BUILDING Africa - Africans should invest in African infrastructure

Lazarus Sauti

Poorly planned and under-developed infrastructure is one of the greatest impediments to improved intra-Africa trade and is proving to be a drawback to improving the lives of the continent’s citizenry.

This is the view of the President of the Pan-African Parliament (PAP), Bethel Amadi of Nigeria, who also points out that the continent’s trade-related infrastructure has hardly been improved upon since colonialism.

Amadi made these remarks at a PAP Southern African Caucus Workshop on Infrastructure Development to Promote Regional Trade in Walvis Bay, Namibia, in early July.

The UN Economic Commission for Africa has for years now urged the continent’s leaders to set aside just one percent of their annual GDP for pooled infrastructure fund to finance priority projects.

The infrastructure fund would be managed by the African Development Bank and would work with the AU.

In 2010, the World Bank estimated that to develop Africa’s infrastructure to modern and internationally competitive standards, an investment of US$93 billion - nearly 15 percent of Africa’s GDP - is required every year.

But African countries have failed to commit just one percent of GDP.

Experts have said that the absence of guaranteed electricity supplies, functioning road and rail networks, modern sea ports, and poor border and customs clearance infrastructure contribute to Africa’s inability to trade within itself.

Intra-African trade is around 10 percent recorded trade, while trade within the European Union and Asian markets ranges between 60 and 70 percent.

It has been recommended that African governments should invest in expanding electricity generating capacity by 7 000MW every year, lay 22 000MW of cross-border transmission lines, interconnect capitals and border crossings with good quality roads, and boost agricultural land under irrigation among other projects.

According to PAP’s Amadi, just 20 percent of Africa’s road network is tarred, hampering the free movement of people, goods and services.

“Lack of reliable infrastructure affects all components of the economic value chain, making delivery slower, less reliable and more expensive,” Amadi said.

Adam Smith International, a leading international advisory firm, adds that tackling poor infrastructure is vital for lifting people out of poverty.

“Tackling the inefficiency and financial burden imposed by under-performing infrastructure is an important issue for developing and transitional countries.

“A lack of adequate infrastructure is an impediment to the development of the wider economy,” Adam Smith International says.

And countries have been warned that they should not sell themselves short when attracting private investors for infrastructure projects as this would work contrary to Africa’s development aspirations.

As such, homegrown initiatives like the proposed continental infrastructure fund are the best way to build a better Africa.

At the recent Infrastructure Investment Conference in Maputo, Mozambique, South Africa’s Minister of Public Enterprises Malusi Gigaba warned: “Africa should not sell its soul while seeking new investors for growth.

“When seeking investors, companies should look beyond the traditional - Anglophile and Francophile investors - and consider forging links with other African countries.”

This would require greater African private sector participation in infrastructure development.

PAP’s Amadi pointed out at the Walvis Bay workshop, “Sixty-five percent Africa’s infrastructure comes from government resources and so there is the need to encourage the private sector to participate in infrastructure development.”

Africa50 Fund

There has been some momentum of late towards establishing a continental infrastructure fund. But while technocrats are enthusiastic about the initiative, dubbed the Africa50 Fund, there is fear that the lack of will and commitment among political leaders could frustrate the drive.

In a joint declaration following a July 19 meeting in Tunis, Tunisia, various African institutions endorsed the AfDB’s Africa50 Fund as a vehicle to facilitate large-scale mobilisation of resources and to unlock international private financing with a view to addressing Africa’s infrastructure gap.

Heads of key African political, economic and finance institutions “pledged to work together towards building Africa50Fund”.

“We, Dr Nkosazana Dlamini-Zuma, Chairperson of the African Union Commission (AUC), Dr Carlos Lopes, Executive Secretary of the Economic Commission for Africa (ECA), Dr Donald Kaberuka, President of the African Development Bank Group (AfDB), the regional economic communities (RECs), regional development financial institutions (DFIs) and NEPAD Planning and Co-ordinating Agency (NPCA), take forward our co-operation in search of new and innovative ways for substantially scaling-up investments in regional and continental infrastructure to support Africa’s transformation,” the communiqué said.

The meeting “welcomed the Africa50 Fund as a new, credible and innovative vehicle for infrastructure financing in Africa”.

They commended AfDB’s initiative, “which is essential vehicle for ensuring that the vision and goals of the Africa Agenda 2063 on the delivery of regional transformational infrastructure projects is achieved.”

The Africa50 Fund will seek to leverage infrastructure financing resources from central banks, pension funds, sovereign wealth funds, the Diaspora, and high net worth individuals on the continent.

African finance ministers endorsed it in May 2013 at AfDB’s annual meetings in Marrakech, Morocco.

The focus will be trans-continental infrastructure, including priority projects under the Programme for Infrastructure Development in Africa.

Dr Kaberuka said, “No country in the world has been able to maintain seven percent GDP growth and above (sustainably) unless the infrastructure bottleneck is overcome.

“We are today, all sources combined, hardly able to put together US$45 billion a year, leaving an annual gap of similar volume.

“We are all doing different things in our respective regions with new initiatives and funds being created, but let us face it: there is limited additionally and no critical mass.”

Turning to the Africa50 Fund, Dr Kaberuka said, “I first mentioned this idea at the SADC Summit in Maputo. It will be a vehicle which can build on the AfDB track record and financial strength as investor, financial engineer, attract local and international pools of savings, utilise smart aid and leverage that to up our funding of infrastructure.

“It will be a strongly rated instrument able to issue a bond of significance – a bond attractive to investors.”

The Economic Commission for Africa’s Carlos Lopes also emphasised “a rising Africa will require adequate infrastructure as a key catalyst for the continent’s transformation agenda, industrial development and intra-African trade”.

“We have to step back, critically examine, and have a good understanding of the different elements of the bankability of Africa’s mega infrastructure projects,” he advised.

He agreed with other experts that domestic resource mobilisation was a viable solution to the slow pace of implementation of cross-border infrastructure projects in Africa.

He said there were a number of projects that had been started which would work better if they were co-ordinated at regional and continental level.

These include the Programme for Infrastructure Development in Africa, the Comprehensive Africa Agriculture Development Programme, and the Continental Free Trade Area.

“Africa should weave the various initiatives together into a coherent whole,” he said, and added that in order to ensure ownership within the continent, Africa needs to set its own objectives as well as concrete development goals, anchored on existing development frameworks, such as industrialisation, towards which the continent has to define its own path.

In addition, he urged Africa to prioritise the development of quality human capacity.

“To address some of these challenges, the Africa50 Fund could be one of the different blocks required to achieve Agenda 2063, which is the Africa Union’s vision for the next 50 years,” he said.