Africa’s global profile has expanded considerably in recent decades. This has been evident in the resilience of the economies of several countries on the continent. Average GDP growth among many states in recent years has been impressive, according to experts, and a rethink in the approach to governance has set the stage for substantial investments. According to Insider Monkey, a well-known website of financial analysis, Africa’s gross domestic output “increased significantly in 2021 by an estimated 6.9%. The anticipated real GDP growth for the continent in 2021 was higher than both the global average and other regions’ growth rates”. It adds that “four of Africa’s top six countries had an increase in their Purchasing Managers’ Index (PMI) readings, indicating an improvement in economic activity. Egypt, Kenya, Nigeria, and South Africa’s PMI values in 2021 (which collectively accounted for 52% of Africa’s GDP in 2021) were usually over the 50-point threshold and closer to prepandemic levels”.
Good prospects for the continent These indices suggest impressive prospects for the continent in coming
years. In its 2023 report on Africa’s Macroeconomic Performance and outlook, the African Development Bank (AfDB) says Africa is set to outperform the rest of the world in economic growth over the next two years, with real gross domestic product (GDP) averaging around 4% in 2023 and 2024. This is higher than projected global averages of 2.7% and 3.2%, according to the report. With a comprehensive regional growth analysis, the report shows that all the continent’s five regions remain resilient with a steady outlook for the medium-term, despite facing significant headwinds due to global socio-economic shocks.
The bank’s efforts in strengthening these numbers have been one of the key factors in driving the
growth that the continent is witnessing today. In eight years, it has been able to establish a strategy for development that has focused on addressing the needs for a more indigenous approach, building the
productive elements that would drive genuine growth, rather than sustaining a settler economy that feeds western exceptionalism. Judging by the published, records the AfDB’s efforts at sourcing funding for key
infrastructural development have been encouraging. Agricultural exports have improved along with other segments of the agricultural value chains. Power infrastructure as well as the Business climate in several states on the continent have seen improvements. Among the various multilateral development financing institutions with private sector partnership on the continent between 2007 and 2020,
AfDB’s contribution tops the list. The group’s efforts have also resulted in marked improvement in managing its Project implementation, administrative and Project preparation costs. In spite of the many advances recorded, there are many challenges that still exist. Africa still faces serious infrastructure
shortfalls across all sectors, both in terms of access and quality, as identified by Dr. Ibrahim Mayaki, former chief executive officer of NEPAD, in an article. Mayaki correctly identifies some of these key
challenges as access to electricity, low penetration rate for internet and the extremely limited number of Africa’s paved road network. These indices may have improved to some extent but studies have shown that poor road, rail and port facilities still add a significant percentage to the costs of goods traded among African countries, adversely affecting private sector development and the flow of foreign direct investment (FDI). A recent World Bank study found that the poor state of infrastructure has made Africa the region with the lowest productivity levels in the world. Addressing these issues require huge funding, the kind that has remained mostly elusive for the continent.
This is the challenge the AfDB was set up by the Organisation of African Unity (OAU), now the African Union (AU) to address in 1964 but meeting the financial needs for the continent has not been easy. AfDB’s effort to boost development finance A major factor in this effort has been the drive to improve infrastructure and social services across the continent. The continent is now focused on building the foundations of industrialisation by leveraging its human resource potential rather than walking the old path of reliance on mining, settler agriculture, or the small-scale production of cash crops. The continent already has the active demographic needed to drive this growth, showing impressive numbers in the information technology sector and showing greater interest in the quality of their different national leadership.
The bank appears to have taken its role as a major force in activating the continent’s economy more seriously in the last eight years, and describes its “overarching objective” as “spurring sustainable economic development and social progress in regional member countries (RMCs), thus contributing to
poverty reduction”. Its performance is measured through five priority areas, considered critical to a Ten-Year Strategy, known as the High 5s. These are ‘Light up Africa’, ‘Feed Africa’, ‘industrialise Africa’, ‘integrate Africa’ and ‘improve quality of life’. Africa’s agricultural deficit has kept it a net importer of agricultural produce since the 1980s and this dependence on food imports, according to the AfDB’s
estimates, is projected to rise to $110 billion. The need to address this problem is the incentive for the “Feed Africa” initiative. The AfDB’s Technologies for African Agricultural Transformation (TAAT) is described by the bank as “a continental initiative to raise agricultural productivity by delivering proven climate-resilient technologies to increase the output of heat-tolerant wheat varieties and other crops” and it seems to be reaping rewards.
