The African Union (AU) announced this weekend that it is setting up an infrastructure fund to finance the construction of roads, railways and power plants on the continent. The continent has an estimated annual infrastructure financing deficit of $60 billion – $90 billion.
The AU infrastructure head, Kenya’s former Prime Minister and AU’s High Representative for Infrastructure Development in Africa, Raila Odinga, disclosed plans in an interview with Reuters at the weekend. He said the continental bloc is turning to new sources of cash due to donor fatigue and higher debt levels.
Africa’s infrastructure gap makes it hard for the continent to advance its goal of integrating the disparate individual markets into a single, free trade area.
Infrastructure is urgent for the realization of the AfCFTA, otherwise it is just going to remain on paper
Raila Odinga AU’s High Representative for Infrastructure
“Africa is financially starved as far as the need for infrastructure development is concerned,” said Raila Odinga.
The African Union plans to utilise sovereign wealth funds, insurance and retirement funds in countries like South Africa, Angola, Nigeria Morocco, Egypt and Kenya, to raise the cash.
Odinga says talks with the funds are going on and the AU’s experts are setting up the legal and financial structure for the infrastructure fund, which will be administered by the newly formed African Union Development Agency.
One of the biggest funders of infrastructure projects on the continent over the past decade, China, has cut back on lending due to high debt levels among individual nations like Kenya.
“We are now trying to think out of the box,” Odinga told Reuters.
The drive to find new ways of funding the construction of roads and railways and other utilities comes as Africa seeks to bring together 1.3 billion people in a $3.4 trillion economic bloc known as the African Continental Free Trade Area (AfCFTA).
It was critical to connect landlocked nations to ports on coastlines, and complete missing links for transcontinental highways, to facilitate the free flow of goods under the AfCFTA and lift people out of poverty, he said.
“Africa needs to trade with itself,” Odinga said, citing figures which show intra-African trade is just 15%, compared with intra-European trade levels of 70% and 50% in Asia.
