Infrastructure and Africa’s Development: The Imperative of Alternative Funding Options

Abstract

From an estimated funding gap of $93 billion a year up to 2020, Africa’s infrastructure financing needs were further revised to $130–$170 billion annually. The Program for Infrastructure Development in Africa Priority Action Plan projects were estimated to gulp $68 billion and an estimated $300 billion for other projects up to 2040. Given the rate of urbanization due to population growth, migration, and other demographic factors, these estimates would likely increase as pressures are put on existing infrastructure with marginal or zero net investments in infrastructure. While several initiatives have been established to frontally deal with the continent’s infrastructure deficit, actual implementation has been frustrated by financial constraints. Resort to conventional financing methods has proven unsustainable. Africa must look beyond the conventional. This paper draws heavily from the infrastructure finance literature and catalogues a number of infrastructure-financing options to include Sovereign wealth funds, pension funds, as well as public–private partnerships arrangements. Data from countries who have actually begun implementing these options show that there are prospects for infrastructure development if applied in a large continental scale. A key recommendation of the paper is that governments must reform the legal, regulatory, and institutional frameworks across the continent to accommodate these financing sources. Regionalization of infrastructure provision may prove a speedier way of bridging Africa’s infrastructure deficits.