‘Let us rely on ourselves’
African countries have been urged to take the lead in funding infrastructure development and drive sustainable growth on the continent.
A summit on financing infrastructure in Africa was held recently in Dakar, Senegal, where participants urged the continent to take advantage of the current favourable economic landscape in the continent, which provides a unique opportunity to collectively address the infrastructure deficit by financing critical national and regional high impact projects.
The participants said Africa should rely on itself before looking for external sources of finance, according to a statement released by the African Development Bank at the end of the summit held on June 14 and 15.
Entitled “Unleashing Africa’s infrastructure potential”, the Dakar Financing Summit (DFS) aimed to mobilise stakeholders around efforts made by the African Union (AU) and its New Partnership for Africa’s Development (NEPAD) programme to accelerate the implementation of priority regional infrastructure projects.
African Development Bank (AfDB) president, Donald Kaberuka, told the summit that Africa needs to find ways of using its limited resources to drive infrastructure development.
He said “we need to leverage our limited reserves” when taking the opportunity to present the Africa50 Fund, an innovative financing mechanism with the goal of mobilising domestic and external resources to finance African infrastructure development.
Senegal President Macky Sall said Africa must rely on internal funding as a first step.
“Africa needs to first rely on internal investment if it is to achieve the infrastructure development it urgently needs,” said President Sall.
He also called for greater integration of the economies and infrastructure of African countries, and a “paradigm shift” in the way the resources of the continent are used.
According to participants at the summit, this could be achieved as some African countries were already financing a significant chunk of their infrastructure using domestic resources.
United Nations Economic Commission for Africa executive secretary Carlos Lopes told the meeting that some African countries are financing a significant share of their infrastructure projects, with domestic resources accounting for almost half of the total of US$90 billion spent on infrastructure projects in Africa.
In Southern Africa, Lopes singled out Namibia and South Africa as the countries using a significant part of their resources to develop infrastructure.
Namibia uses 39 percent of domestic resources to fund infrastructure while South Africa spends 24 percent of its own resources to build infrastructure.
According to Lopes, Cape Verde spends a significant 44 percent of its own resources to finance infrastructure while Uganda spends 28 percent.
The two-day summit aimed to lend momentum to efforts geared towards mobilising resources and begin the implementation of some 16 key regional infrastructure projects that reflect the needs of the continent in the areas of energy, transport and information and communication technologies.
Lopes said there was need to address the divergent legal systems and tapping into African expertise, which was abundant in the Diaspora.
He said harmonisation of laws, policies and making use of African experts who are based in the Diaspora to drive infrastructure development was key.
In his keynote address, Lopes said that the lack of harmonised legal systems at the regional level “has implications on infrastructure finance and development”, and that transparency concerns in the procurement process need to be addressed for they act as a disincentive to foreign investors.
He decried the loss of indigenous capacity to undertake heavy engineering projects.
“Estimates suggest that Africa spends as much as US$4 billion annually to employ over 100 000 non-African experts for its projects when there are over 300 000 highly qualified Africans in the Diaspora, with up to 30 000 of them having doctorate degrees,” Lopes told the summit, as quoted by United Nations Economic Commission for Africa.
He called on the gathering of infrastructure experts, government representatives and the private sector to address the need for strong regional arrangements to co-ordinate and harmonise policies to effectively mobilise resources for infrastructure development.
According to Lopes, a good starting point is to identify the issues and enact rules, including public-private partnerships, deregulation and streamlining of administrative processes and simplification of related procedures.
“Key to this an integrated dispute resolution system is also a critical requirement,” he added.
It is estimated that closing Africa’s infrastructure deficits will increase the continent’s per capita economic growth by 2 percent a year and increase productivity of firms by as much as 40 percent.
In Lopes’ view, boosting investment in infrastructure “is critical to the success of Africa’s economic transformation agenda, which is articulated in the African Union Agenda 2063”.
