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The development of infrastructure within Africa is of paramount concern across the continent. Traditionally, many countries have turned to China for the financing of mass projects. However, with China facing its own domestic challenges and financial constraints, this source of funding is becoming less reliable.
RMB Africa Focus S3: E3 | Where public private partnerships take flight
What was discussed
Crystal Orderson looks at the infrastructure challenges African countries face and how they are increasingly looking inward, seeking support from local banks and private sector players to bridge the financial gap and shift Africa’s economic trajectory towards sustainable growth.
“Financing Africa's infrastructure is still a very, very big challenge.”
Addressing the infrastructure financing gap
The African Development Bank, the continent’s leading authority on economic development, estimates that around $130 billion is needed annually for infrastructure development. However, there is a substantial shortfall of approximately $70 to $100 billion. Governments across the continent are acutely aware of this gap and simply do not have the money to invest in infrastructure like ports, roads or providing essential services like water and electricity. They understand the need to look internally and engage with banks and private sector players to help bridge the financial gap.
“The continent needs banks to come on board to breach that infrastructure gap.”
The Role of Public Private Partnerships
This situation underscores the critical importance of the African Continental Free Trade Area (AfCFTA), which came into force in 2019 and aims to increase intra-African trade but requires robust infrastructure to achieve its goal of connecting 1.5 billion people across 54 countries and significantly enhancing the continent’s GDP, estimated at $3.5 trillion.
“PPPs are essential to unlocking economic opportunities presented by the African Free Trade Pact."
The UN Economic Commission for Africa notes that aging infrastructure hampers regional integration. Public-Private Partnerships are essential to unlocking the economic opportunities presented by AfCTA. They allow governments to retain ownership of infrastructure while contracting the private sector to perform specific functions such as maintaining and operating facilities. While there are sceptics, the potential of the AfCFTA to drive infrastructure development and foster more Public-Private Partnerships is immense, offering a promising path to sustainable growth.
The development of Port Harcourt
In West Africa, Public-Private Partnerships have significantly boosted infrastructure, particularly in Nigeria. The development of new port terminals for exports at Port Harcourt, a major oil-producing city, has been significantly supported by a Public-Private Partnership collaboration. Orchestrated by RMB, a consortium including the International Finance Corporation, international banks and the African Development Bank invested $1.25 billion in a fertilizer production project in Port Harcourt. By addressing the fertilizer shortages exacerbated by COVID-19 and the Ukraine crisis, it has generated thousands of jobs, proving a game changer for agricultural productivity in West Africa.