Editor’s Note: January 24, 2019

Can Africa pay for its infrastructure?

Zimbabwe’s finance minister Mthuli Ncube has said African countries “must stop borrowing to fund infrastructure” in an interview with Bloomberg News, adding to the growing chorus of voices concerned about the continent’s rising debt.

Instead, he says, the bulk of financing must come from domestic sources or public-private partnerships (PPPs).

It’s good advice, but how viable is this?

Africa needs an estimated $170bn a year to fund infrastructure, with a financing gap of up to $107bn according to the African Development Bank.

In the short term domestic revenue – primarily taxes – will struggle to fill this gap. Africa’s has the world’s lowest tax to GDP ratio at 18.2% according to the OECD, ranging from 6.7% in Republic of Congo to 27.7% in Morocco. This is below 22.7% in Latin America and the Caribbean.

Many countries on the continent fall below the 15% recommended as the minimum for effective state functioning.

Changing this will take time Africa doesn’t realistically have.

And while public-private partnerships are gaining traction, these are concentrated in a few key markets like Nigeria and South Africa, and are unevenly distributed by sector. Energy alone accounts for almost 80% of PPPs.

Debt is no silver bullet, but it’s hard to see it taken out of the equation.

From The Continent

Kenya is reportedly planning to issue a $2.5bn Eurobond to help fund its expected budget deficit of 4.7% in 2019/20. This comes amid growing concerns about the sustainability of its rising debt. More: The East African

Ethiopian Airlines has inaugurated a new terminal and hotel complex at the country’s Bole International Airport, aimed at boosting passenger capacity by 22m annually. In 2018 Bole overtook Dubai as the main gateway to sub-Saharan Africa. More: Africanews

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The length of a new bridge linking Gambia and Senegal, inaugurated this week, to drive trade and travel between the two countries. More: News24

The Global Perspective

France’s state-controlled power utility EDF Energy has acquired a 49% stake in Conergies-Group, a leading energy firm in West Africa, for an undisclosed sum. Conergies is active in Côte d’Ivoire, Guinea, Guinea Bissau, Burkina Faso and Mali, and the partnership will focus on refrigeration and air conditioning for industrial and tertiary customers. More: EDF

Generation Investment Management, and investment firm headed by former U.S vice president Al Gore, is leading a $100m funding round into Africa-focused software developer training and outsourcing company Andela. The company supplies mostly US-based businesses with high quality developers in Nigeria, Kenya, Uganda and Rwanda. More:Bloomberg

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