All must come to infrastructure party
THE chorus being sung out of Marrakech, Morocco, this week is that Africans must seize control of their destiny and take the requisite actions to secure growth for the next few decades. At the annual meetings of the African Development Bank, finance and economic planning ministers and central bankers have in particular been reminded that it is within their powers to adopt policies that promote job creation and lift ordinary people out of poverty.
There are no metaphorical escalators that might instantly hoist African countries onto a higher growth path, or easy routes to the level of development of success stories such as South Korea, Singapore and China. They must take the ladder, climbing step by step, making their own mistakes and hopefully learning from them.
One of those steps must be to drastically scale infrastructure to match development goals.
Poor electricity coverage is hindering growth over the entire continent, for instance. Nigeria, Angola, the Democratic Republic of Congo, Kenya and SA would achieve a notch higher growth if power outages were not a constant threat to production. The lack of electricity sometimes means health services cannot be delivered and children cannot do their homework.
The lack of decent roads and rail links means goods and services cannot reach their markets in time, pushing up costs in terms of time and cash. For example, no rail link to Durban or the port of Namibe in Angola means copper from Zambia has to be trucked to these facilities. There is a rail link to Dar es Salaam, but it is further and the port is inadequate for the region’s growing demands.
With new oil and gas finds being made in Africa every other day, in addition to the heightened focus on metals exploration, no-one needs reminding that the pressure to improve infrastructure keeps mounting. Africa has for a long time relied only on governments to fund infrastructure from the fiscus.
The continent has struggled to attract private capital to fund infrastructure because of the persistent inability to bring projects to bankability, and the inability to manage associated risks — be they commercial, political or regulatory.
Rwandan President Paul Kagame hit the nail on the head when he said this week that Africans had well-drawn-up and articulated plans on what they needed to do to sustain the continent’s growth, but tended to drop the ball and act like permanent victims instead of implementing their own agendas.
Africa needs $100bn a year to fund its infrastructure needs. Foreign taxpayers provide 40% of that at present, while only 10% comes from private equity.
The African Development Bank believes, quite rightly, that the money should come primarily from the continent, initially through governments making available 2%5% of their reserves held abroad. That would raise as much as $22bn, which would facilitate the Bank going on a road show to raise more cash for its Africa Infrastructure Bond initiative.
That could cover national projects such as Medupi in SA, as well as the start of work on megaprojects with continent-wide implications, such as the planned Inga Dams on the Congo River in the Congo.
It will also aid the faster flow of goods and services across borders. That bond is just one option. Cities and municipalities, provided they are well managed, can go to the capital markets to raise their own money to deliver better experiences in their areas.
It is critical that private capital comes to the party, and that confidence in investing in infrastructure projects be drummed up from businesses already in Africa.
However, it is also important that governments do everything possible to maintain political and economic stability. Given that funding for infrastructure is primarily long term, added incentives are required to tap the right levels of investment.