Acting President Yemi Osinbajo, SAN, has advocated a new paradigm in financing infrastructure projects in Africa in order to close the huge infrastructure gap in the continent. He stated this at a forum to mark Africa Finance Corporation’s 10th anniversary in Abuja.
Below is the full text of the Acting President’s speech:
The idea of a public- private development finance institution, wholly African from scratch, not born of the will and wishes of the other international multilateral Development Financing Institutions (DFIs) but of the will of African nations, African leaders and institutions, surely seemed a little far-fetched barely a decade ago.
A few minutes ago, I was talking to his Excellency, the former President Olusegun Obasanjo and the former CBN Governor, Prof. Charles Soludo, and they were talking about how a few conversations between them and the approval of President Obasanjo at that time birthed what is today the AFC. It struck me that just as it is always the case, the greatest ideas that become the sort that we celebrate today never really seem anywhere near what they turn out to be, they are just a seed and if that seed is planted, if it ever gets done, then there is a good chance that it can become what it is today. Many of the best seeds never get planted, but I am very glad that this particular seed was planted and we can see the big oak tree that it has become. We are truly grateful to God and to the great men and women who made this happen.
But the story of AFC is the story of a core of solid African professionals whose courage and faith in leaving the safety and certainty of institutions where they had established firm reputations for the unknown world of the start-up multilateral DFI has formed an ethos that today defines the corporation. An ethos that has quickly built up such trust and confidence that has in these few years initiated, led participated in, and offered project finance and management services to some of the most significant infrastructure projects in Africa.
But uncertain and turbulent as the last decade was for African and indeed world economies, it appears inevitable that the next decade will be even rockier. Indeed it would seem that the only certainty in the future is the uncertainty.
But for the student of history and social phenomena, that milieu is the precursor of some of the most phenomenal opportunities for prosperity and growth that we have seen thus far. The coming years may well call for a different mindset and a more nuanced skill set. For example who could have predicted the phenomenal success of the so-called disruptive technologies and businesses riding on their backs.
So, today the owners of the largest taxi fleet in the world own no cars and have no permanent drivers, the largest real estate agency in the world actually also owns no real estate of note and their clients both landlords and tenants sign up to their company. So technology, its accelerative power, and the capacity to disrupt established business, thought and even creative value chains will clearly stretch all our theories and assumptions on financing and management. But if we begin with the known even in this unknown it might help.
Investments in broadband infrastructure, for example, is crucial. Broadband infrastructure has now won its place as the new utility alongside electricity, transportation, telecoms, and water supply. And it is bound to affect and indeed is already defining how every one of these other utilities work and will work in the coming years.
I want to note AFC’s support for the MAIN ONE cable project is one of those farsighted initiatives that these times will require. It is important to mention also how in the past most nations, especially African countries were able to pay up for infrastructure projects in one way or the other. But that sovereign risk environment is changing quickly. Governments had always in the past been the largest contributor to infrastructure even when payments were always never really smooth, but they were able to offer sovereign guarantees or cash support. But today, that is no longer forthcoming given the huge deficits and sovereign debts that most governments now experience.
So, the time certainly calls for new thinking, AFCs and DFIs like that must now begin to look for new ways of engaging with governments, you must look for new ways of engaging with African governments. We cannot forget that unless corporations like AFC recognize that what is important to do in these times, the next 10 years will indeed be very difficult years for our economies, for the African economy. We will be relying on AFC, our own DFIs to do much more; we will be relying on them to show much leadership to take greater risks.
There is no question at all that all of what is required, all of what we need will not be provided just by government, government cannot finance the huge infrastructure needs of most countries. As a matter of fact, without the private sector, it is completely impossible for government to finance all the infrastructure needs.
Take Nigeria for example, all our refineries put together at the moment does not produce 600, 000 barrels of oil, we don’t refine 600, 000 barrels of oil but one single private sector investor is building one single line of 650, 000 barrels. So there is no question at all that government cannot match the power of the private sector and the resources that the private sector can put together. It is the AFC that can bring the private sector and public sector together to deliver on the kind of infrastructure need that our country requires.
One thing is certain and I think that we have all agreed, and that is market will determine practically everything and we have all agreed how, it is market that must determine.
It cannot be any form of central planning, of course government will interfere, but I think all of us have agreed today that we must ensure that market determines all things; it is the markets that has led to the mobile technology boom. The fact that we allowed the private sector to take the lead and we created the regulatory environment that made it possible, is why today in, Africa 750 million Africans have access to phones. For many, their first use of a phone was the mobile phones and that is the power of the market where the public sector comes together with the private sector.
This is the role that DFIs will play; that mediatory role and I believe that the AFC is centrally positioned to do so. So, let me again commend the AFC for the excellent work they have done in the past ten years and especially the leadership of Andrew Alli, Olusegun Akin-Olugbade and all of the great professionals who have come together to make that institution what it is today. And I pray that the next ten years will be the best ten years yet.
