A high perception of risk is one of the major challenges for infrastructure investment in African countries, and much focus is needed to “get things done” and move to another level of development for the perception of risk to fade.
Infrastructure needs in sub-Saharan Africa were estimated at $100-billion a year; however, despite robust private investment, with South Africa attracting the highest concentration of funds, a funding gap of more than $31-billion remained.
“African assets have been undervalued because Africa’s risk has been exaggerated; [however,] that seems to be changing and I think the financial crisis has accelerated the change. All we have to do is fight and mitigate the risk,” African Development Bank (AfDB) president Donald Kaberuka said.
Speaking at the forty-ninth AfDB annual meeting, held in Rwanda this week, he said it was time to focus on commercially viable projects that were already in place.
“Instead of focusing on what is not working, why don’t we focus on how to make things work? We should spend more time showing things that are happening in Africa,” Kaberuka pointed out.
At the event, panelists discussed ways to reduce the perception of risk in Africa, with World Bank Africa VP Makhtar Diop stating that “many things” were happening in Africa that were changing the perception of risk.
“There is a perception of investment risk in Africa by foreign direct investors and it’s time for the continent to assess the risk in a specified and transparent way,” he said.
There was a need to build a better brand for bankable African infrastructure projects and to work to establish African infrastructure investment as an investable asset class – rather than as a development product.
Africa Investor CEO and vice chairperson Hubert Danso suggested that the AfDB and the World Bank work with regulators to put in place incentives that “make it easier” for African pension and sovereign wealth funds to invest in domestic and regional infrastructure investment projects.