Privatising Africa’s development
By Austine O Ometoruwa
LAGOS: There has been considerable progress on achieving the Millennium Development Goals since their inception in 2000. But, despite the best efforts of governments, reaching those goals by the 2015 target date still remains a distant prospect for many countries, not the least of in Africa.
Many of us in Africa’s private sector are keen to make a difference in meeting these goals. At the Africa Finance Corporation (AFC), reducing poverty on the African continent through private-sector initiative is our mission. For, in the end, the private sector is and will be the engine of growth in Africa, and its increasingly active involvement in the development process bodes well for the continent.
Africa’s development challenges are well known. More than 40 percent of its population lives on less than a dollar a day. Over half a billion people live without modern forms of energy, and the continent’s share of global trade remains a paltry 3 percent.
Lack of basic infrastructure and industrial capacity remains one of Africa’s biggest problems, for it sustains poverty and undermines the continent’s ability to compete with the rest of the world. Transport costs for sub-regional trade are double that of other developing regions, and high-energy costs contribute significantly to the prohibitive cost of doing business.
Africa needs substantial investments to correct these shortfalls: $75 billion to close its 135-gigawatt power deficit by 2015, and $37 billion to improve transport infrastructure. And, despite Africa’s huge natural-resource deposits, heavy manufacturing remains elusive. As a result, most of the value chain for the fossil fuel and mining sectors continues to be outside the continent.
But these challenges have not dampened optimism about Africa’s growth prospects. The continent’s economy, after all, has been experiencing its strongest growth in three decades, with annual GDP up by 6 percent in the past three years. The rebirth of Africa’s private sector – a critical missing ingredient in past development efforts – has played a significant role in driving this performance, and it can fill the investment gap while generating returns in the process.
The AFC is promoting such investment, based on a new development-oriented banking style in Africa that involves the proactive creation and management of infrastructure, industrial, and financial assets, including the six leading industrial sectors: power, transport infrastructure, telecoms, oil and gas, mining, and heavy industries. These areas offer the greatest development impact and the most attractive returns to investors.
An AFC-led consortium is financing a project that will develop Sub-Saharan Africa’s first deep-sea container port on the Atlantic coastline area of Olokola, Nigeria. The completion of this $1 billion landmark project is expected to transform Africa’s shipping and port capacity dramatically.
Guinea-Bissau is also taking advantage of this new private sector-led development approach. As a member country of the AFC, it will benefit from a private sector-driven initiative to accelerate economic development and reduce poverty. The AFC, with its project development subsidiary, Africa Infrastructure, and Chinese equity and technical partners, WEMPCO, is launching a power generation initiative in Bissau. The investment will lead to a rapid deployment of emergency power using heavy fuel power generation, and will involve the rehabilitation and management of transmission and distribution.
There is a huge window of opportunity for private sector-led development in Africa. But taking advantage of this opportunity requires a new approach to private financing of Africa’s development, in which Africa is the lead investor in its own economic renaissance.
Austine O. Ometoruwa is President and Chief Executive Officer of the Africa Finance Corporation.