U$170 billion a year needed to meet Africa’s infrastructure needs
Enormous funding gaps
A new report launched in South Africa at the 5th Finance in Common Summit lays out crucial gaps and opportunities for the Africa-Europe Partnership to unlock more and better finance for infrastructure.
Media Release
Africa’s infrastructure needs, estimated at U$130 to U$170 billion annually, are holding back the continent’s growth.
Despite African governments contributing approximately 40% of the current U$80 billion annual investment, a significant funding gap remains.
This gap is costing Africa a 2% annual reduction in its GDP growth. Adopting innovative financing solutions through domestic resource mobilisation and governance reforms is therefore critical for governments balancing competing budget lines.
In response, the Africa-Europe Foundation and the African Union Development Agency, in partnership with the African Climate Foundation, released a new report: The Missing Connection: Unlocking Sustainable Infrastructure Financing in Africa.
Nardos Bekele-Thomas, CEO of the African Union Development Agency (AUDA-NEPAD), said, “Infrastructure development cannot succeed when sectors operate in isolation. Energy, transport, water and digitalisation must function as parts of a larger whole, creating synergies that drive sustainability and long-term impact. Coordinating efforts across these interconnected sectors ensures that every road, bridge, or power plant becomes a vital link in a broader network that uplifts communities and fuels economic growth.”
Step up needed
Paul Walton, Executive Director of the Africa-Europe Foundation added that unlocking untapped areas of cross-continental action is in the DNA of the Africa-Europe Foundation. “At a time when the world needs the Africa-Europe Partnership to step up, our report focuses on concrete actions and processes that will unlock more money and smarter money to address the critical challenges faced by our societies.”
In the same vein, Saliem Fakir, Executive Director of the African Climate Foundation, said that the African Climate Foundation works towards transforming key economic sectors in Africa through their country investment platforms. “With that, we focus on the opportunities that can unlock the much needed investment on the continent - outlined in this report.”
Launched at the 5th Finance in Common Summit in South Africa at the end of February, in association with that country’s presidency of the G20, the report serves as an operational blueprint for African and European public development banks and regional institutions to unlock needed finance without further exacerbating the African continent’s debt crisis.
Priority areas
South Africa’s G20 Presidency, coinciding with the defining Financing for Development Conference, is key to step up the level of ambition on internal revenue mobilisation. This includes clear actions on combatting illicit financial flows (estimated at U$50 to U$115 billion per year);
The report evidences the scope for an effective partnership between Africa and Europe to unlock U$2.3 trillion in investment, pension and sovereign wealth funds currently locked-up overseas.
It also calls for enhanced co-design and co-ownership in the implementation of ‘Team Europe’ pledged financing to ensure the impact and visibility of the flagship EU Global Gateway initiative.
Leveraging African institutional sources, such as pension and sovereign funds, represents another important source of domestic revenue mobilisation. It is estimated that Africa has U$2.3 trillion investment, pension and sovereign wealth funds (SWFs) that are currently locked-up overseas. For instance, African pension funds offer enormous potential as a continental source for investment capital. In 2014, pension fund assets in Africa were estimated at U$334 billion, with growth variations across sub-regions and countries. This high growth trend was expected to continue as Africa moves towards increased coverage, and more inclusive and comprehensive systems.
In 2018, African SWFs controlled U$89 billion worth of assets, and several countries have currently established SWFs, including Angola, Gabon, Ghana, Morocco, Senegal, Rwanda, Djibouti, Nigeria, Namibia, Algeria, Uganda, Mauritania, and Zimbabwe. A total of 21 SWFs can be used as a vehicle to invest in infrastructure, boost economic growth and create jobs through public-private partnerships.
Embracing transformation
While digitally-driven approaches and organic AI solutions are emerging, accelerating growth and maturity needs industry-wide strategic and targeted interventions across the infrastructure ecosystem— from asset managers to contractors and software vendors.
Investment in digital public infrastructure is the technological backbone of sustainable development, leading to transparency in financial management and accelerated regional integration.
Africa’s infrastructure and energy challenges are significant, with the continent needing a paved road network 60 times larger per person to match the road density in China or India 24. Only six African countries, Namibia, South Africa, Botswana, Gabon, Eswatini, and Zimbabwe have a rail network density higher than the average for the US, China, and India, which is about 200 km of track per million population 25.
The other 48 African states have much lower rail densities. Additionally, Africa has the world’s largest energy deficit, with over 600 million people lacking access to electricity.
Africa plays a pivotal role in the global energy transition, with significant reserves of the minerals vital for global decarbonisation and consequent health co-benefits, as well as a vast store of arable land that can enhance food security and support export-driven growth.
Standardising infrastructure-investment data collection can streamline funding processes (‘smart money not only more money’), increase transparency between investors and managers, and maximise industry participation.
Flagship projects
The African flagship projects are a diverse portfolio. Some of these appear genuinely strategic for instance, the high voltage electric interconnection between the Europe and Egypt, Europe and Tunisia, and between Zambia, Tanzania and Kenya; supporting hydrogen plants in Morocco, South Africa and Namibia; hydropower dams in Cameroon, Rwanda, Uganda, Burundi, Zambia, Tanzania, Mozambique and DRC; fibre optic cable across Central and Southern Africa; Critical Raw Materials partnership in DRC, Tanzania and Zambia; Lobito Corridor and port rehabilitation in Senegal, Cape Verde, Gambia and Congo. These are projects where, even without project details, it is possible to construe significant mutual interest between Europe and Africa and development impact in Africa. Collectively, these initiatives and reforms alone could generate more than enough resources to meet Africa’s infrastructure investment gap. However, they require sustained governance improvements, financial transparency, and long-term equitable international collaboration. In a changing geopolitical context where development aid is contested and purse strings are tightening, it is crucial to improve the quality and efficiency of existing investments and projects.
