This article was created in cooperation with AUDA NEPAD
Infrastructure development in Africa has long been a key challenge for the continent’s growth and sustainability. In February, the African Union Development Agency’s New Partnership for Africa’s Development (AUDA-NEPAD) and the Africa-Europe Foundation, in collaboration with the Africa Climate Foundation, published a comprehensive report on infrastructure finance in Africa, highlighting the insights of Nardos Bekele Thomas, a key figure in African development. As Chief Executive Officer of AUDA-NEPAD, Bekele Thomas has been instrumental in shaping the agency’s development approach, and her leadership and strategic direction played a key role in the findings and recommendations of this report.
AUDA and the EU’s cooperation stems from a shared commitment to addressing the infrastructure gaps that hinder Africa’s economic and social development. Infrastructure in its many forms, including energy, transportation, water, and digital connectivity, is the backbone of every economy. However, Africa faces major challenges in financing large-scale infrastructure projects. The report says these challenges are further exacerbated by limited domestic resources, insufficient foreign investment, and a lack of technical capacity to plan, prepare and execute. The preparatory stage is very important as bankability issues arise which often impede private sector financing.
Mr. Bekele-Thomas is steering AUDA-NEPAD to fulfill its assigned mission as the implementing agency of African Union Agenda 2063. Under her leadership, AUDA-NEPAD positions itself as a key player in mobilizing resources and leading African countries to self-reliance in infrastructure development.
Africa’s infrastructure deficit is estimated at $130 billion to $170 billion per year, but only about $80 billion is invested each year.
Key findings on the funding and investment gap
African governments contribute more than 40% of total infrastructure funding. However, despite these efforts, only a small portion of the overall need is being addressed. The role of donors, who account for 35% of total contributions, has been important in the past, but this is declining, especially as China’s involvement in Africa increases. Chinese financing, particularly through loans, is reshaping Africa’s infrastructure landscape and serves as a model for Western financiers to learn from.
The private sector is playing an increasingly important role in infrastructure development, but significant barriers remain, including the high risks and long timelines associated with infrastructure projects. As the global funding environment tightens, finding innovative sources of private funding has become essential.
Bekele-Thomas stresses that Africa needs to strengthen domestic resource mobilization to fill the financing gap, particularly by improving domestic revenue generation and addressing illicit financial flows. Strengthening remittances also presents untapped opportunities for external financing. Foreign direct investment (FDI) is under pressure globally but remains a potential source of finance, especially if attractive and profitable projects are developed in the green energy sector.
Strategic framework for infrastructure development
A key policy framework to guide infrastructure development in Africa is the Program for Infrastructure Development in Africa (PIDA), launched in 2010. PIDA serves as a roadmap to strengthen the continent’s competitiveness and global economic integration. This is critical to building infrastructure development efforts and includes two Priority Action Plans (PAPs). The first PIDA PAP 1 (2012-2020) included 51 programs and over 400 projects across energy, transport, water, and information and communication technology (ICT). PIDA PAP 2 was adopted in 2021, prioritizing integrated corridors, gender-sensitive policies, and projects with a total cost of $160.8 billion from 2021 to 2030.
Bekele-Thomas argues that for these plans to be effective, they need to be more closely aligned with financing realities, so that the integration of infrastructure projects, social goals and broader development agendas is prioritized.
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 €300 billion worldwide through the Global Gateway, of which €150 billion has been allocated to Africa. The initiative aims to improve the quality and impact of infrastructure projects across the continent, with a focus on sustainable development, climate resilience and social outcomes.
Bekele-Thomas notes that despite active political coalitions and a strategic focus on infrastructure, implementation of these efforts has been mixed. In particular, reliance on hard infrastructure investments such as transport and energy projects overshadows the need for complementary ‘soft’ elements such as regulatory frameworks, workforce training and institutional capacity building.
Key stakeholders such as African governments, local businesses, and international partners must fully collaborate to ensure the impact and sustainability of the project.
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 more than $50 billion in infrastructure projects over the past eight years. However, one of the most pressing concerns is Africa’s growing debt crisis.
The growing involvement of foreign financial institutions, particularly China, carries a real risk of exacerbating the continent’s debt burden. Investments must therefore be designed to foster economic growth while keeping African countries’ debt-to-GDP ratios manageable.
Competing global incentives and regional coordination
Competing global incentives, such as US anti-inflation laws, threaten to divert funds from infrastructure projects in Africa. To address this, Bekele Thomas advocates for a global solution to ensure fair investment distribution and improve the global financial framework. The key is streamlining the project preparation process, establishing uniform funding requirements, and developing 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, especially those that cross borders, should not be overlooked. These multi-country projects are essential to achieving Africa’s broader development goals.
Although coordination challenges and competing national interests often impede the success of regional initiatives, Bekele-Thomas argues that cross-border projects can achieve lasting impact by strengthening collaboration and increasing collective ownership between African stakeholders and regional organizations such as the African Union and regional economic communities.
African Continental Free Trade Area and innovative infrastructure
The African Continental Free Trade Area (AfCFTA) offers innovative infrastructure financing opportunities. By strengthening regional integration and facilitating the movement of goods, services and people, infrastructure development will play a central role in the success of AfCFTA.
According to Bekele Thomas, the potential benefits of supporting AfCFTA through infrastructure development are fourfold. First, it could bring significant economic benefits to both Africa and Europe.
Second, we have strong support from African governments and peoples who recognize the need for infrastructure improvements to strengthen regional integration. Third, AfCFTA provides important non-economic benefits, including peace and stability.
Finally, the European Commission’s expertise in promoting regional economic cooperation makes it an ideal partner to support the development of regional infrastructure and build mutually beneficial relationships.
conclusion
Infrastructure gaps in Africa are significant, and while progress has been made, major challenges remain in financing, coordination and implementation. Bekele-Thomas stresses that closing the gap requires a multifaceted approach, including strengthening domestic resource mobilization, increasing the efficiency of foreign aid, leveraging private finance and ensuring projects are aligned with Africa’s long-term development goals.
Through strategic partnerships, effective coordination, and a focus on sustainable and impactful projects, Africa can address its infrastructure needs and achieve greater regional integration and economic development. Bekele-Thomas also encouraged stakeholders to work together and take action ahead of the upcoming 7th AU-EU Summit to implement the report’s recommendations to make the Global Gateway more effective and supportive of Africa’s long-term development goals. ”
