The AUDA-EU Report on Infrastructure Finance

Infrastructure development in Africa has long been a critical issue for the continent’s growth and sustainability. In February the African Union Development Agency New Partnership for Africa’s Development (AUDA-NEPAD) and the Africa-Europe Foundation, in partnership with the African Climate Foundation, released a comprehensive report on infrastructure finance in Africa that has attracted significant attention, particularly for the insights of Nardos Bekele-Thomas, a key figure in African development. As the chief executive officer of AUDA-NEPAD Bekele-Thomas has been instrumental in shaping the agency’s approach to development, and her leadership and strategic direction played a key role in the findings and recommendations of this report. 

The AUDA-EU collaboration stems from a shared commitment to addressing the infrastructure gap that hampers Africa’s economic and social development. Infrastructure, in its various forms – energy, transportation, water, and digital connectivity – is the backbone of any economy. However, Africa faces significant challenges in financing large-scale infrastructure projects. According to the report, these challenges are exacerbated by limited domestic resources, insufficient foreign investment, and a lack of technical capacity to plan, prepare and execute. The preparation stage is critical as this is where the bankability issue, which often hinders private sector finance, falls. 

Bekele-Thomas is steering AUDA-NEPAD towards fulfilling its assigned mandate as the implementing agency of the African Union Agenda 2063. Under her leadership, AUDA-NEPAD has positioned itself as a central player in mobilising resources and guiding African countries toward self-reliance in infrastructure development. 

Africa’s infrastructure gap is estimated at $130bn to $170bn annually, with only about $80bn being invested each year. 

Key findings on funding and investment gaps 

African governments contribute over 40% of total infrastructure finance. However, despite these efforts, they can only address a fraction of the total need. The role of donors, accounting for 35% of total commitments, has been significant but is on the decline, particularly as China’s involvement in Africa grows. China’s financing, particularly through loans, is reshaping the landscape of African infrastructure, providing a model that offers lessons for Western funders. 

The private sector plays an increasingly critical role in infrastructure development, but significant barriers remain, including the high risks and long timelines associated with infrastructure projects. As global financing conditions tighten, finding innovative sources of private capital has become essential. 

Bekele-Thomas emphasises that to bridge the financing gap Africa needs to enhance domestic resource mobilisation, specifically by improving internal revenue generation and addressing illicit financial flows. Strengthening remittances also presents an untapped opportunity for external financing. Foreign direct investment (FDI) is under pressure globally but remains a potential source of funding if attractive, bankable projects, particularly in green energy, are developed. 

Strategic frameworks for infrastructure development 

A significant policy framework for guiding Africa’s infrastructure development is the Programme for Infrastructure Development in Africa (PIDA), launched in 2010. PIDA serves as a roadmap for enhancing the continent’s competitiveness and global economic integration. It has been pivotal in structuring infrastructure development efforts and includes two priority action plans (PAPs). The first, PIDA PAP 1 (2012-2020), encompassed 51 programmes and over 400 projects spanning energy, transport, water, and information and communication technology (ICT). In 2021 PIDA PAP 2 was adopted, prioritising integrated corridors, gender-sensitive policies, and projects with a total cost of $160.8bn for 2021-2030. 

Bekele-Thomas argues that to be effective, these plans need to align more closely with the realities of financing, ensuring that the integration of infrastructure projects, social objectives, and the wider development agenda is prioritised. 

The Global Gateway and Team Europe initiatives 

The European Union’s Global Gateway initiative and the Team Europe approach represent an evolving model for pooling resources for large-scale infrastructure projects in Africa. The EU has committed €300bn globally through the Global Gateway, with €150bn earmarked for Africa. This initiative aims to increase the quality and impact of infrastructure projects across the continent, with a focus on sustainable development, climate resilience, and social outcomes. 

Bekele-Thomas points out that, despite the positive political alignment and the strategic focus on infrastructure, implementation of these initiatives has been mixed. In particular, the reliance on hard infrastructure investment, such as transport and energy projects, has overshadowed the need for complementary “softer” elements, such as regulatory frameworks, workforce training, and institutional capacity-building. 

Key stakeholders, including African governments, local businesses, and international partners, must be fully aligned to ensure that projects are both impactful and sustainable. 

The role of multilateral institutions and Africa’s debt concerns 

One of the main sources of infrastructure financing in Africa is multilateral development banks, such as the African Development Bank (AfDB), which has invested over $50bn in infrastructure projects over the past eight years. One of the most pressing concerns, however, is Africa’s mounting debt crisis. 

The increasing involvement of foreign lenders, particularly China, bears a real risk of exacerbating the continent’s debt burden. Investments must therefore be designed to foster economic growth while ensuring that the debt-to-GDP ratio of African countries remains manageable. 

Competing global incentives and regional coordination 

Competing global incentives, such as the US Inflation Reduction Act, threaten to divert funding away from African infrastructure projects. To address this, Bekele-Thomas advocates for a global solution that ensures equitable investment distribution and improves the global financial framework. Key to this will be the streamlining of project preparation processes, the establishment of uniform funding requirements, and the development of projects that deliver substantial economic, social, and environmental benefits. 

At the regional level, infrastructure investments are typically more effectively implemented at the national level due to local priorities and political dynamics. However, the importance of regional projects, particularly transnational ones, should not be overlooked. These projects, which span multiple countries, are essential for achieving Africa’s broader development goals. 

Coordination challenges and competing national interests often impede the success of regional initiatives, but Bekele-Thomas argues that with stronger alignment and greater co-ownership among African stakeholders and regional bodies, such as the African Union and Regional Economic Communities, transnational projects can achieve lasting impact. 

The African Continental Free Trade Area and transformative infrastructure 

The African Continental Free Trade Area (AfCFTA) presents an opportunity for transformative infrastructure financing. By enhancing regional integration and facilitating the movement of goods, services, and people, infrastructure development plays a central role in the success of AfCFTA. 

According to Bekele-Thomas, the potential benefits of supporting the AfCFTA through infrastructure development are four-fold. First, it could provide significant economic benefits, both for Africa and Europe. 

Second, it has strong support from African governments and citizens, who recognise the need for improved infrastructure to enhance regional integration. Third, the AfCFTA provides important non-economic benefits, including peace and stability. 

Finally, the European Commission’s expertise in fostering regional economic cooperation makes it an ideal partner for supporting the development of regional infrastructure, creating a mutually beneficial relationship. 

Conclusion 

The infrastructure gap in Africa is substantial, and while progress is being made, significant challenges remain in terms of financing, coordination, and implementation. Bekele-Thomas emphasises that filling the gap requires a multi-faceted approach that includes enhancing domestic resource mobilisation, increasing the efficiency of foreign aid, leveraging private sector funding, and ensuring that projects are aligned with Africa’s long-term development goals.

With strategic partnerships, effective coordination, and a focus on sustainable, impactful projects, Africa can address its infrastructure needs and achieve greater regional integration and economic development. Bekele-Thomas also encourages stakeholders to work together and take action ahead of the upcoming 7th AU-EU Summit to implement report recommendations to make Global Gateway more effective and supportive of Africa’s long term development goals.”