African countries cannot leapfrog to industrialisation

AFRICAN countries cannot leapfrog their way into industrialisation.

Yes, there was a telecommunications jump largely bypassing landlines to mobile phones in the early 2000s, but internet penetration is still low at 36%.

Other sectors of many African economies are stagnating. For instance, electricity is a foundational requirement for industry, manufacturing enterprises, for doing business, for running hospitals, schools, and for improving the quality of life at home.

Yet, over 600 million Africans still lack access to reliable and affordable electricity.

This further depresses business productivity and generating their own power increases the operating expenses of companies.

More broadly, the objectives of the landmark African Continental Free Trade Area to boost intra-African trade are severely hampered by the limited transportation options to facilitate the affordable and efficient movement of people, goods, and services from one country to another.

The lack of adequate water and sanitation presents overwhelming and adverse health outcomes across the region.

Limited availability of irrigation hampers agricultural productivity. And so on.

On the other hand, investors regularly struggle to find a deep and broad pipeline of bankable projects. While many options are presented, the majority are unfortunately poorly structured and are not deemed to be commercially viable.

This leaves investors scrambling to participate in a small number of projects; which creates an imbalance on the market. The main bottleneck is really not the capital — it’s the lack of projects. Without a robust pipeline, African countries will struggle to see their industrialisation aspirations realised.

Underpinning this is the lack of a clear legal and regulatory enabling environment with many governments unable to identify or plan for projects. It is, therefore, imperative for African countries to individually and collectively assiduously work on creating a conducive policy environment to build a pipeline.

Project preparation is a critical first step in developing bankable projects that are able to raise capital for construction and operation.

Project preparation grants are also some of the four most common blended finance archetypes identified by Convergence.