A call for enhanced public private partnership to boost Africa’s infrastructure
10 December 2019
Source: The Reporter
The ‘dark continent’ narrative has changed. Africa is growing. Today, five out of the 20 fastest growing global economies are found in Africa. However, lack of adequate infrastructure is hindering economic growth.
With the view of addressing Africa’s infrastructure challenges, the African Union Commission (AUC) launched Program for Infrastructure Development in Africa (PIDA) in 2012. PIDA is a continental infrastructure development initiative formulated by the AUC in collaboration with its partners the UNECA, NEPAD and the AfDB.
PIDA is a program dedicated to facilitating continental integration through improved regional infrastructure in the areas of transport, energy, transboundary water and ICT. PIDA was approved by the AU assembly during the 18th ordinary session of the AU in Addis Ababa, which was held from January 29-30, 2012.
The AUC launched the PIDA Week in 2015 as a platform to bring together key stakeholders involved in the implementation of the PIDA program, to take stock of the progress and identify ways to continue advance implementation.
The fifth edition of PIDA Week was held in Cairo Egypt from November 25-29 under the theme “Positioning Africa to deliver on Agenda 2063 and economic integration through multi-sectoral approaches to infrastructure development.”
More than 700 key infrastructure players gathered at the Grand Nile Tower Hotel and deliberated on the progress on PIDA program.
The PIDA Priority Action Plan (PIDA-PAP) which extends to 2020 comprises 51 programs and projects divided into 433 projects covering transport, energy, ICT and transboundary water sectors.
When PIDA was adopted in 2012, the program was designed in three phases—first phase from 2012-2020, second phase from 2021-2030, and third phase from 2031-2040. The total capital investment required to execute the infrastructure development program is estimated at 360 billion dollars.
As the first phase terminates next year, PIDA II program is being drafted by the AUC Infrastructure and Energy Commission.
Since its inception in 2012, PIDA has contributed to the development of 16,066km of road network, 4,077km of railway, and 3,506km electric power transmission line. In the ICT sector, 17 countries were connected with regional fiber optic cables.
Despite encouraging investments on infrastructure, both at the domestic and international levels, which averages about USD75 billion per year, there is a need for significant increase in infrastructure investments on the continent, according to the AUC.
During the deliberations Africa’s high profile authorities made a call for enhanced partnership between public and private sector in developing the continent’s infrastructure.
Speaking during the occasion Ibrahim Assane Mayaki (PhD), CEO AUDA-NEPAD, pointed out that 80 percent of the infrastructure projects’ costs were funded by public funds adding that there was a huge gap to implement the PIDA regional projects. Mayaki stressed the need to attract the private sector to the development of regional projects. According to him, Continental Business Network (CBN) was created to serve as an instrument to channel funding.
Mayaki touched on the need to conduct a deep study on the challenges of accessing financing. He also stressed the need to work on de-risking and guarantee mechanisms.
The financing gap in Africa for infrastructure development is estimated at between USD 130-170 billion per year.
Amani Abou-Zeid (PhD), AU Commissioner for Infrastructure and Energy, said that African heads of states have demonstrated a strong commitment towards the realization of flagship projects of the Agenda 2063. Abou-zeid said five regional infrastructure projects from each region were selected adding that a project selection criteria was prepared with a participatory approach. She highlighted the need to attract private investments and utilizing pension and sovereign funds. “We should learn from our errors and focus on the projects that we are going to implement in the next ten years. We should learn how we can be more attractive to investment. We should re-draft how we present bankable projects so as to be able to bring stakeholders from the public and private sector,” she added.
The 50 regional infrastructure projects selected from the five regions are expected to change the shape of Africa.
Development partners have expressed their commitment to assist the private sector. Barbara Schaefer, representative of Germany, noted that Germany was supporting infrastructure development projects in Africa as it understands the need for regional economic integration and overcoming borders. Germany supported various instruments including job creation tool kit and network of women in infrastructure. “We focus on private sector involvement and de-risking mechanisms,” she said.
Mamady Souare, Manager, Regional Integration Operations Division, AfDB, on her part, said the role of the private sector in infrastructure development was fundamental. Souare stressed the need to integrate international and national funding. With regards to risk, Souare said AfDB assists the private sector in doing risk assessment.
Panellists cited some of the pressing challenges facing the private sector. Access to information, shortage of foreign currency and political instability were among the myriad of challenges thwarting the role of the private sector in infrastructure development projects.
Robert Lisinge, Chief of Energy, Infrastructure and Services Section, UNECA, highlighted the political and regulatory risk the private sector faces. “Different countries have different investment climates. Capacity issues-There is lack of capacity to prepare bankable projects,” he said. He also noted most African countries lack the capacity to negotiate with the private sector. The UNECA has created a division that works on these issues. Currency stability was the other challenge that Lisinge cited.
