A Review of African Infrastructure Initiatives

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A Review of African Infrastructure Initiatives Powered By Docstoc
					           Bricks, Mortar, Policy and Development:
           Aid and Building African Infrastructure
                                                Greg Mills1

Executive Summary

Donors – and Africans – now attached a greater priority to infrastructure
spending. This is partly due to the realisation that the inflows of private capital
for infrastructure development anticipated in the 1980s and 1990s have not been

However, while there are many infrastructure projects in the (largely donor)
pipeline, there are a number of past problems which need to be examined,
including: the lack of commercial underpinning and distortion of the commercial
focus; a confusion of donors; weak national and regional capacity; an indistinct
model for private investors; and the variance in the governance performance of
African states.

Two sets of key challenges exist in spending aid on infrastructure: First, to tailor
spending to specific countries based both on their record and demand. Today
there is much focus on the relative amounts of foreign aid, rather than their
quality and targeting. Second, to ensure donor co-ordination and, where
possible, place infrastructure expenditure onto a commercial footing.


Two sets of supply-side constraints exist to Africa’s development: One, policy-
related constraints which have mitigated against the development of export
industries; and, Two, structural constraints, which include the economic
dependence on a limited range of exports, a low technological base, poor legal
and regulatory institutions and capacity; limited access to credit; and inadequate

Unsurprisingly, thus, a number of recent initiatives have focused attention on
‘what to do’ about the state of African infrastructure. For example, the African
Commission established by British Prime Minister Tony Blair argues for additional
aid expenditure on infrastructure of US$10 billion annually to 2010, increasing
possibly to US$20 billion per annum for the next five years to 2015. The main
investment sectors are those with pro-poor and pro-growth benefits, notably
power, roads, irrigation, ports, energy and telecoms. This push for more aid for
infrastructure is designed, in part, according to the Commission to make up for

1DR GREG MILLS heads the Brenthurst Foundation, dedicated to strengthening African economic performance. This paper is based partly on research conducted by the Foundation in
conjunction with Dr Jeffrey Herbst, and on a series of interviews conducted across the continent between August
2004 and January 2006.

the failure of the policies of the 1990s which anticipated an increase in private
sector investment in infrastructure.

The European Union’s Africa policy, EU and Africa: Towards a Strategic
Partnership, agreed to in December 2005, commits to ‘Facilitate a better-
connected Africa, to itself and the rest of the world; including by establishing an
EU-Africa Infrastructure Partnership, which will be complementary to the new
Infrastructure Consortium for Africa and include existing initiatives on transport
and to facilitate peoples’ access to water and sanitation, energy and information
technology.’. The document also committed the Union to ‘Increase our aid, by
delivering on our collective commitment to give as official development
assistance 0.56% of EU gross national income by 2010, with half of the
additional €20 billion going to Africa, and 0.7% of GNI by 2015 in the case of 15
member-states, whilst other member-states will strive to increase their ODA to
0.33% by 2015.’2 In February 2006, the MOU creating a Trust Fund in support of
infrastructure in Africa was agreed and signed. The Trust Fund is a financial
instrument of the EU-Africa Partnership on Infrastructure. In the start-up phase
(2006-2007) the Commission intends to mobilise up to €60 million in grants and
the European Investment Bank (EIB) up to €260 million in loans for the
operation of the Fund.

The largest provider of development assistance in Africa, the World Bank, which
shifted expenditure away from infrastructure in the 1980s (partly due to pressure
from NGOs), plans today to increase its funding for infrastructure projects in
Africa by 30% over the next few years in a bid to accelerate development and
poverty alleviation on the world's poorest continent. The Bank’s Africa Action
Plan, unveiled in September 2005, aims to ‘Strengthen drivers of growth’
through some 25 initiatives and 133 suggested actions, focusing on three broad
areas: Building capable states and improving government; Creating a vibrant
private sector, expanded exports, infrastructure investment, increased
agricultural productivity, as well as investments in education, health, and access
to economic opportunity for the poor; and Increasing the impact of partnerships
among governments, donor countries, and development agencies.3 The Action
Plan makes specific commitments, such as increased financial support for free
primary education in 15 countries and more funding for roads, power, and other
infrastructure. ‘In 2000 we were lending about US$600 million to the African
continent for infrastructure and this year we are going to lend $1.8 billion,’ said
Michel Wormser, the World Bank's director for infrastructure in Africa, in June
2005. “We are foreseeing a further 30% increase, so by the end of the next
couple of years, we will probably be at US$2.4 billion to US$2.6 billion a year.
Infrastructure is absolutely critical for growth and there has to be about US$20
billion which would have to be spent in Africa to reach the [UN] millennium
development goals,’ argued Wormser. ‘Today we are at US$10 billion, so much
more than US$3 billion a year’ that donors are today providing ‘has to be put into
Africa if we want results.’ he said. He argued that private funding for African
infrastructure projects also needed to increase.4 (In 2004, International

