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With strong infrastructure, Africa could achieve a seven per cent growth rate, says Kaberuka
Africa is capable of winning additional points in its growth rate with improved infrastructure, Donald Kaberuka, President of the African Development Bank, said on December 4 in Paris. His statement was made during an economic forum discussing a new partnership model between France and Africa during the Elysée Summit for Peace and Security in Africa.
According to President Kaberuka, the current five per cent growth rate is insufficient. “We are all pleased and satisfied with the five per cent GDP growth rate for the continent recorded in the past few years,” he said. “But this rate is insufficient for our needs in Africa. Given strong demographic growth, the required growth rate should stand at seven per cent. The gap between five per cent and seven per cent is due to poor infrastructure hindering the continent’s development. With solid and efficient infrastructure, we can without doubt reach a seven per cent growth rate per annum – a good starting point for Africa.”
The AfDB President’s call for action comes as the continent faces some well-known challenges. One African in 10 has no access to decent roads; while energy costs on the continent are twice as high as elsewhere in the world. Africa produces barely two per cent of global electric power, and 600 million Africans have no access to this source of energy. The result: the lack of infrastructure translates into a 40 per cent decrease in productivity on the continent.
An estimated $120 billion is needed to bridge this deficit and provide Africa with the infrastructure needed for its development. Two-thirds of this amount will be invested in new installations (roads, airports, etc.) and one-third in their upkeep and maintenance. The funding shortfall to finance this infrastructure currently stands between $45 billion and $50 billion.
“These figures may seem enormous, but they are not insurmountable,” said Kaberuka. “The challenge of the AfDB is to build a three-point program. The first should ensure that investments in infrastructure are profitable, serious and viable. The second is to ensure investments are safe from risk. The third and final point is to use our own resources to raise capital.”
From this last point came the idea for the creation of the Africa50 Fund. With this fund, the AfDB seeks to mobilize $100 billion for infrastructural financing in Africa, by calling on institutional investors in Africa and around the world. The aim is to mitigate the risks linked to infrastructure investments and make them viable. This challenge can only be met if the projects are opened up to private sector investors, said Kaberuka.
“In the 1990s, no one would have believed that telecommunication and information technology infrastructure could be financed by private interests. But look at the case of Mo Ibrahim, who made a fortune in this sector. The next high-growth sector on the continent will be the energy sector, if only African governments are prepared to set up and implement much-needed reforms,” Kaberuka said.