Representative of the EU Carla Montesi, reaffirmed the commitment of the EU in supporting Africa’s regional economic integration. According to Motensi, the EU has provided one billion euro for energy, transport and ICT development projects in the past seven years. The need for infrastructure financing is very high. It has never been enough and this calls for the involvement of the private sector. The EU recently pledged to extend 1.6 billion euro grant at the African Investment Forum.
The issue of bankability is a common barrier to scaling-up investment for sustainable infrastructure.
Participants raised concern on scaling up project funding, financing visibility studies and the capital of implementing cost.
According to them, capital is globally available, but private investments remain limited because there are simply not enough identifiable, investment-ready and bankable projects essentially, too few projects are meeting the “risk-return” profile that traditional investors are interested in.
Although the answer given to bridging this gap “just create better project pipelines” seems obvious, it often fails to mention the many challenges that come with project preparation.
Responding to comments and questions, Ibra Wahbou, Representative of AUDA –NEPAD, said that project preparation is an essential step in achieving project bankability and meeting market risk-adjusted return requirements.
Early stage feasibility studies, for instance, lay the groundwork for sustainable, environmentally and socially responsible, and financially sound investments. They contribute to transforming uncertain projects into practicable investments.
Adding that while they are necessary for securing private investment, finding financing and other support for their undertaking, especially in developing and emerging countries, remains a challenge.
Wahbou said that Indeed, as this is the highest risk phase of the project life cycle, traditional investors Development Finance Institutions, Multilateral Development Banks, Private Banks, Pension Funds and Equity Funds usually do not get involved.
Instead, local authorities and project developers are left to deal with developing bankable projects, and often lack the resources or relevant technical, legal and financial know-how to do so successfully.
In that context, many equipment providers see a market opportunity and “offer” feasibility studies with technology recommendations that usually best serve their interests but are not appropriate to local needs.
“If we are to increase the bankability of project pipelines, and in turn attract more private investment, support for early-stage project development must be scaled-up.” Said Wahbou adding that there has been an increasing emphasis from public actors (Multilateral Development Banks in particular) on Project Preparation Facilities (PPFs).
According to the World Bank, the continent needs to spend USD 93 billion annually (44 percent for energy; 23 percent for water and sanitation; 20 percent for transport; 10 percent for ICTs; and 3 percent for irrigation) until 2020 to bridge its infrastructure gap, which is currently removing an estimated 2 percent of GDP growth every year.
On the other hand, Africa only managed to close 158 project finance deals with debt totalling USD 59 billion over the decade 2004-2013, which represents only 5 percent of infrastructure investment needs and 12 percent of the actual financial flows.
Hence, participants called on stakeholders to pursue the mobilization of funding for the complete implementation of the PIDA projects.
In the course of the summit African flagship projects including Continental High-Speed Rail, Trans-Maghreb Highway and Train, and the Single African Air Transport Market (SAATM) were highlighted. The African Network of Women in Infrastructure (ANWIn) was also officially launched.
At the closing session the Summit urged the AUC, AUDA-NEPAD, AfDB and UNECA in partnership with other stakeholders and financial institutions to pursue the mobilization of funding for the complete implementation of the PIDA projects.
The Summit called up on African Union member states, development partners and members of the Continental Business Network (CBN) to provide adequate resources for the PIDA project preparation facilities: the PIDA Service Delivery Mechanism (SDM) and the NEPAD Infrastructure Project Facility (NEPAD-IPPF), among others.
The Summit also urged AUDA-NEPAD and AUC to ensure that digitalization, gender and youth mainstreaming are fully integrated with other PIDA sector projects to support and promote job creation and entrepreneurship.
In his closing remark, Ambassador Khalid Emara highlighted the importance of the engagement of African political leaders in decision making and following up implementation of PIDA projects. Ambassador Emara who commended the launch of African Women in Infrastructure (ANWIn) underlined the need to create jobs for the youth and women in infrastructure development projects. He also stressed the critical role international and regional financial institutions can play by availing adequate financing for PIDA projects. “In this regard, I am happy to announce that Egypt has decided to sponsor the planning of African Energy Market, which will bring a paradigm shift in the energy sector,” he said. “The ambition to develop African states will never be achieved without collaboration and close partnership between the private and public sector,” he added. He called up on international financial institutions to provide more funding to the realization of African dreams.
Amani Abou-Zeid noted that the organization of PIDA Week conference came in parallel with the conclusion of PIDA Part I and the launch of PIDA part II for 2030. “This will enable us to benefit to a great extent from the lessons learnt in identifying weaknesses and understand and full fill the basic needs of the continent,” Abou-Zeid said. “We are extending our full participation and cooperation with all the organizations and partners to respect the time frame for these projects under the auspices of the AU,” she added.
More than 700 delegates participated in the PIDA Week 2019 Summit organized by the AUC and NEPAD and hosted by the government of Egypt at the Grand Nile Tower Hotel, in Cairo, Egypt.
Since its inception in 2015, PIDA Week has evolved and grown to become the flagship advocacy and marketing event for the PIDA program and specifically projects in need of financing. The format of the event provides an opportunity to engage and exchange information on PIDA in particular and infrastructure development in general.