Infrastructure financing 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.