Africa development bank out to tame high cost of doing business to increase investment

More than Sh9.8 trillion ($100 billion) is required to finance infrastructure and other economic sectors in Africa with a view to reduce cost of doing business.
African Development Bank (views that for the continent to be a favourable business and investment environment, more resources will have to be mobilized and efficiently applied.
Recently during the concluded bank annual general meetings in Abidjan, Cote d 'Ivoire outgoing president Donald Kaberuka observed that the next 10 years the bank needs to up the game of mobilizing more resources to address the state of infrastructure as well as enhancing regional economic integration.
Kaberuka observed that state of infrastructure in Africa is still in wanting state and thus requires urgent resources to improve it.
The continent has been suffering out of low investments as investors avoid and relocate from the region for others citing high cost of doing business largely due to poor infrastructure.
"Our urgent priority in coming years ought to be seeking more resources to fund various infrastructure projects mainly roads, energy, transport corridors, Information Communication and Technology (ICT) and water in all the countries. Increasing funding to infrastructure will help in reducing the cost of doing business and thus encourage more production in addition to attracting more investments," said Dr. Kaberuka.
He added, "Over the last ten years, the bank has only been able to spend $28 billion to finance infrastructure of which $11 billion was allocated to finance energy, $11 billion for transport, $4 billion for water and $2 billion for Information Communication and Technology (ICT)."
To make the infrastructure projects succeed, Kaberuka opined that African countries need to be more innovative, for example, by getting the projects them ready and de-risking them to attract additional private capital.
"Further, deregulation in the energy sector, including reform of energy subsidies, strengthening the balance sheets of the national off-takers and truly independent regulations. My belief is that there are too many regional, sub-regional infrastructure funding initiatives, which are fragmented and cannot attain critical mass.
"Kaberuka observed that Africa spends about $11.6 billion per year on developing power sector infrastructure, which is only about a quarter of the annual financing requirement.
He opined that to plug the investment gap, African countries will require private sector investment. This implies that the continent has to think of creative solutions such as sovereign bonds to help finance infrastructure in Africa.
Kenya last year floated a sovereign bond in the international market which realized $8.8 billion, slightly more than four times the $2 billion, the government had presented.
Although some countries have succeeded in attracting Independent Power Producers (IPPs), a lot more is required if Africa is to overcome its chronic underinvestment problem. Kenya together with Ghana, Togo, Senegal, and Tanzania are some of the countries that have excelled in development of IPPs.
"The continent is suffering from poor performance of power industry due to conflict, poor management, high level of poverty, lack of financial resources, uneven distribution of energy resources and consequent affordability issues on the part of consumers," he added.
Kaberuka observed that Africa is an energy deficit region thus the need of more resources to be committed in initiating projects geared towards producing more power to boost national grids. He called on the African countries to ratchet up economic integration in the continent on physical infrastructure side, on soft issues, as well as regional public goods.
Over the last 10 years the bank has committed $4 billion to enhance regional integration ranging from transport corridors to power pools.
In one of the sessions convened during the meetings on how to finance infrastructure, the bank AfDB, acting Vice-President and Chief Economist Steve Kayizzi-Mugerwa said governments can do more to finance their own infrastructures, through taxation, for instance; and to make sure that the infrastructure built is effective and well maintained.
And to ensure that people, especially in the rural areas, benefit from the completed projects.
Cote d'Ivoire President Alassane Ouattara observed that fixing the physical infrastructure will largely improve state of business in the continent and thus help in taming many challenges countries are grappling with.
"As African leaders we need to remove administrative barriers, develop the capital markets, regional integration and be innovative in energy production," said Mr. Quattara.