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$93bn a year needed for Africa infrastructure

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$93bn a year needed for Africa infrastructure

31st August 2011

By: Esmarie Swanepoel
Creamer Media Senior Deputy Editor: Australasia

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Global law firm DLA Piper on Wednesday estimated that Africa would need an estimated $93-billion infrastructure investment each year.

“This is best exampled when you consider there are only 10 000 km of roads connecting African countries and between 60 000 km and 100 000 km of road network is required to sufficiently integrate the region,” DLA Piper head of mining and energy, Robert Edel told delegates at a mining conference in Australia.

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“An estimated expenditure of $32-billion on roads would increase trade on the African continent by $250-billion dollars over the next 15 years alone,” he said.

Edel said that the continent’s energy sector also needed financial assistance, particularly when considering that 48 sub-Saharan African countries generated roughly the same power output as Spain.

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“However, there are challenges in terms of capital availability. This is dogged by the fact development costs for African resources and infrastructure projects are very high, the payback periods are long and there are sovereign, regulatory and policy risks not evident in other markets.

“To deal with these issues, China and North Asia will become the major source of resource investment flows into Africa.”

Edel noted that the Asian majors have shown a willingness to lend for longer terms and at lower rates than their Western counterparts.

He added that this willingness was also likely to be matched by North Asian credit agencies as strategic imperatives for North Asian governments were competition for resources, and a geopolitical, not just commercial approach to infrastructure financing – an environment less comfortable for western lenders.

He warned, however, that successful future development of African resources and infrastructure would involve significant interface with government as many African governments had key policy requirements for railways, ports, power stations and transmission lines.


 

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