The African Continent, over the years, has been bedeviled by its lack of adequate infrastructures to cater for the volume of its production which is largely agro based. Africa then produces cocoa, rubber, coffee, cotton, sesame, ginger, garlic etc in large volumes and export to Europe and the America at next to nothing prices where these are processed into finished products and sold back to Africa at huge amounts.
Setting up a fund to finance the construction of much-needed infrastructures such as roads, railways, power plants and huge processing facilities on the continent has become necessary which is why the AU is turning to new sources of cash generation due to donor fatigue and higher debt levels on the part of member countries.
The continent has an estimated annual infrastructure financing deficit of $60 billion-$90 billion which makes it hard for the body to advance its goal of integrating the disparate individual markets into a single, free trade area.
Odinga said: “Africa is financially starved as far as the need for infrastructure development is concerned.”
The 55-Nation AU is now turning to sovereign wealth funds, insurance and retirement funds in countries like South Africa, Angola, Nigeria, Morocco, Egypt and Kenya, to raise the cash.
The funds will be invited to invest about 5% of their holdings, Odinga said, “which is actually going to be more lucrative for those institutions, rather than having funds lie idle”.
Talks with the funds are going on and the AU’s experts are setting up the legal and financial structure for the infrastructure fund, which will be administered by the newly formed African Union Development Agency, Odinga said.
The move bucks the past trend of dependence on wealthy donor nations and borrowing from financial markets.
China, which has been one of the biggest funders of infrastructure projects on the continent over the past decade, has cut back on lending due to high debt levels among individual nations like Kenya. “We are now trying to think out of the box,” Odinga said.
The drive to find new ways of funding the construction of roads and railways and other utilities and infrastructures comes as Africa seeks to bring together 1.3 billion people in a $3.4 trillion economic bloc known as the African Continental Free Trade Area (AfCFTA).
“This infrastructure is urgent for the realization of the AfCFTA, otherwise it is just going to remain on paper,” Odinga said.
It was critical to connect landlocked nations to ports on coastlines, and complete missing links for transcontinental highways, to facilitate the free flow of goods under the AfCFTA and lift people out of poverty, he said.