Africa is emerging as a fertile battleground for multilateral development banks scrambling for the massive infrastructure-financing gap estimated at $100 billion.
Multilateral development banks have emerged as key financiers of infrastructure projects on the continent, with the African Development Bank (AfDB), the World Bank, the European Investment Bank and International Finance Corporation leading the pack after committing $10.5 billion in 2017 alone.
And now, in a move likely to radiate further geopolitical rivalries, the Asian Infrastructure Investment Bank (AIIB) is pushing to increase its presence on the continent, bringing more African countries into the fold as it targets to capitalise on Africa’s significant infrastructure financing needs.
On July 13, the China-backed lender announced that it had expanded its membership to 100, with the latest entry of Rwanda, Djibouti and Benin.
“We now have members on every continent,” said Danny Alexander, the Bank’s vice-president at the bank’s annual meeting in Luxembourg.
It was the first time the bank had held the two-day gathering outside Asia since it was founded at the end of 2015, as it seeks to position itself in the global financing landscape.
But the Beijing-based lender is still some way off the size of the World Bank, which has 189 members.
Projections by the AfDB put Africa’s infrastructure needs between $130 billion and $170 billion a year, with a financing gap in the range of $68 billion to $108 billion.
The bank reckons that poor infrastructure has cost the continent a cumulative 25 per cent in growth over the last two decades.
It is also estimated the gap in the power sector alone subtracts two to four per cent from African countries’ GDP annually.
Although the World Bank has been the face of multilateral development in Africa, the AIIB wants to enhance its influence on the continent by bringing more countries into its membership.
For China, Africa is crucial particularly at this time it is expanding the Belt and Road Initiative.
The entry of the three African countries brings to five the African members, with the others being Egypt and Ethiopia.
Mr Alexander, the AIIB VP, said that in Africa, the AIIB is seeking to invest in sustainable infrastructure and other productive sectors “that better connect people, services and markets with the aim of impacting the lives of billions and build a better future.”
“The bank will be making more of its grants, more of its loans to Africa as a percentage and also in absolute dollars,” said new World Bank president David Malpass.
Meanwhile, the Africa Finance Corporation is also seeking to deepen its project financing, especially after raising $1.2 billion over the past four years and boosting its balance sheet to $4.5 million.
Africa Finance Corporation invests in infrastructure projects in sectors like power, natural resources, heavy industry, transport and telecommunications with its portfolio across 28 countries currently standing at $4 billion.
According to the Infrastructure Financing Trends in Africa 2017 report by the Infrastructure Consortium of Africa, total funding for Africa’s infrastructure development hit $81.6 billion in 2017, an increase of 22 per cent compared with 2016.
The significant growth was attributed to identifiable Chinese investments that rose from $6.4 billion in 2016 to $19.4 billion in 2017.
The resources were directed mainly in sectors like transport, water, energy and ICT.