NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, November 13, 2012

Arabic Knowledge@Wharton: One of the biggest investment goals for AfDB is in infrastructure. Can you talk about some of the complexities of infrastructure projects? Which countries need infrastructure loans the most and how did Africa fall behind in infrastructure development?

Mthuli Ncube: The infrastructure sector is one of the key operational areas of the bank. Approvals in 2010 for infrastructure projects amounted to UA 2.60 billion, representing 70.9% of all bank group loan and grant approvals for the year — the largest sectorial allocation. The bank selectively targets high-impact projects in its infrastructure portfolio, to stimulate an investment-friendly climate, strengthen regional member countries’ (RMCs) competitiveness and productivity, create jobs, and promote sustainable economic growth. In particular, the bank is well-placed to lend its support to large, transboundary infrastructure projects and programs that promote regional integration. The prioritization of infrastructure not only in the Medium-Term Strategy (MTS), but also in RMCs’ national agendas, demonstrates the crucial role that modern, reliable, and affordable infrastructure plays in achieving sustainable economic growth and poverty reduction.

All the RMCs need infrastructure and the bank provides both loans and grants to finance infrastructure development. Africa fell behind in infrastructure development because of underinvestment in the sector. Confining infrastructure development in African low-income countries to mostly public financing sources has left their infrastructure needs unaddressed. The vast infrastructure gap has limited their growth potential and in some cases also impeded achieving the Millennium Development Goals. Nevertheless, the landscape of infrastructure financing in Africa has changed in recent years. Recognizing the infrastructure gap as an opportunity, both domestic private investors and emerging partners, scaled up their investment in Africa’s infrastructure.