Africa’s infrastructure needs, estimated at U$130 to U$170 billion annually, are holding back the continent’s growth.
Despite African governments contributing approximately 40% of the current U$80 billion annual investment, a significant funding gap remains.
This gap is costing Africa a 2% annual reduction in its GDP growth. Adopting innovative financing solutions through domestic resource mobilisation and governance reforms is therefore critical for governments balancing competing budget lines.
In response, the Africa-Europe Foundation and the African Union Development Agency, in partnership with the African Climate Foundation, released a new report: The Missing Connection: Unlocking Sustainable Infrastructure Financing in Africa.
Nardos Bekele-Thomas, CEO of the African Union Development Agency (AUDA-NEPAD), said, “Infrastructure development cannot succeed when sectors operate in isolation. Energy, transport, water and digitalisation must function as parts of a larger whole, creating synergies that drive sustainability and long-term impact. Coordinating efforts across these interconnected sectors ensures that every road, bridge, or power plant becomes a vital link in a broader network that uplifts communities and fuels economic growth.”
Step up needed
Paul Walton, Executive Director of the Africa-Europe Foundation added that unlocking untapped areas of cross-continental action is in the DNA of the Africa-Europe Foundation. “At a time when the world needs the Africa-Europe Partnership to step up, our report focuses on concrete actions and processes that will unlock more money and smarter money to address the critical challenges faced by our societies.”
In the same vein, Saliem Fakir, Executive Director of the African Climate Foundation, said that the African Climate Foundation works towards transforming key economic sectors in Africa through their country investment platforms. “With that, we focus on the opportunities that can unlock the much needed investment on the continent - outlined in this report.”
Launched at the 5th Finance in Common Summit in South Africa at the end of February, in association with that country’s presidency of the G20, the report serves as an operational blueprint for African and European public development banks and regional institutions to unlock needed finance without further exacerbating the African continent’s debt crisis.
Priority areas
South Africa’s G20 Presidency, coinciding with the defining Financing for Development Conference, is key to step up the level of ambition on internal revenue mobilisation. This includes clear actions on combatting illicit financial flows (estimated at U$50 to U$115 billion per year);
The report evidences the scope for an effective partnership between Africa and Europe to unlock U$2.3 trillion in investment, pension and sovereign wealth funds currently locked-up overseas.
It also calls for enhanced co-design and co-ownership in the implementation of ‘Team Europe’ pledged financing to ensure the impact and visibility of the flagship EU Global Gateway initiative.
Leveraging African institutional sources, such as pension and sovereign funds, represents another important source of domestic revenue mobilisation. It is estimated that Africa has U$2.3 trillion investment, pension and sovereign wealth funds (SWFs) that are currently locked-up overseas. For instance, African pension funds offer enormous potential as a continental source for investment capital. In 2014, pension fund assets in Africa were estimated at U$334 billion, with growth variations across sub-regions and countries. This high growth trend was expected to continue as Africa moves towards increased coverage, and more inclusive and comprehensive systems.
In 2018, African SWFs controlled U$89 billion worth of assets, and several countries have currently established SWFs, including Angola, Gabon, Ghana, Morocco, Senegal, Rwanda, Djibouti, Nigeria, Namibia, Algeria, Uganda, Mauritania, and Zimbabwe. A total of 21 SWFs can be used as a vehicle to invest in infrastructure, boost economic growth and create jobs through public-private partnerships.
Embracing transformation
While digitally-driven approaches and organic AI solutions are emerging, accelerating growth and maturity needs industry-wide strategic and targeted interventions across the infrastructure ecosystem— from asset managers to contractors and software vendors.
Investment in digital public infrastructure is the technological backbone of sustainable development, leading to transparency in financial management and accelerated regional integration.
Africa’s infrastructure and energy challenges are significant, with the continent needing a paved road network 60 times larger per person to match the road density in China or India 24. Only six African countries, Namibia, South Africa, Botswana, Gabon, Eswatini, and Zimbabwe have a rail network density higher than the average for the US, China, and India, which is about 200 km of track per million population 25.
The other 48 African states have much lower rail densities. Additionally, Africa has the world’s largest energy deficit, with over 600 million people lacking access to electricity.
Africa plays a pivotal role in the global energy transition, with significant reserves of the minerals vital for global decarbonisation and consequent health co-benefits, as well as a vast store of arable land that can enhance food security and support export-driven growth.
Standardising infrastructure-investment data collection can streamline funding processes (‘smart money not only more money’), increase transparency between investors and managers, and maximise industry participation.
Flagship projects
The African flagship projects are a diverse portfolio. Some of these appear genuinely strategic for instance, the high voltage electric interconnection between the Europe and Egypt, Europe and Tunisia, and between Zambia, Tanzania and Kenya; supporting hydrogen plants in Morocco, South Africa and Namibia; hydropower dams in Cameroon, Rwanda, Uganda, Burundi, Zambia, Tanzania, Mozambique and DRC; fibre optic cable across Central and Southern Africa; Critical Raw Materials partnership in DRC, Tanzania and Zambia; Lobito Corridor and port rehabilitation in Senegal, Cape Verde, Gambia and Congo. These are projects where, even without project details, it is possible to construe significant mutual interest between Europe and Africa and development impact in Africa. Collectively, these initiatives and reforms alone could generate more than enough resources to meet Africa’s infrastructure investment gap. However, they require sustained governance improvements, financial transparency, and long-term equitable international collaboration. In a changing geopolitical context where development aid is contested and purse strings are tightening, it is crucial to improve the quality and efficiency of existing investments and projects.
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