CASABLANCA – In Africa, the COVID-19 pandemic is likely to lead to an unprecedented economic recession. In addition, several African countries are grappling with the consequences of a collapse in commodity prices – another key factor in the current negative trends.

The continent must now find the path to economic recovery, while strengthening its resilience to future shocks. From strengthening the health sector to promoting broad economic growth, African leaders need to develop new strategies to address structural challenges. The continent's external partners are also affected by COVID-19 and are focused on their own national needs. In addition, foreign capital is fleeing emerging markets (including Africa) at a record pace since before the pandemic. Therefore, African policymakers need to turn to their countries' internal resources.

One possible solution is a large-scale infrastructure investment program, financed in part by mobilizing domestic resources through "asset recycling" – a system that allows governments to unlock capital tied up in assets already in their possession. By offering these assets to credible private sector investors through concession schemes, governments could free up funds for critical new projects. These concessions promise long-term revenue streams and new infrastructure investment opportunities that are expected to attract more investment capital to Africa. In this way, asset recycling could help close the continent's massive infrastructure financing gap, which the African Development Bank (AfDB) estimates at $68-108 billion a year.

Recyclable assets include power plants, toll roads, ports, airports, fiber optic networks, pipelines, etc. The funds generated by monetizing these assets could be deployed into new projects with powerful multiplier effects, creating jobs and business opportunities throughout a country's economy. This is essential, given the massive job losses the continent is likely to face and the millions of young people entering the labour market every year.

 
Although asset recycling has never been tried in Africa, Australia has successfully used it to generate more than A$25 billion ($18 billion) in three years, thanks to the recycling of just 12 state-owned assets. African governments could repeat this process across the continent to help close the annual infrastructure financing gap.

In addition to the immediate benefits, asset recycling in Africa could attract a new class of infrastructure investors. In Australia, a combination of sovereign wealth funds, pension funds and several private equity funds have been involved in such projects. Attracting similar investors by leveraging existing assets would end the dependence of African governments on donors and development finance institutions alone. My organization, Africa50, is currently discussing the implementation of asset recycling projects with several governments across the continent.

Large-scale investments in infrastructure go hand in hand with a focus on digitalisation, which can reduce costs for public and private actors, increase their efficiency, overcome physical barriers and improve the quality of services provided to customers and citizens. The continent's digital transformation is well underway in many ways: the number of new broadband connections is soaring, mobile use continues to grow, and the continent is a global leader in mobile money. In addition, the "new normal" of remote work and the changes in consumer behavior triggered by COVID-19 present an opportunity to accelerate this process across the continent.

However, while economic growth and job creation in Africa would clearly benefit from increased digitalization, broadband penetration is still below the global average. A complete digital transformation will not be possible without a reliable core infrastructure. Achieving universal broadband access through 4G/5G and expanding fiber optic cable networks will require an additional $100 billion by 2030, according to the World Bank. Raising the necessary funds is becoming a top priority for African governments looking to adapt to a post-COVID-19 world. Africa50 is already working on such a transaction in a shareholder country, using the principles of asset recycling.

 
Asset recycling strategies clearly offer African governments a viable way to contribute significantly to the self-financing of the investments their countries need. And while the development of large-scale digital infrastructure is rightly a priority for African countries, governments must also focus on supporting entrepreneurs with ecosystems that enable digital innovation. Initiatives such as Kigali Innovation City will provide turnkey support to technology and knowledge-based companies.

Finally, African governments must focus on pursuing regional integration through the African Continental Free Trade Area (AfCFTA). Shared infrastructure is vitally important for developing manufacturing capacity, yet many African economic communities are lagging behind in this regard. The integration of energy infrastructure, in particular, would stabilize supplies and reduce costs, with economy-wide effects. The AfDB's "Desert to Power" initiative, for example, aims to develop 310 gigawatts of renewable energy in the Sahel region, with the aim of providing electricity to 11 countries, including Nigeria, Mauritania, Mali, Burkina Faso, Niger, Djibouti and Eritrea.

Similarly, regional integration of supply chains through the full implementation of the AfCFTA would boost local economies and strengthen domestic production capacity. Most African countries depend on trade with non-African partners, accounting for about 30% of their GDP. By encouraging intracontinental trade, the AfCFTA will support the growth of the continent's manufacturing sector serving local markets. Moreover, the increase in intracontinental trade, from its current level (15% of all trade) to around 60%, is likely to create millions of jobs.

Clearly, a recovery designed and financed largely by Africans is within reach. As the pandemic hits the continent hard, strategies such as asset recycling, further digitalization, and deeper regional integration can help ensure Africa has enough strength to respond.