The answer to Africa’s infrastructure financing

THE commonly accepted US$93 billion a year infrastructure funding gap constraining sub-Saharan Africa’s growth may be closing faster than most people give credit.

This is according to research conducted by professional services firm EY (formerly Ernst & Young) and discussed at an Infrastructure Investing in Africa symposium co-hosted by the Gordon Institute of Business Science (Gibs) and the Southern African Venture Capital and Private Equity Association (Savca), earlier this year.

Discussing the findings, EY’s Michael Lalor said the research found that more is happening in Africa (including North Africa) than had previously been recognised. Furthermore, approximately one-third of projects foundered at the implementation phase, and it was here that private equity was starting to play a significant role in accelerating infrastructure funding.

“Project preparation and lack of institutional capacity were the key variables, and it was here that private equity and the indeed entire private sector can play an important role,” said Lalor.

The EY research found that approximately 800 meaningful projects were under way (at the time of the research) valued at US$700 billion across the continent, averaging about US$100 billion a year – indicating the extent to which the funding gap was closing.

This amount was split roughly 50/50 between governments and external funding, but with the private sector contributing only 8,8 percent to 13 percent of the total.

The research also disclosed that it was a myth that China was by far the biggest investor.

Though China invested a substantial 13 percent of the total, that figure had stabilised in recent years, while investment from Arab countries into North Africa had grown substantially.