South Africa Sees $100 Billion Fund for Africa at SummitNasreen Seria
South Africa sees the creation of a $100 billion fund to finance infrastructure projects on the continent as one of the key outcomes from the U.S.-Africa Leaders Summit this week.
About 40 African leaders meeting with U.S. President Barack Obama in Washington over the next two days will discuss the possibility of setting up the fund, South African Transport Minister Dipuo Peters said in an interview in Washington today. An announcement may come from Obama or Vice President Joe Biden, she said.
The U.S.-Africa Infrastructure Development Fund will seek to have equal contributions from the U.S. and Africa, South African International Relations and Cooperation Minister Maite Nkoana-Mashabane said on Aug. 1. The financing will go toward supporting “regional integration and Africa’s industrialization,” she said.
“There’ll always be a need for infrastructure funding,” Peters said. “The terms and conditions still need to be worked out and that will determine South Africa’s response.”
African nations have a funding shortfall of $50 billion a year to ease energy shortages and transportation bottlenecks, according to the World Bank. Last month, the so-called BRICS group of nations, which includes Brazil, Russia, India, China and South Africa, agreed to create a $50 billion development bank to fund projects and serve as an alternative source of finance from the World Bank.
U.S. officials haven’t disclosed any plans for an infrastructure fund. The Obama administration has said it expects more than $900 million in deals to be signed at this week’s summit, with an emphasis on development driven by private business.
While an infrastructure fund is “a great idea,” the $100 billion figure “sounds extremely high unless they’re thinking of pulling in” international donors, said Jennifer Cooke, director of the Africa Program at the Center for Strategic and International Studies, a Washington policy group.
“And where would the U.S. get $50 billion?” Cooke said. “It’s very hard to imagine if they’re talking about U.S. public resources.”
One possibility, Cooke said, would be if the U.S. funding were raised privately and backed by the Overseas Private Investment Corporation or a similar group that backs loans.
“If it’s a risk mitigation mechanism, a kind of insurance for getting people to invest” that would make more sense, she said.
South Africa is also lobbying for an extension of the African Growth and Opportunity Act, a preferential trade pact between the U.S. and Africa, for 15 years and to remain a beneficiary. South African exports to the U.S. have more than doubled since 2000, when AGOA was implemented.
U.S. poultry groups want South Africa to be exempted from the preferential trade program because the government restricts some American imports by using anti-dumping duties.