The African Development Bank (AfDB) forecasts that by 2025, Africa will need $170 billion annually for infrastructure funding. Multilateral development banks and government-supported institutions play a vital role, contributing around $100 billion to $120 billion each year to development projects in low- and middle-income nations. Despite this, a significant financing gap remains, leading to many critical projects being left underfunded.
Addressing Africa’s significant infrastructure needs in areas like energy and healthcare cannot rely solely on governmental actions. To bridge the financing gap, innovative funding mechanisms, such as public-private partnerships and cross-border investments, are essential. Engaging private capital through strategic partnerships with export credit agencies, development finance institutions, and multilateral organizations can considerably aid in unlocking the necessary financial resources.
The Emerging Africa Infrastructure Fund (EAIF), a public-private partnership, provides long-term debt financing for infrastructure projects in sub-Saharan Africa. In its latest funding cycle, EAIF successfully obtained $294 million in debt facilities, representing one of the largest blended finance debt packages for African infrastructure. Key stakeholders include the governments of the UK, Netherlands, Sweden, and Switzerland. Additionally, EAIF attracts debt capital from private entities like Allianz and Standard Chartered Bank, enabling it to offer adaptable and patient capital for significant infrastructure projects that improve connectivity, promote regional cooperation, and foster sustainable economic growth across the continent.
New initiatives address systemic challenges
Various projects led by Standard Chartered exemplify how international collaborations can address systemic infrastructure challenges in Africa. In Angola, water scarcity, exacerbated by climate change, is a serious issue. A €22 million loan is aiding the development of clean water infrastructure for rural areas in Luanda. The Quiminha water project aims to renovate the Quiminha Dam and establish new water storage and distribution networks, potentially benefiting around 100,000 residents in rural communities.
This project strives to enhance living standards and stimulate economic growth by ensuring a reliable supply of clean water for both industrial and agricultural uses in the Quiminha region, which is crucial for agriculture. The World Bank recognizes agribusiness as vital for Angola’s economic diversification. This initiative illustrates how global financing expertise can help mitigate climate-related challenges while improving access to needed resources.
In rural Angola, a substantial €1.29 billion financing agreement was finalized with Standard Chartered to establish solar-powered electricity distribution networks for off-grid communities. This initiative enhances energy security while fostering sustainable development goals by decreasing reliance on traditional energy sources. Utilizing renewable energy not only strengthens local energy resilience but also significantly advances global climate targets. Such initiatives effectively address urgent infrastructure needs and provide long-term advantages through improved trade and connectivity, leading to a sustainable and prosperous future.
In a recent collaboration, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) and a banking partner funded a $174 million project to build hospitals in Kong and Odienne, enhancing Côte d’Ivoire’s healthcare infrastructure. These hospitals, equipped with modern technology, aim to increase access to high-quality medical services. This investment aligns with the government’s National Development Plan and the missions of the IMF and WHO to strengthen healthcare systems in developing countries.
Energy infrastructure remains a critical investment focus across Africa. In 2022, CrossBoundary Energy Access (CBEA) successfully raised $25 million from ARCH Emerging Markets Partners Limited, the Microsoft Climate Innovation Fund, and private banks. The funding is allocated for solar-powered mini-grids throughout Africa, aiming to deliver clean energy to one million people and support the United Nations Sustainable Development Goal Seven (SDG7), which focuses on affordable and clean energy.
In Tanzania, the Ministry of Finance formalized a facility agreement with Standard Chartered Tanzania, designating it as the global co-ordinator, bookrunner, and mandated lead arranger for a $1.46 billion term loan focused on financing the 550km Standard Gauge Railway (SGR) project connecting Dar es Salaam and Makutupora. This railway will link Tanzania to Burundi, Rwanda, and the Democratic Republic of Congo (DRC), enhancing regional trade. The project has already created over 8,000 direct jobs for Tanzanians and opened up opportunities for local communities to access social services. It stands as one of the largest infrastructure projects in the country. According to the Tanzania Railways Corporation, the railway will alleviate congestion and reduce freight service costs by 40%, allowing the transport of 10,000 tons of goods, equivalent to 500 lorries, per trip.
The urgent call for investment
Financing Africa’s infrastructure challenges extends beyond mere financial figures; it encompasses creating an environment conducive to investment while ensuring projects are sustainable, resilient, and inclusive. Now is the time for innovative financial models and cross-border partnerships to tackle the infrastructure crisis.
International investors, development institutions, and private capital providers must continue to collaborate, harnessing their combined expertise and resources. The potential for transformative impact is substantial – these initiatives not only lead to immediate infrastructure enhancements but also generate jobs, improve living conditions, and promote sustainable development.
By mobilizing the necessary capital for resilient infrastructure, Africa can make significant strides toward industrialization, job creation, and integration into global trade, thereby securing a thriving future for its populations.
The time for decisive action is now. International partnerships and investments must align with Africa’s ambitious vision for the future, ensuring that infrastructure becomes the foundation of the continent’s economic transformation.
