Africa Infrastructure Index; $108B financing gap

New estimates by the African Development Bank suggest that the continent’s infrastructure needs amount to $130–170 billion a year, with a financing gap in the range $68–$108 billion.

With an estimated infrastructure gap up to $107.5 billion a year, and urgent needs in health, education, administrative capacity, and security, AFDB suggests that the continent has to attract private capital to accelerate the building of critical infrastructure needed to unleash its potential.

According to the research, poor quality infrastructure services can increase the input material costs of consumer goods by up to 200 percent in certain African countries. In Madagascar for instance, supply chain barriers can account for about 4 percent of total revenues of a textile producer (through higher freight costs and increased inventories), eroding the benefits of duty-free access to export markets. Small and medium enterprises (SMEs) tend to face proportionally higher supply chain barriers and costs.

The Africa Infrastructure Development Index (AIDI), produced by the African Development Bank also ranks infrastructure developments across the continent based on four main components: transport, electricity, ICT, and water and sanitation.

These components are disaggregated into nine indicators that have a direct or indirect impact on productivity and economic growth.

In the updated version, there is a wide variation among African countries in their infrastructure gap, with a range of more than 90 percent between the country at the top of having good infrastructure (Seychelles) and the country at the bottom (Somalia).

According to AFDB, more than $100 trillion is managed by institutional investors and commercial banks globally. Therefore, african countries seeking financial resources for infrastructure developments now have a wide variety of options, well beyond foreign aid.

AFDB further notes that African countries should better leverage public funds and infrastructure investments, while encouraging private sector participation. It urges Govts to involve institutional investors in African infrastructure through reforms and new financial instruments.