IFC chief eyes Africa infrastructure spend
THE new head of the International Finance Corporation (IFC), Jin-Yong Cai, believes the private-sector lender of the World Bank should “step up its game” in helping Africa to secure big infrastructure deals that are vital for its economic transformation.
To Mr Cai, a former Goldman Sachs executive in China who became the corporation’s CEO six months ago, Africa is the growth story of the next two decades, but is badly in need of roads, railways, ports and reliable electricity.
A growing population and rising new middle class demanding better services and housing have added to the urgency for better infrastructure in African cities, Mr Cai said in an interview.
“There are deals that can be done, but we need to make them bankable,” he said.
“To do that we have to find ways to mitigate risk, allocate risk, and create an investment climate that gives investors clarity and transparency. We see that there is a huge need in this area, and we think we can make a difference.”
While Africa’s natural resources have attracted increased private investment capital, little of that has gone into infrastructure, leaving budget-strained governments to shoulder the cost of developing projects. China’s arrival in Africa has boosted infrastructure development, but much of it has been to link resource-rich areas by road and rail with warehouses and ports.
Meanwhile, the global financial crisis and stringent capital requirements have reduced the number of big banks willing to provide project financing for infrastructure development.
Local banks are willing to step
In the postfinancial crisis world, we must act as a catalyst both in fragile and poor countries
in but do not have the capacity to provide long-term loans for infrastructure investments.
“In the post-financial crisis world, our role has become even more important — we must act as a catalyst both in fragile and poor countries,” said Mr Cai. “We should be very ambitious in identifying the key bottlenecks and be bold in delivering infrastructure projects or services,” he said.
The World Bank has identified poor infrastructure as one of the biggest obstacles to higher and sustained growth in Africa. It has estimated that the lack of infrastructure in Africa has reduced national economic growth by two percentage points annually and cut output by as much as 40%.
The World Bank has estimated $93bn a year is needed over the next decade to boost infrastructure investment in the region. About two-thirds of that is needed to develop new infrastructure and another $30bn for maintenance.
Last year, the International Finance Corporation mobilised $3.4bn in infrastructure globally, of which $688m is in Africa.
“As economies continue to grow, that gap will get much bigger. Our organisation can be the problem-solver and we intend to step up our game,” said Mr Cai.
Poor infrastructure is also blamed for limited intra-African trade. “We need to be involved in important regional transactions, where we can serve as deal maker and enabler,” he said. Reuters