Bridging the infrastructure deficit.

Author:Ford, Neil

With an infrastructure investment gap of over $92bn a year, Africa urgently needs to increase deal flow by mobilising domestic and external capital. Our special report reviews the infrastructure investment landscape.

Piecemeal and insufficient infrastructure is one of the biggest brakes on economic development in sub-Saharan Africa. The World Bank calculates that African per capita GDP could increase by 1.7% a year if the continent's infrastructure was in line with that of the developing world as a whole. Initiatives have been set up to bridge this gap but there is a sense now that some momentum is finally building, as governments, the private sector, institutional investors and donors join Beijing in developing new projects.

The need for additional investment is not spread evenly across all forms of infrastructure. The telecoms and IT sectors are benefiting from massive investment, with huge progress made in developing intercontinental telecoms cables and onshore backbones (forfurther information, see our special report on pages 38-51). The port sector and the continent's railways are also enjoying something of a boom, yet road, water and power sector infrastructure are in need of massive investment.

Headline initiatives have been launched to galvanise support. Nepad (seepages 20-21) has launched a campaign to promote investment in African infrastructure by the continent's institutional investment community. The 5% Agenda hopes to persuade African pension and sovereign wealth funds to increase the proportion of their investments in African infrastructure from little over 1% of their assets under management at present to 5%. With estimated total reserves of $1.1 trillion, the potential is vast.

The Emerging Africa Infrastructure Fund (EAIF) has been set up to pool the African investments of a wide range of investment funds. Allianz Global Investors has already committed $120m to the EAIF in the form of a 12-year loan. At the other end of the scale, a large proportion of the $45bn that the World Bank will commit to Africa over the next three years will be for infrastructure.

Chinese investment

Many projects are being built by Chinese companies, including China Harbour Engineering Company, China Major Bridge Engineering Company and China State Construction Engineering Corporation. The $60bn fund for African infrastructure that was announced at the China-Africa Forum for Cooperation (FOCAC) summit in Beijing in September was just the latest in...

To continue reading