  Cited in the Financial Express, 7 June 2005 at

Development Association (IDA), the World Bank's arm that gives grants and
interest free-loans to the poorest countries, funded 334 projects in
infrastructure, agriculture, regional trade integration, health, nutrition,
education, community-driven development and capital flows, totaling US$16.6

Such views correspond with that of the New Partnership for Africa’s Development
(NEPAD) – essentially the development wing of the African Union (AU) – which
recognises the key role to be played by infrastructure in Africa’s development, as
the vehicle, too, for regional integration. The NEPAD Infrastructure Action Plan is
underpinned by the belief that ending Africa’s international economic
marginalisation is dependent on development which hinges, in turn, on
increasing trade. Virtually every regional economic community (and there are 14
of them on the continent), the African Development Bank (ADB) and continental
business-body is in on the infrastructure-promotion act, as are bilateral and
multilateral donors. But there has for a long time been a long list of regional and
continental infrastructure projects, but far fewer have seen the light of day.
Indeed, the record on donor spending on Africa is a testament to the difficulty in
managing infrastructure projects, at least in a manner that offers sustainable

With this in mind, this paper focuses on three inter-linked issues:
 First, it provides a current ‘lie of the land’ in both infrastructure capacity and
   spending in Africa.
 Second, it defines a number of problems with the current approach to African
   infrastructure development.
 Third, it offers, in conclusion, some alternative thinking on infrastructure

A Picture of African Infrastructure Capacity and Needs

Why is infrastructure important?

Studies show that governments which spend money on essential public services
realize very high rates of return. One shows, for example, that for every one
percent of GDP invested in transport and communications, growth increased by
0.6%. The rate of return on basic infrastructure including drainage and irrigation,
telecoms, airports, highways, seaports, railways, electricity, water supply and
sanitation, and sewerage averages 16-18% per annum; and on maintenance
spending to existing infrastructure as high as 70%.5

Infrastructure is key to accessing markets and enables the development of other
sectors and industries, notably agriculture. It puts communities, especially those
poverty-stricken in the rural areas, in closer touch with the market-place – local,
regional and international. It is also a facilitator of human development.
Electricity improves literacy, and health-care, delivering lighting, water pumps,
and refrigeration among other essential services. It lowers transaction costs and
the costs both of inputs and exports.

5Cited in William Easterly, The Elusive Quest for Growth: Economists’ Misadventures in the Tropics. Boston: MIT,
2002, p.234.

In summary, infrastructure is a necessary interface – of the conduit – between
good development intentions and the delivery of productive capacity. The
measure of African infrastructure can partly be assessed from the delivery of
basic services:

 Energy: With 13% of the world’s population, the continent consumes just 3%
  of global commercial energy. Less than one-quarter of households are
  connected to electricity networks, the lowest connectivity world-wide.
 Connectivity: Sub-Saharan Africa has 15 telephone mainlines per 1,000
  people (the average for low and middle income countries is 270/1,000), while
  the cost of a local call (US$0.09 per 3 minutes) and international call
  (US$3.55) is the highest for any region world-wide (the world averages are
  US$0.06 and US$2.09 respectively). It has 16 internet users per 1,000 people
  compared to the global average of 131 and the East Asian figure of 44.
 Transport: It is the continent with the greatest number of landlocked
  countries, but poor transport networks and very high transport transaction
  costs. Measured as a share of the value of exports, transport and insurance
  payments are very high: 55.5% in Malawi, 51.8% in Chad, 48.4% in Rwanda,
  35.6% in Mali, 35.5% in Uganda, and 32.8% in the Central African Republic.
  The world average is under 5.4%; and in developing countries 8.2%.6 For the
  majority of countries in sub-Saharan Africa, ‘transport cost incidence for
  exports (the share of international shipping costs in the value of trade) is five
  times higher than tariff cost.’7 Africa has the lowest density of roads for any
  region – 0.86km/1,000 people versus South Asia’s 1.8km or the world
  average for middle-income countries of 8.5km. Port facilities, apart from
  those found in parts of Southern Africa and in Egypt are considered deficient;
  while notable airport activity is restricted to a few hubs including
  Johannesburg, Dakar, Cairo and Nairobi.8
 Water and Sanitation: While access to clean water in sub-Saharan Africa
  increased from 49% of the population in 1990 to 58% in 2002, this is still well
  short of the MDG target of 75%. Moreover, less than 20% of the continent’s
  irrigation potential has been utilized effectively.9

However, the picture across Africa with regard to infrastructure provision is
extraordinarily differentiated as the Table (below) suggests. This reflects acute
differences in governance, private sector involvement, level of economic activity,
conditions of peace and stability, and demand – factors which are more-often-
than-not inter-related. Inasmuch as this is an indicator, across the seven
categories of infrastructure, only one country (South Africa) is in the top ten for
all seven; two others (Mauritius and Tunisia) in six of seven; three (Algeria,
Morocco and Swaziland) in five of seven; two in four sectors; three in three; four
in two sectors; fifteen in just one sector; and nineteen were not in the top ten for
any of the seven sectors. This would seem to suggest that, while in the top few
categories governance is important, in most of the cases, infrastructure
penetration reflects a variety of other factors including colonial legacy. Of course,
6 At
7 Hildegunn Kyvik Nordås and Roberta Piermartini, ‘Infrastructure and Trade’. WTO Staff Discussion Paper,
August 2004, at
8 NEPAD’s ‘Comprehensive Africa Agriculture Development Programme’, November 2002, at
9 Ibid.

       this Table does not provide an indication as to the use and functioning of the
       transport network. (In the Table, the top ten performers in each category are
       highlighted in bold.)