The 16 priority projects, which are found in all the continent’s regions, are being driven under the Programme for Infrastructure Development in Africa (PIDA).
PIDA is the basis for the implementation of priority projects to transform Africa and the inspiration for the financing of the construction of modern infrastructure based on the PIDA Priority Action Plan (PAP) projects.
PAP requires an estimated US$68 billion for implementation till 2020 while an additional US$300b is needed for the project’s implementation through to 2040.
To this end, the AfDB’s initiative to establish Africa50 as an infrastructure investment platform designed to significantly narrow the infrastructure finance gap was welcomed at the summit.
“The AfDB’s progress in the implementation of Africa50, and in particular its proposed initial investment in Africa50’s Project Finance Business Line for an estimated amount of US$500 million and a contribution of up to US$100m to Africa50’s Project Development Business Line was highly welcomed,” the AfDB said.
Delegates called on African governments to support the African Development Bank efforts in making this vehicle successful.
The summit adopted the “Dakar Agenda for Action” to move forward financing for Africa’s infrastructure.
“For infrastructure financing in Africa to reach the desired level, we urge the promotion of Africa-owned private equity funds, deepening of infrastructure bonds, the utilisation of Diaspora bonds and regional stock exchanges, securitisation of remittances and strengthening existing Sovereign-backed pension funds for development projects, with focus on improving policy and institutional environment to assure investment returns,” read one of the resolutions of the summit.
Participants focused on the best means to promote enabling legal, policy and regulatory environment to enhance infrastructure project bankability and investment, as well as solutions to unblocking the challenges associated with project preparation.
They equally explored the de-risking mechanisms to advance project financing for transport and energy development, and the expansion of regional ports to promote trade competiveness.
Below are the 16 priority projects
1. Ruzizi III Hydropower Project
2. Dar es Salaam Port Expansion
3. Serenge-Nakonde Road (T2)
4. Nigeria-Algeria Gas Pipeline
5. Modernization of Dakar-Bamako Rail Line
6. Sambangalou Hydropower Project
7. Abidjan-Lagos Coastal Corridor
8. Lusaka-Lilongwe ICT Terrestrial Fibre Optic
9. Zambia-Tanzania-Kenya Transmission Line
10. North Africa Transmission Corridor
11. Abidjan Ouagadougou Road-Rail Projects
12. Douala Bangui Ndjamena Corridor Road –Rail Project
13. Kampala Jinja Road Upgrading
14. Juba Torit Kapoeta Nadapal Eldoret Road Project
15. Batoka Gorge Hydropower Project
16. Brazzaville Kinshasa Road Rail Bridge Project and the Kinshasa Illebo Railways
• Some of the projects with direct benefits for SADC
Batoka Gorge Hydropower Project (Zambia and Zimbabwe)
• Will reduce power shortages and load shedding; generate renewable energy.
• Both Zambia and Zimbabwe will be able to increase their electricity generation capacity, while reducing their reliance on electricity imports, hence improving energy security.
• Will also allow Zimbabwe to become a net exporter of electricity in the region.
• SAPP energy generation mix, which currently mostly comprises fossil-fired plants, will be significantly improved through this green hydropower project.
· It is expected that the project will create 6 000 permanent jobs per anum during construction, and 1 200 during the operation phase (split equally between both countries).
Serenje – Nakonde Road Project (Zambia)
· Road transport carries over 80 percent of the cargo on the Dar es Salaam Corridor and directly and indirectly serves beneficiaries in Zambia, Tanzania, Kenya, Democratic Republic of Congo, Malawi, Zimbabwe, Botswana and Namibia.
· Reducing the cost of transport along the North-South and Dar es Salaam corridors is key to improving competitiveness in the eight countries served by these corridors.
· The Serenje-Nakonde road, which was constructed in the late 1970s, has received minimal maintenance until 1995 by which time significant deterioration had taken place. The Government of Zambia is currently undertaking emergency maintenance works in order to improve safety on the road.