SPECIAL REPORT
Africa missed the third industrial revolution but now has a great opportunity to be at the forefront of this green( 4th) revolution. This is why the African Development Bank puts such a strong focus on renewables, and why I am so optimistic about the future of renewable energy in Africa.
What role do public-private partnerships( PPPs) play in the development of large-scale projects in Africa?
Public-Private Partnerships( PPPs) are increasingly seen as a logical and appropriate recourse to deal with the problem that governments alone lack the ability to finance infrastructure and other large-scale projects.
The African Development Bank is aware of the benefits of a well-managed and balanced PPP and, therefore, assists member countries as lender and advisor in supporting PPPs.
Most governments look for the key elements that enable a PPP to be successful, effective and profitable,
yielding the anticipated“ win-win solution” for all participants, stakeholders, and beneficiaries. In the Bank’ s experience, the elements to look for are strong political support; a robust legal framework; an incentivised private sector; and end-user engagement.
PPPs essentially represent a contractual relationship between the public and private sector for the management of risks and the sharing of revenues from the provision of a service over a period of time. Governments, keen to conclude PPPs and deliver on promises and policies, sometimes take risks that they are not able to manage. The PPP Knowledge Lab, a centre established by the African Development Bank with other Multilateral Development Banks, produces guidance on PPP conditions in different sectors and on the apportionment of risks in specific deals.
The Bank’ s involvement in most transactions has been key to attracting private capital and reducing transaction costs. Two examples are:
Dakar-Diamniadio Highway- Senegal: The Bank’ s participation with 15 percent financing of total cost(€ 375 million) crowded in at least 20 percent extra equity from the private sector. The project was delivered on time and within budget and resulted in faster travel times and better access for 300,000 people to social and economic services, production centres and job opportunities.
The Henri Konan Bédié( HKB) Bridge- Cote d’ Ivoire: The Bank participated with 20 percent financing of the total cost(€ 300 million) and crowded in at least 30 percent equity from the private sector. The bridge was built over a period of three years on time and within budget. The success of the HKB Bridge project provided a basis for other PPP investments in Africa.
What steps have been taken to help bridge the funding gap for infrastructure in Africa?
Africa’ s infrastructure needs are estimated at $ 130-170 billion a year, leaving an annual financing gap of $ 68-108 billion a year. Africa, therefore, needs to look beyond aid and tap into the estimated $ 100 trillion managed by institutional investors and commercial banks globally. A small fraction of the excess global savings and low-yield resources would be enough to plug Africa’ s financing gap and underwrite productive and profitable infrastructure. That would boost demand, create employment in rich and poor countries alike, and move the world towards peace and prosperity. In ideal political circumstances, a global pact between rich and poor nations would codify a“ grand bargain” based on infrastructure financing.
African countries need to accelerate their investments in infrastructure and find new mechanisms and instruments to fund their most urgent needs. They can leapfrog directly into the global economy by building well-targeted infrastructure to support competitive industries and sectors in industrial parks and export processing zones linked to global markets.
In this context, the African Development Bank is scaling up its efforts to leverage financial resources from the private sector to help the continent meet its development needs in infrastructure.
The overall resourcing needs across the High 5s over 2016-2025 are estimated at over $ 1 trillion. The Bank has committed to mobilise over $ 269 billion during the same period. In order to finance this ambitious agenda, a greatly enhanced role for institutional investors is critical.
That is why the African Development Bank launched the African Investment Forum, a transaction driven
14 • COMESA • 2018