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High level of risks remains the most intractable challenge undermining the fixing of infrastructure gaps in Africa. This was the submission of the President of African Development Bank (AfDB), Dr Akinwunmi Adesina at the ongoing UK-Africa Investment Summit (UK-AfIS).
Business Hilights recalls that the summit is coming on the joint bills of the Department for International Development (DFID) and Her Majesty’s Trade Commissioner for Africa.
Giving an analogy, Dr Adesina said “A critical constraint to investments in infrastructure is the high level of risks, ranging from project risks, financial risks, operational risks, and political risks. De-risking instruments such as partial risk and partial credit guarantees are quite effective in leveraging private sector investments.
He recalled that the bank used a partial risk guarantee to support the Lake Turkana wind power project in Kenya, the largest wind power generation project in Africa, which will produce 300 MW of electricity.
“The African Development Bank’s €20 million Partial Risk Guarantee essentially backstopped the government of Kenya’s obligations to developers against delays in the construction of transmission lines.
According to him, “The African Development Bank also has a Private Sector Credit Enhancement Facility, which it uses to reduce risks of financing private infrastructure projects in fragile states. And it works: so far with $500 million in credit guarantees, provided through the African Development Fund, it has leveraged $2.5 billion of financing into fragile states. And the default rate is zero.
“To attract even more infrastructure investments, two years ago, the African Development Bank launched the Africa Investment Forum, to advance bankable projects, secure financing and accelerating financial closure for projects. In 2019, at the fully transactional forum, investor interest was secured for projects worth $40.1 billion in less than 72 hours. The African Development Bank and its partners have formed a formidable financial alliance that pools together development finance institutions, commercial banks and insurers, with a co-guarantee platform to de-risk infrastructure projects at scale.
“There’s so much to do to help close the infrastructure financing gap in Africa. Progress is being made as Africa witnessed an increase in infrastructure financing to $100 billion in 2018, an increase of 24% over 2017 and 38% over 2015-2017 on average.
Dr Adesina noted that “As we develop and deploy innovative instruments for infrastructure, mobilize domestic resources, support governments to do the right things, and create more opportunities for greater private sector investments, we will fully meet Africa’s infrastructure financing demand.”
He therefore called on development partners to amongst other things, “do more to accelerate sustainable infrastructure investments in Africa.”
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