optic submarine cable to be implemented in West Africa.
In September 2009, the Bank and Main One Cable Company signed a loan agreement of US $61 million towards the development of a submarine fiber optic cable connection along the West African coast. With this investment, the Bank further expanded its wide support for African infrastructure and communication technology (ICT) projects following investments in the East African “EaSSy” submarine cable and the two satellites, Rascom and New Dawn.