Fiscal constraints and limited project finance capabilities may hinder ambitions, but African governments are opening their doors to greater private investment to overcome their infrastructure deficits.
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In July 2019, the launch of the African Continental Free Trade Area (AfCFTA) – the largest in the world – demonstrated a rising intergovernmental commitment to bolster the continent’s economic potential. If political and existing regional trade obstacles can be overcome, AfCFTA is set to attract large investment in critical trade and telecommunications infrastructure to enhance interconnection as the continent embraces digitalisation.
Eastern Africa stands out
The eastern region was already producing standouts prior to the launch of AfCFTA. In a 2018 World Economic Forum event, Kenyan President Uhura Kenyatta announced ambitions to move Kenya’s installed renewable energy capacity from 70% to 100% by 2020. A target well on its way largely due to the 310MW Lake Turkana wind farm, which was connected to the national grid, via the new USD 271m Loiyangalani-Suswa power transmission line, in December 2018.
Strong political will and regulation have also made Ethiopia an attractive destination for investors. Securing energy to meet its growth needs has been a top priority for the country that, with the support of World Bank-backed programme Scaling Solar, is currently implementing a 1GW pipeline of solar PV tenders.
Enhancing digital infrastructure
A growing asset class across the region is telecommunications, with strategies to improve internet penetration being explored. Ethiopia is in the process of privatising its state monopoly, Ethio Telecom, and the island country Cape Verde is to be linked to the landmark EUR 150m EllaLink subsea cable project connecting South America with Europe.
Across the continent, the construction of large assets has mainly been driven by China’s Belt and Road Initiative (BRI). However, China is facing increasing competition from French, UK, and Japanese government-backed investors to develop projects in Kenya, Ghana and Ethiopia.