Pretoria — With the African continent continuing to battle poor infrastructure, Africa must mobilise domestic savings and capital markets to invest on deals on the continent, says Finance Minister Malusi Gigaba.
“Africans must not expect others to invest in what we ourselves, are not ready to invest in. Our capital resources may by limited, but they are not insignificant. We need to mobilize our domestic savings and capital markets to invest in deals on the continent,” said Minister Gigaba on Wednesday.
Addressing a Black Business Council breakfast roundtable in Durban, Minister Gigaba said poor infrastructure continues to undermine intra-continental trade.
While Africa’s infrastructure backlog is estimated at around US$100 billion per year, regrettably, available financing covers only half of this.
He said the combination of years of under-investment and exploitation has meant that African roads and railways were mainly designed and built to facilitate transportation of raw minerals and resources to markets outside the continent.
“We need infrastructure which supports industrialization, the beneficiation of minerals and the delivery of basic services to our people. We need social infrastructure to support a globally competitive education system, such as schools, universities and housing for students,” said Minister Gigaba.
The consequences of poor infrastructure have led to intra-African trade only being at around 11%, whereas intra-Asian and North American trade is both at 40%.
“Intra-continental trade in Europe sits at an impressive 60%, thus mobilizing capital to build economic infrastructure. Unlocking industrial activity, intra-Africa trade, and growing Africa’s share of global trade, is crucial for Africa’s development,” said the Minister.
Minister Gigaba noted that in most cases it is not funding that is missing, but projects which are well structured and bankable.
“South Africa has over R4 trillion worth of projects in our pipeline, the National Infrastructure Plan. Government is spending R1 trillion over the next three years in funding and delivering the most strategic and urgent of these.”
He added that the projects are attracting private investment as well.
“What often holds us back, are projects which have not been rigorously packaged through the various feasibility stages, such that they are ready to be funded with a clear path to repayment,” said Minister Gigaba.
Minister Gigaba said governments on the continent need to put in place policy and regulatory regimes which attract investment.
The Minister said an African infrastructure report pointed out that weak policy in sectors like electricity and transport can hold back investment.
“These investments involve huge initial outlays and long repayment horizons and therefore investors require certainty and stability. We have to balance political pressure for low user charges, with the need to establish user pay funding models which are needed to provide funding in a scarce resource context,” said the Minister.
The Minister also called for the use of state procurement strategically. This, as the state plays a leading role in capital investment, due to the resources it can mobilise. Such resources, he added, must be deployed strategically.
He further added that government must show decisive leadership with regards to inclusive growth and economic transformation.
“We must sustain the political will to drive it such that growth results are achieved, with real benefits for our people. We must be bold and creative, and not limit ourselves conceptually from imagining new approaches appropriate for our national circumstances.”
Credit: All Africa . com