According to the AfDB Annual Development Effectiveness Review 2022, “in Ethiopia, wheat yields have
increased from 2 tons per hectare to 4 tons per hectare. In 2021/2022, total production reached 7 million metric tons, equivalent to 80 percent self-sufficiency. It is same story in Sudan where wheat self-sufficiency grew from less than 20 percent in 2014/15 to 50 percent in 2020/21, producing more than 1 million metric tons. This puts the two countries on a path to full wheat self-sufficiency in the coming years. TAAT is targeting 40 million African farmers. The “Light up Africa” initiative exemplifies the seriousness with which the organisation takes its responsibility to activate infrastructural growth through
its funding assistance. From 2015 to 2021, the proportion of the population with access to electricity increased from 42% to 56%. This drive demonstrates the projection by the President of the AfDB, Akinwumi Adesina. According to him, “in 2025, there is no reason why Africa should not be totally lit up with the power it needs to industrialise, because no economy develops unless you have the base load of power to drive industries and to be competitive”. The AfDB has sourced its funding largely from traditional structures that have been in place since its commencement, but its resources have remained a small fraction of the continent’s requirements and, as it notes, “current fiscal constraints in donor countries suggest that official development assistance could well be stagnant in coming years”.
However, the AfDB seems to be working on finding new and creative ways of mobilising resources to support Africa’s transformation, especially by leveraging its own resources. The options include attracting additional investment from emerging economies and from new donors, including sovereign wealth and
pension funds. It says it is also managing existing instruments better, while, as it puts it, “developing new ways of ensuring that a dollar invested by the Bank unlocks significantly more from other investors”. These new ways include “wider use of public-private partnerships, co-financing arrangements and risk-mitigation instruments”, which it believes will draw in new investors.
Funding infrastructure Through its many initiatives and partnerships, such as the Programme for Infrastructure Development in Africa (PIDA), a framework designed to provide an adequate, cost effective
and sustainable regional infrastructure base to promote socio economic development and integration with the global economy, the AfDB has been able to spread its influence across a significant portion of development initiatives throughout the continent. PIDA is described as “a continent-wide program to develop a vision, policies, strategies and a programme for the development of priority regional and
continental infrastructure in transport, energy, trans-boundary water and ICT. It is jointly coordinated by the African Union Commission, NEPAD, the regional economic communities and AfDB, set up to implement the construction of modern infrastructure that would integrate the continent’s economy.
An example that highlights the result of PIDA’s objectives is the 4,500-kilometre Trans Saharan highway from Algiers in Algeria to Lagos in Nigeria, which, according to Mayaki, would not have been possible without the political and technical support of each of the affected countries. “Ten years ago, a private
sector operator who wanted to discuss a regional project with two governments would be lacking a rational framework.
PIDA is that rational framework”, he says. The highway corridor is one of the nine main Trans-African Highways (TAH) corridors being developed by the United Nations Economic Commission for Africa (UNECA), the African Union (AU), the Islamic Development Bank (IsDB) and the African Development
Bank (AfDB) with the support of other regional and international organisations and development institutions (such as the Arab Bank for Economic Development in Africa – BADEA and UNCTAD).
The Abidjan-Lagos highway is another project that has attracted the interest of the AfDB. The project, for which Adesina says the bank has secured 15.6 billion dollars needed to execute it, would have significant impact on the economies of five West African countries, Côte d’Ivoire, Ghana, Togo, Benin and Nigeria.
The AfDB has provided €22.4 million in funding to finance preparatory studies for the implementation and management of the corridor project. Drawing global attention to Africa The bank has also made extensive
efforts to draw attention to Africa’s funding needs through several conferences where global audiences
are given first-hand insight into the challenges and prospects of investing in the continent.
The second Dakar Financing summit for Africa’s Infrastructure Development, which took place in the Senegalese capital, showcasing a list of 69 infrastructure projects worth 160 billion dollars, draws the spotlight on PIDA as a prominent framework for promoting the development of infrastructure across
the continent. Several projects affirm the AfDB’s keen participation in developing a fully functional and vigorous private enterprise environment as a development partner on the continent. Two examples are the “African Training and Management Services”, designed to enhance management training and capacity building for African MSMEs through provision of experienced managers on a commercial basis to African companies, and the “Inclusive Industries Program”, designed to contribute to “the establishment of
an Inclusive Industries Programme (IIP) that will provide a framework for strengthening Micro and Small Medium Enterprises (MSMEs) and optimise their participation in the value chains of selected Bank financed projects.
The AfDB and other partners also recently launched a new Investment in Digital and Creative Enterprises (iDICE) programme with investments totalling $618 million, which the organisation says will attract direct investments in more than 200 technology and creative start-ups and provide non-financial services to about four hundred and fifty digital technology small and medium enterprises. These three initiatives make up part of a total of seventy-five projects in private sector assistance with total funding approvals of over sixty-four million dollars. The overall impact of the AfDB’s agenda supporting national and regional
imperatives of development in Africa especially with the urgency cultivated by President Akinwumi Adesina’s leadership suggest that the future is bright for home-grown solutions to the historical deficiencies of the past.