Infrastructure Finance in Africa: Overview, Research Gaps, and Urban Research Agenda


Africa’s development requires substantial investment in infrastructure systems, such as water, energy and telecommunications. These systems are essential in ensuring that contemporary processes, such as industrialisation and urbanisation, can be leveraged to create real and sustained value for cities, countries, regions and global networks. One of the key questions underpinning this infrastructure challenge is how to finance these systems. Often focussing on the need for bankable projects and creditworthy institutions, debates about how to finance African infrastructure reflect an important and well-rehearsed argument that the key to addressing the infrastructure finance gap, thereby unlocking Africa’s infrastructure challenge, is overcoming the mismatch between investor expectations and the actual risk/return profile of infrastructure programmes and projects. In this mismatch, many useful projects are regarded as simply unbankable, either as short-term returns are too low, or the risks are too high or not easily quantified and costed.

With the sustainable development goals and other global agendas calling for more equality, climate responsiveness and poverty alleviation, the development sector has been compelled to move beyond the frame of bankability to ensure that investments are sustainable and just. This has required deeper engagement with how financial logics, such as rating systems and assessment criteria, shape the sustainability of infrastructural outcomes. It has also required recognising current gaps in knowledge, such as the lack of data on Africa and the weaknesses in our ability to analyse this data in the context of rapid urbanisation, digitisation, demographic transition and other important trends that have unique implications for the continent.

This paper comprises four parts with the intention of demonstrating these gaps and providing a scaffolding for future knowledge production. In section 2, an overview is given of the actors and instruments involved in infrastructure finance in Africa, namely how much different actors are investing, what kinds of financial mechanisms are being used, and into what types of infrastructure sectors. In section 3, the research issues that surface when attempting to analyse that data are outlined, with an indication of where improvements could be made to strengthen documentation and accountability. Building on the insights from section 2 and 3, in section 4, a propositional and forward-thinking research agenda for infrastructure finance research in Africa is presented. The paper is concluded by a presentation of two key areas for collective action. A summary of the main sections in the paper follows.

Although information about investment in Africa is scattered and difficult to consolidate, in this section, an overview is given of the actors involved in financing and delivering infrastructure on the continent, of the emerging trends concerning financial mechanisms and the ways in which they play out in each major investment sector. This high-level overview is an indication that national governments are key actors in infrastructure finance, leveraging their own revenue and loans. Multilateral and bilateral lenders are also major players, but they operate in a complex landscape of geopolitical ties and utilise diverse financial mechanisms that are often difficult to chart. Blended finance and other emerging instruments that combine concessional and commercial elements reveal an increasing complexity of the project packages through which infrastructure is delivered. This brief map shows that existing available information is heterogeneous and cannot simply be portrayed through numbers as richer qualitative reflections are needed to make sense of scattered and diverse documentation.

The gaps in understanding the trends and patterns affecting investment in infrastructure in Africa reflect interrelated and systemic issues. In this part, the paper is focussed on three important obstacles to building shared meanings of sustainable infrastructure financing in Africa, particularly among key financial actors. First, there is an absence of commensurability and, therefore, the interoperability of available datasets. In other words, data collected by different actors use different categories and metrics, making comparability difficult. Secondly, data are rarely collected by autonomous agencies. The need for autonomy and transparency of the research underpinning many of the existing outputs on the topic is clear. Finally, yet importantly, the lack of fine-grained, localised data at the subnational level makes nuanced analyses difficult.

This is particularly evident and important in the context of urban infrastructure, which pays the price of unrealised decentralisation reforms, competing territorial governance, traditional lenders’ opposition to funding subnational institutions, and an even greater dearth of data and research.

When researched, many priorities could, each in its own way, address the knowledge problem of sustainable infrastructure financing. The most pressing imperatives are synthesised in this part of the paper. The first is capacitating research centres in Africa to engage the questions of infrastructure finance. As shown in this paper, African research institutions are rarely involved in setting priorities of international lenders and could be capacitated to play a vital interlocutor role. A second necessity is understanding the increasingly important role and unique practices of non-OECD actors, such as China, India and Arab countries. While players such as the World Bank were once regarded as the leaders of the African infrastructure investment agenda, a diversity of lenders and donors, often with divergent and even competing objectives, has proliferated, and needs to be better understood and coordinated, if possible. The third imperative relates to the need to give serious consideration to key continental transitions already underway. Africa is changing rapidly. Urbanisation; climate change; demographic transitions, for example, youth bulge; industrialisation; digitisation and other processes have direct and fundamental impacts on infrastructure, and failure to account for them has its own peril. The fourth imperative relates to the rise of alternative spatial and territorial formations, which may challenge the primacy of the nation state over decades to come. Put differently, multi-country corridors, transborder megacities, and/or regional natural systems reflect the interconnectedness of the pan-African infrastructural project and point to the need for new governance formations that can deal with these infrastructural realities. Finally, the reality of existing infrastructural hybridity and diversity cannot be overlooked. Focussing exclusively on capital intensive mega projects fails to acknowledge the diverse ways services are already being accessed, as well as the wider social infrastructures that support human, cultural and social well-being.

In this paper, two policy responses have been identified, which, in our view, would serve the research agenda identified in this paper. First, by creating collaboration protocols that help Africa-based research institutions, privately and publicly owned financial actors, local government and other stakeholders to join forces and, through dedicated channels, design, define and assess sustainable infrastructure projects over the long term. Secondly, a need has been identified to operationalise urban sustainable infrastructure financing through dedicated tools that respond to the twofold need of using small-scale testbeds and reframing the question of bankability by adopting innovative forms of risk-sharing.