By Alain Ebobise, CEO, Africa50
Enoh T. Ebong, Director, U.S. Trade and Development Agency
15 March 2023
The launch of the U.S. Strategy Toward Sub-Saharan Africa and the U.S.-Africa Leaders Summit in 2022 have set the stage for 2023 to be a year of action on infrastructure development. This comes at a critical time for Africa.
The last two decades of engagement have seen marked and welcomed shifts from aid to trade and now to investment. By 2050, a quarter of the world’s population will be African, making the continent an increasingly important global player in shaping the world’s future. The 2022 summit’s agenda included critical issues such as inclusive economic growth, job creation, climate change, and scaling infrastructure development that addresses all three imperatives.
But how can Africa and the United States leverage their respective resources to create the scale that Africa needs?
With the right partnerships, African countries will succeed in finding a balance between infrastructure development, economic growth, and sustainability.—
The U.S. government has a suite of tools and services to support African infrastructure projects and facilitate investments, and the U.S. private sector has cutting-edge expertise in high-priority sectors including clean energy, health care, and digital infrastructure. Meanwhile, Africa’s financial institutions understand local markets and have the on-the-ground knowledge to identify suitable project developers and fast-track execution. How these resources are coordinated will shape the success of this Africa-U.S. infrastructure partnership.
Seizing the infrastructure opportunity
Partnering to invest in infrastructure development will be a critical enabler for sustainable growth and prosperity for Africa. While the word “infrastructure” may evoke thoughts of roads and bridges, it has a much more expansive definition that emphasizes its importance: It also includes investments in digital and clean energy infrastructure. Investments in data centers, base stations, transmission towers, and advanced electric grids at all scales, for example, are crucial to continue and bolster Africa’s push toward digitization.
With its growing population, expanding the middle class and rapid urbanization, the continent has one of the fastest growing demands for infrastructure. Opportunities for U.S. private sector investment are abundant, as the continent faces an estimated infrastructure funding gap of over $100 billion a year.
The traffic has dissipated, and the heads of state have gone home. But what will the lasting legacy of this U.S.-Africa Leaders Summit be? That will unfold in the months and years ahead and here are some key issues to watch.
One of the most important priorities to solidify investment opportunities in Africa’s abundant infrastructure space is to increase the number of investment-ready “bankable” projects. This will require substantial capital to be injected into the project preparation and development phases, which are critical parts of the infrastructure investment lifecycle.
While many investors are aware of the U.S. government’s financing tools for emerging markets including debt, working capital, and guarantee mechanisms, the U.S. government also funds infrastructure project preparation through the U.S. Trade and Development Agency. Project preparation is one of the riskiest parts in the project life cycle, with 80% of African infrastructure projects failing at the feasibility and business-plan stage. USTDA’s grant-based funding for project preparation de-risks and unlocks projects on the continent, enabling a pathway to public and private financing.
Project preparation facilitators such as USTDA are natural partners to on-the-ground leading financial institutions such as Africa50, which identifies projects, pools public and private capital, and accelerates project implementation. Africa50 catalyzes African infrastructure by working with project developers to prepare environmental, social, and governance studies, sounding out stakeholders and end-users, drafting legal and concession agreements, investing, and structuring finance. It has done so across the continent in sectors like power, transport, logistics, and ICT.
By working together, complementary institutions like USTDA and Africa50 can both accelerate and scale priority infrastructure development in Africa. Kenya’s poa! Internet offers a good example. In January 2022, Africa50 finalized an equity investment and led a $28 million financing round to support the internet service provider, or ISP’s, growth in lower-income urban communities in Kenya and across Africa. USTDA subsequently approved grant funding for a market assessment and feasibility study to inform the ISP’s expansion into three countries and facilitate the deployment of its capital into new telecommunications infrastructure for underserved populations. Since then, 42% of poa!’s clients now use the internet for formal education, and 28% of poa!’s clients use the internet to earn an income.
Supporting Africa’s climate goals
This kind of collaboration will be critical for Africa to reach its climate goals. Disproportionately affected by climate change, we are seeing African countries seeking low- and zero-carbon solutions to foster adaptation, resilience, and economic growth. The deployment of innovative technology is imperative to these goals, which is why U.S. companies are eager to partner with Africa’s private and public sectors on their infrastructure priorities.
What will pull African economies from what the head of the African Development Bank described as a “deluge of shocks” that has hit countries on the continent? “Finance, finance, and more finance,” Akinwumi Adesina tells Devex.
Fostering these partnerships was a prominent subject of conversation during the U.S.-Africa Leaders Summit and has become a component of U.S. foreign policy, as evidenced in the U.S. Strategy Toward Sub-Saharan Africa and the Partnership for Global Infrastructure and Investment, which U.S. President Joe Biden and the Group of Seven