Politics
African Development Bank Raises Funding as China Boosts Role
Infrastructure Shortfall
The AfDB’s fund will help complement China’s investment in Africa given the scale of the infrastructure shortfall in the region, said Alastair Herbertson, an investment specialist at Investec Asset Management. “The actual quantum of the infrastructure investment deficit is so great that all of this goes together,” Herbertson said by phone from Cape Town on May 15. Herbertson also said, “It’s never going to displace the Chinese investment.”
Faster economic growth is putting pressure on ailing infrastructure. Africa’s economy will probably expand 4.8 percent this year, with West Africa growing the fastest at 7.2 percent, the AfDB said in its African Economic Outlook report, which is co-written by the Organization for Economic Co-operation and Development and the United Nations.
The AfDB, which is marking its 50th anniversary this year, will focus its funding on large-scale projects, mainly in energy and transport, in all 54 countries across the continent, Neside Tas Anvaripour, who heads Africa50 fund, said in an e-mailed response to questions on May 15.
Low Savings
“There is a huge infrastructure gap and we need capital from elsewhere to address it” Admassu Tadesse, president and chief executive officer of PTA Bank, based in Burundi’s capital, Bujumbura, said in an interview in Kigali today. Tadesse went on to say, “The savings in the region are too low compared to capital investment needs.”
Given the scale of Africa’s financing needs, the Africa50 fund is too small to bridge the funding gap and more businesses need to be encouraged to invest in infrastructure, said Aurelien Mali, vice president and senior analyst at Moody’s Investors Service. This will require reforms in industries such as electricity because the regulated price for energy in many countries doesn’t cover the cost of producing it, he said.
“Until it’s done, the investment is not going to happen,” Mali said. Finally, Mali concluded, “It’s one of the first rules: you don’t invest in something if you are not going to have a return, or if it’s a loss-making situation.”
Source: Bloomberg
