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Webinar Replay: The Infrastructure Financing Trends in Africa

Jul 02, 2020 | Global (Online)

Making Finance Work for Africa (MFW4A) and the Infrastructure Consortium for Africa (ICA) hosted a webinar on “The Infrastructure Financing Trends in Africa”.

Date: 02 July 2020 @ 1 pm GMT Abidjan | 4 pm Nairobi | 9:00 am New York

The IFT 2018 report suggests that, financing of infrastructure in Africa has never been as high as in 2018 when it reached $100.8bn, (24% higher than in 2017) and thus passing the $100bn mark for the first time. However, even with the significant increase in commitments in 2018, there remains a total financing gap of $52bn to $92bn per year.

The first Webinar held on February 7th, 2020 outlined how financing was spread between regions and sectors, explored the different sources of financing and identified sectorial challenges specifically in the water and transport sectors.

In this second session, the panelists discussed some of the reasons why the financing gap persists and identify potential solutions. Although African governments contributed approximately 37.2% ($37.5bn) towards Infrastructure financing in 2018, there is a need to do more. In addition to the need for increased public funding, funding by the private sector is expected to help narrow the financing gap. The private sector is already quite involved in ICT and in electricity, with a strong focus on renewables (solar, wind), and in some dimensions of transport (airports, ports).  However, the challenge of financial sustainability is a major obstacle to its stronger participation. One of the constraints to increasing private sector financing is currency mismatch issues. To be economic and financially viable, infrastructure projects require long-term capital often raised in foreign currencies, however the revenues are typically collected in local currency, hence creating currency mismatch and long-term foreign exchange risk. This phenomenon increases the risks and cost of infrastructure financing. This is without mentioning the risk of currency devaluation, which can in some instances lead to the collapse of projects. Local currency financing in infrastructure must be addressed in an innovative way and addressing local currency issues in the context of weak local financial markets to raise long term local currency funding will require some innovative thinking.

A copy of the 2018 IFT report can be downloaded below:

English: https://www.icafrica.org/fileadmin/documents/IFT_2018/ICA_Infrastructure_Financing_in_Africa_Report_2018_En.pdf

French: https://www.icafrica.org/fileadmin/documents/IFT_2018/ICA_Infrastructure_Financing_in_AFrica_Report_2018_Fr.pdf
 

Objectives

The webinar aimed to:

  • Discuss possible reasons why the financing gap still persists
  • Highlight the effects of currency mismatch issues on infrastructure financing and discuss potential solutions, and;
  • Provide additional/new viewpoints to improve the study into Africa’s infrastructure financing.

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For more information about the webinar's content, the event recording is available below. The presentation slides are also available here.