[BLOG] Africa’s Infrastructure Hype: Recommendations

By Anzetse Were

I have discussed the opportunities and risks that Africa faces in what will inevitably be significant and targeted investment in infrastructure from local and foreign investors. The next question is: What can Africa do to make the most of opportunities in a manner that minimizes the risks? The suggestions below are not exhaustive but rather seek to highlight key recommendations:

1. Avoid Legacy Projects

Simple point but difficult to execute given African leader’s predilection for such projects as means of ensuring immortality and eternal adulation. The reality is that in some countries the culture will support legacy projects. In such cases it is imperative that such projects still be vetted for practicality, contributions to productivity and growth and just basic usefulness. As the World Bank states, ‘all investments under political consideration should pass at least a minimum threshold of economic viability’.

2. Match infrastructure projects with specific economic development goals

In order to generate revenues for newly built infrastructure, investment should be concentrated in high potential areas through developmental corridors and primary production centers which promise the greatest economic return such that they become infrastructure hubs with efficient ports and airports to maximize scale. After all, Africa must avoid‘unsustainable infrastructure development that pose a huge financial burden on the host government."

 

3. Secure funds for maintenance spending

While raising investment capital governments should be cognizant of maintenance needs and ensure these are catered for. Further, ‘maintenance offers one of the highest returns to infrastructure spending; it may be more helpful to think of maintenance as a kind of investment in asset preservation’.

4. Use infrastructure to catalyse regionalism and African integration

Where possible and pragmatic, African governments should work with other governments in regional and multi-country infrastructure projects to reap benefits such as:

• Cost effectiveness: For example the West Africa Power Market Development Project could see Nigeria and Cote d’Ivoire reduce their power generation costs from 8-10 US cents per kWh to only 3.5 and 4-4.5 cents per kWh.Other projects include those in Southern and East Africa. This trend should be encouraged.
• Creates economies of scale: Regional infrastructure not only harnesses regional public goods, it fosters intra-regional trade and global trade.Shared inter-country infrastructure also, ‘addresses the problems of small scale and adverse location by increasing the scale of construction, operation, maintenance and revenue. It reduces costs, pools scarce technical and managerial capacity and creates a larger market’.
• Peace building: Connected countries foster cultural interaction and provide a platform for the development of collaborative arrangements to deal with peace and security concerns.

5. Foster Public Private Partnerships (PPPs)

The private sector has mainly invested in expanding the ICT footprint on the continent with investment in power plants and container terminals as well. The private sector, particularly the LOCAL private sector, not only can play a role in tackling costly management inefficiencies such as undercollected utility revenues, low labor productivity, or neglected road maintenance, ‘companies have an important role to play in evaluating the social and environmental impacts of their activities’.The private sector role can be expanded by African governments by making PPPs attractive through mechanisms such as :

• Identifying the contributions that the private sector can make using costs/benefits analysis
• Create risk-mitigating instruments such as guarantees and co-financing facilities that can help to attract private sector investment
• Ensure appropriate risk allocation across partners
• Engage the private sector to formulate their requirements and constraints in order promote mutual understanding and better appropriateness of contracts.
• Develop appropriate tariff schemes and/or funding mechanisms that allow for proper operation and maintenance of infrastructure and account for the different levels of affordability

Bear in mind that, ‘in countries with well-developed frameworks for PPPs, project preparation costs are generally about 1% as a percentage of total project costs, but for countries without much PPP experience, the project preparation costs run between 3% and 10% of total project costs.’ Africa has to get this right.

 

6. Strengthen line ministries

Ministries related to infrastructure have to be engaged and strengthened since they, ‘take the lead in sector planning, participate in the formulation of the public budgets, and execute investments.’[14] One approach to strengthening line ministries is through, ‘creating engineering universities within line ministries to support infrastructure development’, as China did.This means there needs to be a conversation between the line ministries and the ministry of education to ensure the universities teach the skills the ministry needs. Other strategies include:

• Strengthening sector planning such that the construction of critical new assets begins early enough to come on stream when needed
• The development of sound technical methodologies for identifying and selecting infrastructure projects
• More rigorous project screening such that infrastructure investments are selected according to their expected returns and are appropriately sequenced and synchronized with one another and broader development plans
• Another key element of strengthening line ministries is improving the budgetary process such that the process is medium-term, link sector objectives and resource allocations and are underpinned by clear sector plans that go down to specific activities and their associated costs

7. Address the land issue

Crucial to infrastructure projects is ensuring the lands on which the projects are built are not beleaguered in conflicting claims and acrimony. There are examples of strategies to address this. For example in Burkina Faso, Rwanda and Sierra Leone the Investment Climate Facility for Africa automated land registration processes which led to facilitating access to credit and prevented land disputes.

 

8. Foster Harmonisation 

Given the multitude of actors that will be involved in African infrastructure projects, there should be coordination between different bodies where possible. This could be done via pan African bodies such as the AfDB due what some consider as its robust financial management systems and firm commitment by all stakeholders. Such coordination would also allow for common reporting and joint monitoring and evaluation processes. Investors and implementers can also organise informational exchange meetings on infrastructure activities at national or regional levels. Further, division of labour among investors such that each administer small portions of the total investment for Africa’s infrastructure can be considered.

9. Create an enabling environment

Bear in mind that, ‘the enabling environment cannot be dissociated from broader governance reforms—for instance, anti-corruption measures or a developed financial sector’.[19] African governments have to prove they have the capacity to manage the incoming investment, deliver on projects and ensure deadlines are met efficiently. This means eliminating issues such as poor policy planning and weak operational performance or poor municipality/county functioning crucial to project implementation.These key elements, also addressed in points 5,6 and 8, are crucial to fostering confidence for continued investment in infrastructure.

10. Remember affordability

Infrastructure development, particularly basics such as roads, water and electricity, cannot afford to leave out the poor. This is a challenge because in the case of water and sanitation ‘an estimated 60 percent of the African population cannot afford to pay full cost-recovery tariffs or extend consumption beyond the absolute minimum subsistence level’.[21] African governments and investors have to find a means through which access to infrastructure such as water, energy will be affordable where affordability is, ‘measured by the share of infrastructure spending in the total household budget and whether it exceeds a set threshold.’[22] African governments therefore must take the time to consider affordability needs at the public finance level. If households, ‘cannot afford to pay cost-recovery tariffs, the move toward universal access will create burgeoning liabilities for the state, which must bridge the gap between the tariffs the public can afford to pay and the real cost of service provision’.Therefore governments must assess how, when and, ‘whether subsidizing services to reach universal coverage is an affordable strategy at the country level.’

www.anzetsewere.wordpress.com

 Anzetse Were  is blogs on  Africa’s socio-economic growth and development. Her posts are geared towards stimulating thought and dialogue about the continent in a manner that is constructive and beneficial to Africa. Her other writing interests are on the topics of African masculinities as well as the urban African lifestyle. You can email her at: anzetsew@gmail.com