THE Zambian government must ensure that the hedging mechanism used in contracting concessional loans for infrastructure development is well managed, says the Development Bank of Southern Africa.

And former British prime minister Gordon Brown says Africa needs to spend US $1.5 trillion to plug the continent’s infrastructure gap.

DBSA managing director Patrick Dlamini said the Zambian government should ensure the hedging mechanism used in contracting concessional loans was well managed so that commercial viability of Zambia’s infrastructure projects is maintained in the face of continued currency volatility and imminent debt repayments.

“I think what is important on the capital markets and Eurobond and sustainability of debt repayment by the countries is to try and manage the currency risks, especially if we were to raise bonds in euros and coming to fund a project inside Zambia. It has got to be well-managed to make sure that the commercial viability of the project is well protected,” he said during a press conference at the just-ended World Economic Forum on Africa 2015 in Cape Twon.”

Dlamini said investment in economic infrastructure was important if Zambia was to sustain its debt repayments because this was where revenues can easily be generated.

“It is quite important that [investment] especially in economic infrastructure, [which] has the ability to generate their own revenues and hence can be able to serve the debt associated with the funding of this infrastructure,” added Dlamini.

And speaking earlier, Brown told the media that Africa needs to increase its spending on infrastructure to plug the huge deficit and meet the needs of its citizens.

“Africa has a US$100 billion a year infrastructure gap. In other words, we need to spend US$1.5 trillion on infrastructure in the next 15 years if we are to provide the electricity, roads, water and sanitation and rail that are necessary for economic growth,” he said.

Brown, who is also chairperson of the WEF Global Strategic Infrastructure Initiative, added that with this investment, Africa could catch up with China and India.

“If Africa could solve its infrastructure problem and secure the investment that is necessary, the growth rate could approach that of China and India; that is the prize that is available to Africa if we can deliver better infrastructure,” said Brown, whose Initiative works on major projects such as the Central Corridor in East Africa.

Source: The Post

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