Africa needs $93 billion to maintain economic growth, AFDB says

| Friday June 11, 2010 00:00

'If any economic activity is going to take place, clearly our infrastructure deficit must be closed,' Moyo said in an interview yesterday at the Conference of Montreal. 'We need a lot of money, and the bank can only supply a part of that.'

Africa, the world's poorest continent, is home to one-sixth of the global population. It holds about 10 percent of the earth's oil reserves, 40 percent of its gold and 60 percent of cobalt reserves.

Shareholders of the African Development Bank last month approved the tripling of the lender's capital base to almost $100 billion to help fund projects such as railways and ports. The bank, based in Tunisia's capital, Tunis, more than doubled lending to $12.6 billion last year.

Lending to companies in 2010 will probably be little changed as the bank waits for shareholders to start injecting capital, Moyo said.

'We are holding our pipeline a bit flat,' he said. 'It's a timing issue. The capital increase will only kick in sometime next year, so we are bridging the period between now and when the capital comes in by suppressing a little bit.'

Founded in 1963, the bank has 53 member countries from Africa and 24 from outside the continent, including the U.S., the European Union and Japan. Nigeria, Africa's most populous nation, has the biggest shareholding in the bank, with 8.9 percent.

The bank, one of five major multilateral development lenders in the world, invests more than half of its funds on infrastructure projects, mainly in energy and transportation.

The World Bank estimates that electricity capacity in Africa amounts to only 68 gigawatts for 48 countries, about the same capacity as Spain.

No other continent has more power outages than Africa, Moyo said. This, combined with deficient roads, boosts the cost of doing business in the region, he said.

'Power is a big issue,' Moyo said. 'Everything else in terms of economic development needs that foundation.'

After approving power investments in South Africa and Botswana last year, the bank is considering whether to back wind-power projects in Kenya and Cape Verde, Moyo said.

The lender is also continuing to evaluate a plan to build the Inga 3 hydropower plant on the Congo river -- a project that has been beset by delays.

 'Inga is one of the projects we are looking at,' Moyo said. The Democratic Republic of Congo 'is doing a study to see if it makes more sense to keep the project small, or go for a bigger version right away. We are still in the very early stages.'

Telecom investments such as the construction of wireless towers also fit the bank's focus on infrastructure, Moyo said. Africa will probably have 560 million mobile-phone subscribers by the end of next year, double the 2007 total, he said, citing bank estimates.

'There is a lot of pent-up demand for telecommunications in Africa,' Moyo said. 'The penetration rate is still very low, and consumers are prepared to pay for the service. This should translate into good opportunities for investors.'-(Bloomberg)