Financing Africa’s Rural Infrastructure: A New Approach

Michael R. TaylorSchool of Public PolicyUniversity of Maryland

March 17, 2006

Rural Infrastructure and Trade Trade policy is important – at national,

regional and international levels Technical assistance for farmers and

agribusiness can be valuable BUT neither will pay off for Africa’s rural

poor without the physical infrastructure needed to produce goods and access markets

Aid for trade initiatives should emphasize infrastructure

Public Investment in Infrastructure Substantial “public goods” investment is

needed for irrigation, electrification, transport, and market infrastructure

Public investment is justified to foster private investment and entrepreneurship

Maputo Declaration reflects commitment of African leaders to agriculture-led growth

External public capital remains essential

Infrastructure Financing Gap CAADP calls for public and private

investment of $25 billion per for 10 years Africa’s poorest countries have little

capacity to mobilize local resources for infrastructure projects

Private investors have little incentive to invest in infrastructure, especially absent public goods

Donors doing little now to fill the infrastructure financing gap

The Gap in Donor Financing of Infrastructure World Bank is the largest external source of

infrastructure investment, but total 2005 commitments to Africa were only $3.9 billion

Of which, less than $1 billion related to rural infrastructure

USAID generally doesn’t “do” infrastructure; MCA promising but still modest scale

US and other OECD donors generally still give priority to health, education and other social sector spending

The Donor Effectiveness Gap

Much external assistance for African agriculture and rural development is:

Donor driven Fragmented Inefficient Undermining of local ownership and

accountability

One Solution: A New Africa-Led Financing Facility An African Rural Infrastructure Facility, housed

at the African Development Bank, could: Attract and pool significant new donor

resources Build African capacity to design and manage

infrastructure projects Focus on capital-intensive physical and

market infrastructure Be the primary pan-Africa vehicle for

prioritizing, coordinating and managing external public investment

To Be Successful….An African Rural Infrastructure Facility should: Respond to local assessments of need and

be accountable to Africans Be market-oriented and collaborative with

the private sector Be transparent and provide leadership in

fighting corruption Work closely with the World Bank and other

international financial institutions Have a clear compact with donors

Conclusion Doha “Development Round” is

hollow without infrastructure More of the same on development

assistance is not the answer Africa’s development rests on what

Africans do An Africa-Led finance facility can

give Africans the means to do it