Renewable Infrastructure holds a trans formative power in our societies and economies. Through the construction of electricity, transportation, and telecommunications networks; we are able to power our homes and businesses, connect our producers to markets, and share information rapidly, boosting our trade, competitiveness, economic opportunities, and quality of life.
So crucial is infrastructure to promoting our shared prosperity that it is featured in Goal 9 of the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda—“Build resilient infrastructure, promote sustainable industrialization and foster innovation”—adopted at the historic September 2015 U.N. Sustainable Development Summit and Aspiration 2 of Agenda 2063, the African Union’s vision for Africa’s transformation over the next decades. Regional institutions, including the African Development Bank (AFDB), the New Partnership for Africa’s Development (NEPAD), and the U.N. The Economic Commission for Africa is actively supporting infra- structure development in the continent.
Yet, meeting this goal will require decisive action as Africa’s infrastructure needs remain immense: Only 30% of Africa’s population has access to electricity, 34% has access to roads, and internet penetration rate is low, a mere 6% compared to 70-90% for other developing countries. In Sub-Saharan Africa, the infrastructure deficit is particularly acute, with the poorest countries in Africa falling far below other low-income countries on all infrastructure related indicators.
To address these infrastructure gaps and fully achieve Goal 9 of the SDGs and Aspiration 2 of Agenda 2063, governments will need to accelerate and intensify efforts to mobilize domestic and external resources for infrastructure development. Sub-Saharan African countries alone spent nearly $60 billion from their national budgets on infrastructure development in 2012. Although significant, this sum falls short of the estimated $93 billion needed to close the region’s infrastructure gap completely, and explains the continuing bottlenecks in the region. So where can African governments find the necessary funding to carry out these projects? Which untapped and innovative sources can be leveraged toward Africa’s infrastructure?
Domestic public investments constitute the bulk of resources allocated toward infrastructure projects in sub- Saharan Africa, with tax revenues making up a large portion of these funds. At the third United Nations International Conference on Financing for Development held in July 2016 in Addis Ababa, Ethiopia, world leaders called for greater domestic resource mobilization—focusing primarily on strengthening tax collection mechanisms and broadening tax bases—to support infrastructure projects. However, other domestic mechanisms for financing infrastructure do exist. For example, pension funds are able to set aside assets for investment, including in infrastructure, but these schemes are currently underutilized in the African continent. While some experts argue that pension funds are too risk averse to invest in risky, decades-long infrastructure projects, others contend that with the right governance, regulation, and instruments to assess and manage the risks associated with long-term investment in infrastructure, pension funds could take on a greater role in transforming the continent’s infrastructure landscape.
This report explores the key issues surrounding pension funds as a source of financing for African infrastructure and makes a compelling case for reforming the continent’s pension schemes so they can serve as an integral component of the global approach to meet Goal 9 of the SDGs and Aspiration 2 of Agenda 2063. It begins by providing an overview of the gaps in African infrastructure, as well as the financial resources available to support infrastructure development. In the sections that follow, it illustrates pension funds’ untapped potential in the continent, highlighting international experiences with pension funds and the lessons learned from these cases. Then it concludes with policy recommendations for reforming pension schemes and fully capitalizing on the continent’s favorable demographic trends.
Click here to read the full report by the UN:
LEVERAGING AFRICAN PENSION FUNDS FOR FINANCING INFRASTRUCTURE DEVELOPMENT