Derisk infrastructure projects to woo investors, African States told

A section of participants follow proceedings at the KICC on May 27, 2024, during the opening ceremony of this year's board of governors of the African Development Bank. [Collins Kweyu, Standard]

Infrastructure projects are poised to play a key role in the success of the African Continental Free Trade Area (AfCFTA) with policymakers insisting on the need to derisk these investments to attract the private sector.

At the ongoing African Development Bank (AfDB) annual meeting in Nairobi, the continent’s dependency on developed nations to fund these projects was discouraged.

It was also noted that the slow  growth of infrastructure across Africa has hurt industrialisation - leaving the continent trading in raw materials instead of finished goods as envisioned in trade agreements.

South Africa High Commissioner to Kenya Johanness Mahlangu said this dependency had African nations caught unaware in recent times due to macro conditions, among them the financial market meltdown and the Covid-19 pandemic.

Mr Mahlangu said the reliance on traditional Western partners should be countered with South-to-South corporations and intra-Africa trade.

He cited infrastructure and connectivity deficit and trade agreements with developed markets as some of the challenges that face the implementation of the AfCFTA. The Rainbow Nation’s envoy said trade agreements with developed countries should be complementary to AfCFTA.

“Our industries have remained small scale and infrastructure development has been on a snail space. These are some of the factors that have affected the development of Africa hence we are still dependent on trading of basic commodities,” he said.

Mr Mahlangu was speaking during a breakout session on building resilient African economies in the face of economic shocks.

The discussion was in line with the theme for the AfDB meeting - Africa’s Transformation, African Development Bank Group, and Reform of the Global Financial Architecture.

He said Covid-19 exposed the continent’s overdependency on Western markets, noting that AfCFTA as well as BRICS+ (Brazil, Russia, India, China, and South Africa) have enormous opportunities to reverse this trend.

“We have witnessed the expansion of BRICS to BRICS+ and more developing countries are expected to join. The expansion of these groupings with the context of AfCFTA presents even more opportunities,” he said.

He added: “We have to change and focus on something that will not catch us unaware when such pandemics come.”

BRICS+ is an intergovernmental organisation comprising of formerly comprising of Brazil, Russia, India, China and South Africa before Iran, Egypt, Ethiopia and the United Arab Emirates also joined. The last four countries were admitted this year.

Heavily funded

East African Business Council (EABC) Executive Director John Bosco Kalisa said infrastructure is one of the reasons behind East Africa’s 5.4 per cent growth.

He noted the growing challenge in the region, where infrastructure is heavily funded by the governments and the development partners, crowding out the private sector. “The role of the private sector has been very marginal. It accounts for only three per cent,” he said.

He called for the derisking of our infrastructure investment. “We need to create an enabling environment for the private sector to invest in infrastructure development both roads, ports, and digital,” he said, citing Kenya as a leading market for digital infrastructure on the continent.

Mr Kalisa urged the continent to embrace multimodal transport to reduce trading costs.

“How do we ensure our ports are active where ship turnaround is four days yet in other places it is 24 hours,” he said.