The African Union’s economic development programme, the New
Partnership for Africa’s Development (NEPAD)
gathered international investors and CEO-level business leaders at the NASDAQ
Stock Market on Monday, September 18, for the launch of its 5 per cent Agenda
campaign to bridge the $68 billion infrastructure finance gap, reports ITRealms.
This is coming five years after a January 2012 African Union
Summit adopted the Programme for Infrastructure Development in Africa (PIDA)
which sets out 51 cross-border infrastructure programmes and more than 400
actionable projects in four sectors.
According to the World Bank, the continent needs to spend
$93 billion annually (44% for energy; 23% for water and sanitation; 20% for
transport; 10% for ICTs; and 3% for irrigation) until 2020 to bridge its
infrastructure gap, which is currently removing an estimated 2% of GDP growth
every year. On the other hand, Africa only managed to close 158 project finance
deals with debt totalling $59 billion over the decade 2004-2013, which
represents only 5 percent of infrastructure investment needs and 12 percent of
the actual financial flows.
The 5% Agenda campaign highlights that only a collaborative
public-private approach can efficiently tackle these issues and calls for
allocations of institutional investors to African infrastructure to be
increased to the declared 5% mark.
Speaking at the launch event in New York, Ibrahim Assane
Mayaki, NEPAD Chief Executive Officer, commented: “Infrastructure plays a
leading role in supporting growth on the continent. At the same time, it can
represent an innovative and attractive asset class for institutional investors
with long-term liabilities. By launching the 5% campaign in New York today, we
invite investors to take advantage of the wide-ranging opportunities Africa has
to offer and to move forward with what can only be a win-win partnership”.
The launch of the campaign gathered high-level international
investors and business leaders, including members of the PIDA Continental
Business Network (CBN) which is spearheaded by NEPAD and constitutes a
CEO-level private sector infrastructure leaders dialogue platform on PIDA.
Tony O. Elumelu, one of Africa’s most prominent
entrepreneurs and active participant in the CBN said: “Africa is getting
stronger every day with new business opportunities and innovative ideas but
what is still crucially missing is project implementation. A coherent and
coordinated approach is needed to mobilize institutional investors while
limiting their risk exposure. African governments need to work on creating
conducive environments to attract these investments which are so vital for the
continent's growth and development.”
According to a 2016 McKinsey report, institutional investors
and banks have $120 trillion in assets that could partially support
infrastructure projects.
Now more than ever, Africa needs to tap into this available.
As banks face additional regulatory challenges and as governments have limited
fiscal space, it is becoming increasingly urgent to unlock additional flows
from long-term institutional investors such as insurers, pension funds, and
sovereign wealth funds.
For pension and sovereign wealth funds to be able to invest
in large-scale infrastructure projects in Africa, a variety of issues need to
be addressed to strategically and intentionally facilitate long-term
allocations. Chief amongst these matters is the need to reform national and
regional regulatory frameworks that guide institutional investment in Africa.
Likewise, new capital market products need to be developed that can effectively
de-risk credit and hence, allow these African asset owners to allocate finance
to African infrastructure as an investable asset class to their portfolio.
All these issues are at the heart of the 5% Agenda roadmap,
which is the backbone of NEPAD’s campaign and is foreseen to have the following
impact:
1. Unlocking
notable and measurable pools of needed capital to implement regional and
domestic infrastructure projects on the continent.
2. Broadening
and deepening the currently very shallow African capital markets, whilst at the
same time contributing significantly to regional integration and job creation.
3. Promoting
the development of innovative capital market products that are specific to the
continent’s challenges and potential in regards to infrastructure development.
4. Raising
the investment interest of other institutional and non-institutional financiers
that so far have been hesitant to include African infrastructure projects as an
asset to their investment portfolio based on specific, concrete next steps and
project suggestions.
Ayo Midele/GEE
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