Investing in Africa's Infrastructure: Financing and Policy Options

Africa has a severe shortage of infrastructure. Addressing this shortage involves both correcting the problems of poor maintenance and underinvestment that have caused it and raising the finance for a phase of remedial investment. We review evidence that substantiates the shortage, in terms of both stocks and the potential for high rates of return. We then turn to the range of options for attracting remedial finance, focusing in particular on how they relate to the region's endowment of natural resources. Governments will need to build the regulatory and technical capacities to tap into this opportunity for leveraged private capital flows by reducing the risks associated with large, capital-intensive projects. Furthermore, governments must build the authority necessary to manage both the challenges associated with deferred public consumption and the time consistency needed to support long-term ventures.