FOR Africa to serve as a haven for Foreign Direct Investment (FDI), the continent needs $93 billion a year to meet its huge infrastructure deficit over the next decade, an amount that represents more than 35 per cent of its gross domestic product.
These were disclosed by the Managing Partner, Ernst and Young, a global financial advisor for airlines, telecommunications firms, and other vital sectors, Mr. Zemedeneh Negatu, at the 20th African Aviation Conference on Air Finance in Africa convened by Nick Fadugba, which ended last week in Addis Ababa, Ethiopia.
According to Negatu, current spending on African infrastructure is at $45 billion.
He, however, took a swipe at African governments for their inability to generate electricity for their citizens, describing this as the region's most important development challenge. He lamented that the lack of electricity was in fact reducing growth in Africa.
According to him, an estimated cost savings of $17 billion of the so-called "efficiency gap" could be achieved if existing resources were used more efficiently, stressing that a substantial infrastructure funding gap of $31 billion a year remained.
He reiterated that yearly private investment in infrastructure reached $9.4 billion in 2007, more than official development assistance of $3.7 billion a year.
He noted that the vast majority of FDI in Africa was in Information Communication Technology-related projects, hinting that mobile phone penetration rates had risen from two per cent in 2000 to over 30 per cent in 2010.
He recalled that between 2003 and 2007, the growth in the number of FDI projects in Africa, both in absolute terms and as a relative proportion of global FDI projects was erratic and that penetration estimate was expected to reach 50 per cent by 2012, with over 500 million subscribers, adding that 48 of 53 African countries had more than one mobile operator.
His words: "Africa has enormous potential for energy production from renewable sources - solar, hydro, wind and geothermal. Almost all sub-Saharan African countries have sufficient renewable resources, exploitable with current technologies, to satisfy many times their current energy demand and the private sector is increasingly aware of the enormous opportunities involved."
The finance expert stated that there were magnificent opportunities, but regretted that there were still hugely untapped potential.
He stated that after an exceptional 2008, in which total new projects and the proportional share of global FDI peaked, the investment figures had remained resilient, despite the negative impact of the global economic downturn.
"The fact that Africa has managed to remain relatively attractive through the economic crisis, and has maintained its increased share of FDI compared with other regions of the world, reflects positively on the economic growth prospects for Africa, as well as the improving investors perception," he said.
The Guardian