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Investment fears weigh on African recovery

By Thierry Ogier
25 May 2010

A wave of energy shortages across Africa – which reached a peak this year – has brought into sharp relief the lack of investment in infrastructure which threatens to slam the brakes on the region’s economic development, senior officials have warned

A wave of energy shortages across Africa – which reached a peak this year – has brought into sharp relief the lack of investment in infrastructure which threatens to slam the brakes on the region’s economic development, senior officials have warned.

A rebound in economic growth following a crippling downturn has also highlighted chronic shortcomings in the region’s infrastructure, the IFC vice-president for sub-Saharan Africa, Thierry Tanoh, told Emerging Markets in Abidjan.

All 48 sub-Saharan countries have an aggregate power generation capacity equivalent to Spain’s, Tanoh said. “As long as we do not manage to go beyond this stage, it will remain difficult to talk about development in Africa.”

Tanoh, who also works in includes Latin America, the Caribbean and Western Europe, said: “The greatest barriers compared to other emerging markets are in sub Saharan Africa.

“On the other sub-Saharan countries are among those that have registered the greater progress in terms of reforms in recent years.”

Lack of investment is all the more critical for landlocked for countries such as the Central African Republic, where the development of waterways and roads are critical in order to lower production costs.

The Central African Republic’s government has recently planned to set up and rehabilitate a road linking the east and west of the country, between Cameroon and Chad.

But a funding gap of more than $500 million remains, even after the World Bank, the AfDB and the European Union extended a $200 million financing facility to fund a new 150 kilometre stretch. “We hope the World Bank is going to get on board,” said Sylvain Maliko, the Central African Republic’s planning and economy minister.

There are also success stories, such as Rwanda, which topped the Doing Business ranking of the World Bank and the IFC last year – after jumping by 80 places, once the Rwandan authorities opened up to the private sector and improved the business environment. Other post-conflict countries such as Sierra Leone and Liberia have also registered progress.

Meanwhile, the AfDB has said it intends to be the lead financier of renewable energy in Africa. AfDB vice president Bobby Pittman asid : “Our pipeline has 26 renewable projects amounting to 11 billion dollars.

“Over the next three years, these projects range from programmes in Uganda, Burkina Faso, where solar is the best option to provide power, hydro, wind and biofuels. We want to continue to grow that number.”

There are still numerous restrictions to investment as few countries have defined a clear legal framework for public private partnerships.

“A great deal of work has yet to be done in this regard,” said Tanoh. Many projects can not be completed without PPPs and private-sector involvement. “There are not enough countries that allow private sector companies to generate energy,” he said.

The IFC says it has stepped up its investment from $1.8 billion in 2008/09 to $2.2 billion in 2009/10 (fiscal years ending in June). Half this amount goes to the financial sector but less than 15% currently goes to infrastructure, according to the IFC.

By Thierry Ogier
25 May 2010