New Financing for Africa’s Roads, Rail Without High Debt

Lack of infrastructure a major obstacle to faster growth in Central Africa

Costly upgrades to transportation, utilities place premium on financing

Increasing investment without taking on excessive debt a crucial priority

Sub-Saharan Africa’s strong growth over the past decade has highlighted the importance of infrastructure development.

Senior officials, academics, business executives, and civil society figures from Central Africa and representatives of international financial institutions gathered in Yaoundé, Cameroon, on March 10 for a regional conference on “Financing the Future: Infrastructure Development in Central Africa.”

The one-day event examined options for infrastructure financing, including how to leverage existing financing and promote innovative alternatives. The event also emphasized the role of private capital in infrastructure financing.

Delegates heard, however, that a robust private sector response depends on the returns from public infrastructure investment. Infrastructure development should therefore proceed alongside reforms aimed at improving the business and investment climate. Appropriate safeguards, as well as review of the risks faced by governments, are also essential to effective private sector participation.

Public-private partnerships

The conference considered several core issues, including the need to optimize domestic financing, especially from natural resources, and streamline inefficient expenditure to free up fiscal space for investment; national and regional infrastructure projects; and domestic and international financing options, including public-private partnerships.

Central African officials acknowledged that infrastructure is critical to the region’s continued resurgence. They agreed that investing in infrastructure can boost growth, raise productivity, and assist poverty reduction. However, they noted that building and upgrading infrastructure is costly and implies large financing needs during the construction phase and for subsequent maintenance.

For Central African countries, increasing investment without taking on excessive debt will continue to be a crucial policy challenge. Conference participants widely agreed that a good debt management strategy is important as infrastructure investments are scaled up.

Right financing mix

The conference recognized that the right financing mix will depend on multiple factors, including financial...