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African countries urged  to consider innovative infrastructure financing

24th October 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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African countries should consider innovative solutions to finance infrastructure development that would enable the continent to unlock quality growth, the Africa Progress Panel (APP) has argued.

The organisation, which is chaired by former UN secretary-general Kofi Annan, pointed out that, according to a 2009 estimate, plugging the continent’s infrastructure gaps would cost Africa $48-billion a year for a decade, with economic growth and urbanisation further widening the gap.

The APP noted that Africa had already begun to tap into global financial markets, while domestic tax and savings also offered solutions in terms of infrastructure investment.

“By extending their tax reforms to African countries, G20 and Organisation for Economic Cooperation and Development countries can support a clampdown on tax avoidance and evasion, which cost Africa billions of dollars each year.

“African governments can boost available infrastructure funds both by reforming their domestic tax systems and by making their banking systems more competitive,” the organisation said, pointing out that higher savings helped finance investment in East Asia’s high-growth developing countries.

“But with some of the highest spreads in the world, Africa’s interest rates deter both savings and investment,” the APP pointed out.

Further, the continent also had to tackle the common perception that its infrastructure projects were high risk.

The organisation said the development of insurance markets could help in this regard through the accurate measurement of risk.

“Meanwhile, the global community can help by scaling up operations of the Multilateral Investment Guarantee Agency and by using the International Development Association to cover the costs of insurance premiums on infrastructure projects.

“Improved regional cooperation also offers solutions through economies of scale for infrastructure. Africa may also wish to tap into its combined foreign exchange reserves – around $450-billion in 2012 – to finance infrastructure bonds,” the APP suggested.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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