The latest on Infrastructure Development in Africa
source: AEP – Africa Energy Portal
Investment in Africa’s infrastructure boom has significantly declined in the last few years. Compared to peak levels seen in previous years. A report by global law firm Baker McKenzie attributes this slowdown in infrastructure investment to factors such as economic contraction and the global Covid-19 pandemic. Africa Infrastructure development remains crucial for economic and social transformation on the continent. Statistics suggest that only 38% of the African population has access to electricity, with a dire continental internet penetration of 13.5%.
Infrastructure Investors in Africa
China
Report data shows a surprising increase in lending from Chinese banks in 2020 towards energy and infrastructure projects in Africa. The deal values are much lower than the peak in 2017, it is expected that lending will become more targeted towards specific projects.
International Players
Recent political changes in the US and the UK could signal capital flowing into Africa. Although bankability and risk-sharing remain a priority for US lenders, the new US administration will likely focus on impact-building and financing long-term strategic projects in Africa. The UK has indicated that there might be signs of redirecting funds towards Africa in a post-Brexit era to focus on influence, investment, and trade.
Commercial Banks
The report identified specific infrastructure gaps in energy provision, transportation, and internet access. These gaps indicate an urgent need to seek new funding sources beyond traditional lenders and international partners. Therefore, there is room to transform the funding-opportunity gap. However, commercial banks are unlikely to invest capital in this vacuum
Development Finance Institutions (DFIs) and Alternative Financing
Filling the infrastructure gap requires significant capital. According to the report, blended and multi-finance solutions are ready to enter the market. These solutions combine private equity, debt finance, and specialist infrastructure funds. Consequently, they are expected to become more popular. They will support a broader range of lenders and carry less risk on deals.
Current Infrastructure Megaprojects in Africa
Dangote Oil Refinery (Nigeria)
The Nigerian facility will be the largest single oil refinery globally. It is set to produce around 650,000 barrels of oil per day. The project is projected to cost $14 billion to complete. It will create thousands of jobs and boost the country’s economy. The facility will increase oil exports and reduce the need for petroleum product imports.
Konza Technology City (Kenya)
As part of Kenya’s Vision 2030 blueprint, the smart city will create 17,000 high-value jobs. Additionally, it will generate 68,000 indirect jobs upon completion. The project will cost $14.5 billion. It aims to resemble Silicon Valley in the US. Located 64 kilometers from Nairobi, the smart city will focus on software development, business process outsourcing, data centers, disaster recovery centers, call centers, and research institutions. Thus, it will drive significant economic growth and technological advancement.
Bagamoyo Port (Tanzania)
Anticipated to become the largest port in East Africa and Central Africa. The project is envisioned to handle twenty times as much cargo as is currently being processed in the country’s largest port in Dar es Salaam. The construction of the port is a tri-state venture between Tanzania, China, and Oman and projected to cost $10 billion. However, the port construction could take as much as 30 years to achieve its full potential.
Grand Inga Dam (Congo)
Expected to be the world’s largest hydropower scheme, this project on the Congo River could produce enough power to serve almost half of the continent. The costs of this project are forecast at $80 billion and will include the placement of transmission lines across Africa.
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