In the second half of the last century, world populations sought peace and security as the background for economic growth and overall prosperity. The US was the major underwriter and supplier and became world leader.
In this 21st century, with the globalisation of trade, social habits and new technologies, world populations need infrastructure and connectivity to be able to achieve economic growth and prosperity. China seems to be emerging as the main underwriter and supplier, be it in Asia, with the creation of the Asia Infrastructure Investment Bank; Latin America, with massive investments in power transmission; or in Africa, where it has been the main developer, builder and financier of infrastructure assets, based primarily on bilateral government-to-government arrangements.
Given its proximity to Africa – geographical, cultural, historical, ethnical – Europe, the most infrastructure-rich continent in the world, should be playing the leading role by creating a specialised institution – an ‘African Infrastructure Investment Bank’ – that will reignite the presence, the influence and the partnership of Europe in Africa, reinforcing the geopolitical weight of Europe in the world.
What does Africa need? Infrastructure
Africa is a continent with a faster-growing population than any other, urbanisation happening at a faster pace than any other, more people without access to electricity and other basic infrastructure than any other and a need for industrial diversification bigger than any other.
Africa must develop a legal and economic framework that supports investment; structure projects that are developed on time, on budget, bankable, profitable and sustainable over time; and raise capital to meet the challenge of increasing investment in infrastructure from $70bn to $150bn a year!
What should be done? ‘African Infrastructure Investment Bank’
Massive and immediate investment in infrastructure in Africa is the only way to (1) create a background conducive to agricultural and industrial development which can (2) create the jobs in the short term that can absorb the arrival of millions of people to working age while (3) promoting economic diversification and sustainable growth.
This way, a positive economic spiral will be created, lifting millions out of poverty, massively increasing productivity in the last frontier of the planet and transforming high demographic growth into a real, self-sustainable African demographic dividend rather than a demographic timebomb for both Africa and Europe (through migration).
Europe should create a new institution, the African Infrastructure Investment Bank, that brings to Africa all the accumulated experience of the EIB and EBRD, finances projects that meet the required thresholds, and attracts the right levels of human, financial and political capital needed for this enormous challenge (working in partnership with the current African Development Bank).
Additionally, a Europe-led African Infrastructure Investment Bank would create the right level of engagement between the two continents, with neither unjustified patronising nor unjustified complaining. This institution would address once and for all the (mis)perception that Europe and the US only come with check lists rather than with cheque books.
The African Infrastructure Investment Bank will ensure that check lists become to-do lists and that cheque books help transform play books into real, efficient, high-quality and profitable infrastructure assets that will benefit all Africans, today and tomorrow!
Europe should act as the catalyst to bring into Africa further funds from other regions be it the US, which has made funds available through its Power Africa initiative, or Asia, where we have seen countries such as Japan, South Korea and India willing to invest in Africa if the opportunity is properly presented.
Europe’s capabilities perfectly match Africa’s needs, so bringing the two together can only be a win-win proposition. Europe is short on growth opportunities and long on capital (human and financial) while Africa is long on growth opportunities and short on capital, making this partnership a mutually profitable proposition.
Europe has everything to gain from the success of such an initiative and everything to lose if infrastructure investment does not happen, frustrating the hopes of millions of Africans for a life with a future in their own countries.
Miguel Azevedo is head of investment banking for Africa at Citigroup.