World Bank: Unleashing the Power of Africa’s Private Sector Key to Continent’s Growth

 

TOKYO, October, 2012 – The private sector is a key but underused resource for Africa’s development, as much of the continent’s savings go yet untapped for investment. Speaking at the Africa Investor CEO Summit in Tokyo, Makhtar Diop, World Bank Vice President for Africa, stressed that public private partnerships (PPPs) can be an important instrument to mobilize these resources and address the estimated US$30 billion per year infrastructure financing gap in Africa, particularly in energy and transport.

Diop highlighted that despite the global economic crisis, growth prospects in Sub-Saharan Africa remain very positive at an expected 4.8% in 2012, while private capital flows will slow somewhat. According to him, the region’s resilience in face of the international crisis is a testament to its efforts to improve investment climate and address challenges such as jobs, infrastructure deficits (particularly power) which are constraining the creation of productive jobs.

At the same time, Diop stressed that Africa needs to consolidate and expand these gains, and that taping the private sector is essential to reach sustainable solutions and a more inclusive growth that can be translated into effective poverty reduction. He called for the engagement of African and international pension Funds, capital markets experts and corporate leaders to look into the region’s opportunities. At the same time, investments in human capital and capacity building are essential to sustain the effort. With more transactions in the pipeline across many African markets, the need for professionals to share information and network with each other is more important than ever.

On the infrastructure side, Diop highlighted that among the key challenges is achieving significantly greater power generation and turning the lights on in homes, schools, clinics, and businesses across Africa, including greater reliance on hydropower in a region where 90% of its hydro potential remains untapped. While Africa is increasingly diversifying its economy with higher value-added activities, the lack and unreliability of energy represents a major constraint to the continent’s growth potential. Good national and regional PPP frameworks would greatly facilitate investment into these areas, in turn attracting new investments.

“It is hard to compete for foreign direct investment if your energy costs 30 cents per kWh while you could have it at 5 cents in another developing country,” said Diop. “This is an essential problem for productivity and competitiveness in Africa. The whole World Bank Group is working to help countries find long term solutions in energy, and PPPs are essential to this.”

The World Bank Group has extended around $3.8 billion to support the financial close of 50 PPP transactions in energy, transport, and water in Africa. Of this amount, approximately $2.4 billion came through World Bank loans dedicated to cover the public sector contributions in PPP projects, $0.8 billion was extended in the form of Partial Risk Guarantees, $0.4 billion were extended by MIGA guarantees to private investors, and approximately $0.3 billion was via IFC investments in financing PPP projects.

The World Bank is helping build legal and institutional frameworks for PPPs and supporting regulatory capacity through technical assistance support in countries such as Nigeria, Ghana and Kenya, with a view to develop the enabling environment. This is complemented by the development of a pipeline of “bankable” projects which are likely to attract private sector interest and investment. Innovative financial instruments are being developed to help unleash the savings of institutional and individual African investors in domestic, regional and global capital markets.

The Africa CEO Summit, sponsored by the Africa Investor Magazine and the World Bank, happens on the fringes of the World Bank Annual Meetings in Tokyo, and assembled private sector representatives, African Ministers of Finance, Development Finance Institutions, donors and African policy makers. Source: WorldBank.org

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