Although the African continent is not, to date, the most dramatically affected by Covid-19, from a health point of view, with 3% of deaths for 17% of the world's population, the economic fallout from the pandemic lead the World Bank (WB) to anticipate a 3.3% drop in growth in 2020 in sub-Saharan Africa, its first recession in 25 years. And 40 million Africans are at risk of falling into extreme poverty.

In this context, the need to finance development and in particular infrastructure in Africa is more glaring than ever. Because the continent suffers from a flagrant lack of infrastructure. However, they allow both the development of economic activity (the shortage of electricity would cause a loss of 2 to 4 points of growth per year according to the WB) and access to essential needs (340 million people do not have access to drinking water, 640 million live without electricity). “One of the positive impacts of this crisis is that it pushes us to really focus on our priorities. And to ensure that we build quality infrastructure that maximizes the positive impacts on the economy, and we also build it to overcome the natural disasters, pandemics and epidemics that are before us,” said Salomon Quaynor, vice president of the African Development Bank (AfDB), in November 2020. Covid-19 redefines priorities while the different sectors are unequally financed (see graph). It makes water and sanitation infrastructures even more necessary, which are underfunded because they are not very profitable, health… It also accelerates movements such as the installation of telecom and web networks.

The continent's infrastructure suffers from a lack of funding. The AfDB estimates the needs at 170 billion dollars per year until 2025, with a shortfall estimated at 108 billion per year. Africa, however, ended the 2010 decade by exceeding 100 billion in financing for its infrastructure for the first time in 2018, according to the latest report from the Infrastructure Consortium for Africa (ICA). The States are the primary funders (37% of commitments). China has become the second (26% of the total), but its practices are beginning to be questioned. International donors and development banks are and will remain equally important. Even more than before the crisis, when States have modest budgets and see their debts grow, it seems necessary for the private sector (11.8 billion dollars in 2018) to mobilize more to finance infrastructure. Many obstacles must be removed, but public-private partnerships (PPP) and innovative financing methods are emerging. The resources exist on the continent but are struggling to be used. LB

They said

The pandemic is redefining priorities

The pandemic has imposed new priorities by confining 3 billion people worldwide. Housing, food, health infrastructure, water and sanitation are becoming No. 1 priorities. Huge funds are allocated in concessional loans or grants to countries in the fight against the pandemic by organizations such as WB, AfDB, African Development Fund (ADF), United Nations. This is why most of the financing intended for infrastructure will thus be carried forward in 2020 or even 2021 to the new priority sectors, with the hypothesis of a decline in the pandemic during the year. But the electricity sector, given its strategic role, will quickly regain its priority position in order to be able to continue to support the other key sectors. However, as visibility on the evolution of the pandemic still remains limited, there is still uncertainty that could go as far as 2022.

Safiétou Diallo, Technical Advisor to General Management, Senelec, Revue Banque n° 848, October 2020, p. 33.

http://www.revue-banque.fr/banque-investment-marches-gestion-actif/article/des-leviers-pour-attraction-secteur-prive

Towards a better satisfaction of basic needs

The infrastructure sector in Africa should be able to benefit from the new opportunities resulting from the crisis, for several reasons. First of all, the crisis has finished exposing in Africa the deep socio-spatial inequalities not only in terms of access to social services (health, education) but also from the point of view of telecommunications (Internet, etc.), transport, employment, housing, etc. Then, the World Bank estimates that 20 to 25 million Africans could fall into extreme poverty because of the pandemic: admittedly, this is not strictly speaking welcome news, but the response of African states should be now to lay the foundations of a strategy for prioritizing investments, in particular to guarantee access to basic services for the most vulnerable populations. The AfDB estimates the additional annual need for infrastructure projects at 80 billion euros in this period of crisis. Finally, a major lesson to be learned from this crisis is that people must now be at the center of priorities: as a result, African economies are increasingly moving towards financing infrastructure dedicated to improving well-being. and meeting basic needs.

Henri-Claude Oyima, CEO, BGFIBank Group, Banking & Strategy n° 395, October 2020, p. 8.

http://www.revue-banque.fr/banque-investment-marches-gestion-actif/article/groupe-bgfibank-acteur-majeur- financement-des-i

The urgency of mobilizing private financing

More than ever, the continent will have to develop its own infrastructure financing model, which allows private investors to fully play their role, as is increasingly the case in emerging countries and more widely in more mature economies. Until then, in Africa, private capital has only accounted for an average of 2 to 3 billion dollars per year of infrastructure financing, or nearly 4% of total investment. […] In this context, it seems obvious that it is necessary to mobilize massive private institutional investments, both international and national.

Karim Zine-Eddine, Director of Studies, Paris Europlace, Banking & Strategy n° 395, October 2020, pp. 30-31.

A turning point for China in Africa?

In a less favorable economic context and debt service that is now too high, the governments of some African countries have become more reluctant to face Chinese proposals, and are asking for more transparency as well as more balanced agreements. One of the most interesting examples from this point of view is that of the Freetown international airport project of 318 million dollars (275 million euros), which China was to finance, build, manage and maintain. It was thus canceled by the authorities of Sierra Leone once they came to power in October 2018. “The government considers that it is not economically profitable to continue the construction of a new airport when the current one is seriously underused”, justified the Ministry of Transport and Aviation, in a letter consulted Wednesday, October 10 by AFP.

Estelle Brack, founding president, KiraliT, Revue Banque n° 848, October 2020, p. 26.

http://www.revue-banque.fr/banque-investment-marches-gestion-actif/article/chine-acteur-majeur-singulier- financement-des-i

Societe Generale analyzes the developments linked to the crisis

Covid has created additional constraints for sovereigns and we are seeking to ensure that the impact of indebtedness on the country can be as limited as possible. On the export side, the implementation of projects has been delayed, with new discussions at the level of the councils of ministers and governments to reprioritize certain projects, and put others on hold, because the level of indebtedness is worrying certain authorities such as the International Monetary Fund (IMF) or the WB. We are therefore having further discussions with the government to ensure that the project we are working on has received the blessing of these authorities.