Who pays for African infrastructure?

According to a report by The Economist Corporate Network (ECN), a crucial enabler to building, upgrading and maintaining Africa-based infrastructure is the collective support provided by development finance institutions (DFIs) and export credit agencies.Some of the largest and most active institutions supporting Africa-based infrastructure projects and initiatives include the World Bank, Development Bank of Southern Africa (DBSA), African Development Bank (ADB) and the Agence Francaise De Développement (AFD), with over 67% of funding approvals provided by them.The Infrastructure Consortium for Africa (ICA) estimates that, in 2013 alone, around US$44 billion in DFI-sourced funding was committed to various infrastructure projects across Africa. The private sector, by comparison, is only estimated to have invested around US$9 billion in this year, just 17% of the total combined private and DFI funding that year.So the question now is why are DFI’s so popular for finance, as opposed to capital markets and commercial banks? According to the report the answer is not clear-cut, but some of the reasons include the following:Many DFIs have A-grade credit ratings, allowing them to source capital at lower rates than individual companies or many countries can. The benefits of a lower cost of capital are reflected in the terms extended by DFIs to funding recipients.DFIs, unencumbered by regulations that impact on commercial players such as banks, are also able to offer longer-tenor-loan agreements.Moreover, DFIs play a role when commercial players are constrained (for example, during the 2008 financial crisis) or find that the market conditions associated with a particular project or country are not conducive to lending.The Asian funding armAsia-based DFIs have played a large role in the funding of African infrastructure projects, China-based DFIs, in particular, are estimated to be the largest single source of funding, contributing over US$13.4 billion in Africa in 2013 alone, according to the Infrastructure Consortium for Africa (ICA).Chinese support for Africa based infrastructure has been focused on industries in the transportation sector: Rail, roads, airports and seaports. The report states that in 2013 China-sourced funds were nearly nine times higher than those of the second-largest contributing nation (Japan) and nearly 79 times greater than the total contributed by South Korea.China-based DFIs and policy banks, such as China Exim, have committed to as much as US$1 trillion over the next decade or so, in support of Africa-based investments of Chinese companies and the foreign-policy objectives of the Chinese government according to the report.INFRASTRUCTURE NEWS

Who pays for African infrastructure?

Comments

Namibian Sun 2026-08-07

Please login to leave a comment

Who pays for African infrastructure?

Comments

Namibian Sun 2026-08-07

Please login to leave a comment

Subscription Required to Access Content ×

Login

Subscription Required to Access Content