Financing Africas Rural Infrastructure: A New Approach Michael R. Taylor School of Public Policy University of Maryland March 17, 2006

Rural Infrastructure and Trade Trade policy is important – at national, regional and international levels Technical assistance for farmers and agribusiness can be valuable BUT neither will pay off for Africas rural poor without the physical infrastructure needed to produce goods and access markets Aid for trade initiatives should emphasize infrastructure

Public Investment in Infrastructure Substantial public goods investment is needed for irrigation, electrification, transport, and market infrastructure Public investment is justified to foster private investment and entrepreneurship Maputo Declaration reflects commitment of African leaders to agriculture-led growth External public capital remains essential

Infrastructure Financing Gap CAADP calls for public and private investment of $25 billion per for 10 years Africas poorest countries have little capacity to mobilize local resources for infrastructure projects Private investors have little incentive to invest in infrastructure, especially absent public goods Donors doing little now to fill the infrastructure financing gap

The Gap in Donor Financing of Infrastructure World Bank is the largest external source of infrastructure investment, but total 2005 commitments to Africa were only $3.9 billion Of which, less than $1 billion related to rural infrastructure USAID generally doesnt do infrastructure; MCA promising but still modest scale US and other OECD donors generally still give priority to health, education and other social sector spending

The Donor Effectiveness Gap Much external assistance for African agriculture and rural development is: Donor driven Fragmented Inefficient Undermining of local ownership and accountability

One Solution: A New Africa- Led Financing Facility An African Rural Infrastructure Facility, housed at the African Development Bank, could: Attract and pool significant new donor resources Build African capacity to design and manage infrastructure projects Focus on capital-intensive physical and market infrastructure Be the primary pan-Africa vehicle for prioritizing, coordinating and managing external public investment

To Be Successful…. An African Rural Infrastructure Facility should: Respond to local assessments of need and be accountable to Africans Be market-oriented and collaborative with the private sector Be transparent and provide leadership in fighting corruption Work closely with the World Bank and other international financial institutions Have a clear compact with donors

Conclusion Doha Development Round is hollow without infrastructure More of the same on development assistance is not the answer Africas development rests on what Africans do An Africa-Led finance facility can give Africans the means to do it