Ride the wave of the African Continental Free Trade Area, AfDB President Urges UK investors
Africa is on the cusp of unmatched economic transformation, and the UK must engage in a “partnership of change, African Development Bank President Akinwumi Adesina said Tuesday in a keynote address at a UK Parliamentary Symposium. “The Africa of the 21st century is very different. The Africa of the 21st century is new and more confident,” he said.
The Symposium was co-organized by the All-Party Parliamentary Group for Africa with the Royal African Society, Oxford Brookes University, and the Trade Justice Network under the theme UK-Africa Trade and Brexit.
The Bank’s chief argued that Africa and the UK should be significant trading partners. “The reality, however, is that UK’s trade with Africa is trending downwards. From a $49 billion peak in 2012, trade decreased to $30.6 billion in 2018,” he noted.
The decline in UK trade and investment in Africa is against a backdrop of projected business-to-business and consumer-to-consumer expenditures of $5.6 trillion by 2020, and a food and agriculture market worth $1 trillion by 2030.
“The fact that we are having this conversation in the UK Parliament is a great start. The convening of this Summit by Prime Minister Boris Johnson is an even greater start,” he acknowledged.
President Adesina used his engagement at the House of Commons to share Africa’s investment opportunities, “which speak for themselves.” Trading under the African Continental Free Trade Agreement, which represents a market of more than 1.3 billion people and a gross domestic product of $2.5 trillion, and is the world’s largest free trade area since establishment of the World Trade Organization, starts in July.
Speaking earlier in the morning at the UK-Africa Investment Summit Sustainable Infrastructure Forum, the Bank’s chief said: “Investing in quality and sustainable infrastructure can spur Africa’s economic transformation.”
The Forum, organized by the Department of International Development (DFID) and Her Majesty’s Trade Commissioner for Africa, seeks to facilitate new investment and commercial opportunities for the UK and promote quality infrastructure to deliver better services to African citizens.
The Bank has been a forerunner in the race to rapidly close the continent’s infrastructure gap, which Adesina suggested be renamed “Africa’s Infrastructure demand opportunity.” Investors who tapped early into information and communications technology infrastructure in Africa have seen those investments became game changers for Africa, he noted.
“Just under two decades ago, Africa had fewer telephones than Manhattan in New York. Today, Africa has over 440 million cell phone subscribers. Returns on digital infrastructure are very high as the continent expands broadband infrastructure to boost connectivity and improve services,” Adesina.
The African Development Bank has been a major investor in infrastructure development in the electricity, transport, and water sectors across Africa. Cumulative Bank funding for infrastructure on the continent rose by 22% from $66.9 billion in 2016 to $81.6 billion in 2017. During the same period, the value of infrastructure projects with private sector participation has increased from $3.6 billion to $5.2. Billion.
To meet Africa’s unmet infrastructure needs, project preparation is critical, the Forum heard.
The Bank has established several project preparation facilities to address the lack of bankable projects and ensure a robust pipeline of projects. These facilities collectively provide $30-50 million annually in support for project preparation.
The African Development Bank and DFID are collaborating to explore how to better support fragile states, which are facing huge financing needs. DFID has been the Bank’s key strategic partner since it joined the group in 1983. And its “strong and consistent” support for the African Development Fund has helped the Bank work in low-income states, especially the fragile states.
Instruments, such as the Private Sector Credit Enhancement Facility, a credit-risk participation vehicle from the African Development Fund, (ADF)’s concessional window to support Non-Sovereign Operations in low-income countries, are showing tremendous results.
With $500 million in credit guarantees, provided through ADF, the Bank has leveraged $2.5 billion of financing into fragile states, with a zero default rate.
“We are committed to quality infrastructure and ensuring that no one is left behind!” Adesina concluded.
The Bank’s chief is on a three-day visit to the UK. On Monday, he joined African Heads of States at a reception at Buckingham Palace after taking part in a presidential panel at the UK-Africa Investment Summit convened by British Prime Minister Boris Johnson.