Sub-Saharan Africa Needs Better Laws, Increased Private Funds, Fiscal Incentives for $100 Billion Infrastructure Gap

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Traffic jam in the third Mainland Bridge, Lagos Lagoon, Lagos Metropolitan Area, Lagos State, Nigeria
  • Boston, Africa Finance say infrastructure incentives needed
  • Governments must upgrade financial systems for projects

Sub-Saharan Africa needs solid legal frameworks, increased private-sector involvement and better fiscal incentives to plug its annual infrastructure-funding gap of about $100 billion, Boston Consulting Group and Africa Finance Corp. said.

The region’s governments have insufficient strategic foresight, political will and policy certainty and numbers of adequately skilled people to improve delivery, the organizations said in a report released Tuesday in Nigeria’s capital, Abuja. Financial systems need upgrading to be sound enough for projects, and nations must develop local capital and debt markets that provide lower financing costs, it said.

Implementing projects takes “twice as long as in other regions,” they said. “Private investors often must act as project developers, adding 10 percent to 15 percent to the project costs and lengthening the project life cycle.” The region’s nations “lose as much as 2.1 percent of gross domestic product annually to inadequate infrastructure,” they said.

Two-thirds of Africans lack access to power and the road-access rate is 34 percent compared with 50 percent elsewhere. The International Monetary Fund said last week the region’s growth outlook is subdued, and forecast expansion of 2.6 percent in 2017 from a two-decade low of 1.4 percent last year.

Governments are trying to address deficiencies that limit investment, with 42 of the region’s 49 countries enacting laws to provide a regulatory framework for private investment in infrastructure, the report showed.
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Besides these laws, countries should establish sector-specific standards and regulations, have fiscal incentives and provisions that promote dispute settlement and licensing. Basic infrastructure that’s difficult to make economically profitable should be the responsibility of governments and development partners, while infrastructure that’s financially viable with appropriate tariffs should fall under private investment via concessions or public-private partnerships.

Governments should “insist on transparency, enforce anti-corruption standards, and strengthen anti-waste capabilities,” it said.

There is huge appetite globally to invest in Africa infrastructure, Nigeria Finance Minister Kemi Adeosun said on Tuesday at a conference in Abuja. “We need to properly package and showcase the opportunities.”

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