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