Country          Elec’ity   Aircraft   Density of   Density of        %             %          Tele    Aid per
                Consmtn      Dep’s        Road          Rail      Population    Population   Density   Capita
                   per         per      Network       Network        with          with      Mnlines    US$,
                 Capita     10,000       (km of        (Km of      Access to     Access to     per      2002
                  (KW-      citizens   road/km2     rail/km2 of   Improved      Improved      1,000
                 hours)                    of        territory)   Sanitation      Water
                                       territory)                  Facilities
Algeria           866        13.2          --          1.7            92           89         61        12
Angola            125         3.6         0.06         2.2            44            38          6       32
Benin              75         2.4         0.06         4.1            23            63          9       34
Botswana         1,001        40          0.18         1.5            66           95         87        22
Burkina Faso       24         3.0         0.05         2.3            29            42          5       40
Burundi            73         2.1          --           --            88            78          3       24
Cameroon          226         3.7         0.07         2.1            79            58          7       40
CAR                29         4.0          --           --            25            70          2       16
Chad               12         1.9         0.03          --            29            27          2       28
Congo             137        18.3         0.04         2.6            --            --          7       115
Côte d'Ivoire     233         2.4         0.17         2.0            52           81          20       65
DRC                93         1.5         0.07         1.6            21            45          0       16
Egypt            1,129        7.4         0.07         5.1            98           97         110       19
Eq Guinea          49          --          --                         --            --         --        --
Eritrea            61         9.4         0.03          2.5           13            46          9       54
Ethiopia           30         4.1         0.03          0.6           12            24          5       19
Gabon            1,214       58.8         0.03          2.7           53           86          25       55
Gambia             95        14.7         0.25                        37            62         28       44
Ghana             404         2.5         0.16          4.0           72            73         13       32
Guinea             97         5.9         0.13                        58            48          3       32
Guinea-Biss        43         9.7         0.13                        56            56          9       41
Kenya             140         9.7         0.11         4.5            87            57         10       13
Lesotho            21                      --          0.1            49            78         13       43
Liberia           174          1.3        0.10         4.4            --            --          2       16
Libya            4,021        11.8         --                         97            --        118        2
Madagascar         51         14.3        0.09          1.5           42            47          4       23
Malawi             76          4.7         --          6.8            76            57          7       35
Mali               34          1.4        0.02          0.6           69            65          5       42
Mauritania         61         14.4        0.01           --           33            37         12       128
Mauritius        1,592       102.8        1.02           --           99           100        270       20
Morocco           569         15.5        0.08         4.3            68           80         38        21
Mozambique         70          3.8        0.04          3.9           43            57          5       112
Namibia           308         27.5        0.08          2.9           41            77        65        68
Niger              41          1.4        0.01           --           20            59          2       26
Nigeria           154          1.0        0.21          3.9           54            62          6        2
Rwanda             23          4.1         --            --            8            41          3       44
Senegal           151          1.0        0.07         4.6            70            78         22       46
Sierra Leone       55          0.4        0.16           --           66            57          5       68
Somalia            31                     0.03           --           --            --         10       21
South Africa     4,313       25.1         0.30         18.6           87           86         107       14
Sudan              81         2.5         0.01          1.8           62            75         21       11
Swaziland         822        24.9         0.22         17.7           --            --        34        23
Tanzania           85         1.8         0.09          3.1           90            68          5       35
Togo              125         3.3         0.13           --           34            54         10       11
Tunisia          1,106       20.8         0.11         13.1           84           80         117       49
Uganda             66         0.1          --           1.1           79            52          2       26
Zambia            598         6.2          --           1.7           78            64          8       63
Zimbabwe          950        10.9         0.05         7.9            62           83          25       15

       If infrastructure is so important to African development, why has it not been

The Lie of the Funding Land

While it is very difficult to disaggregate funding expenditure, as best as can be
ascertained the following allocations are made to African infrastructure
expenditure from both public ad private sources:

NEPAD: There are essentially three different types of NEPAD infrastructure
projects: First, those ‘attractive at face value to investors, mainly in the energy
field’; Second, those that ‘require seed money’, such as railroads; Third, those
that have ‘no commercial value’ and will rely on grants for roll-out, notably from
the World Bank, such as roads and bridges. The total cost of projects identified in
NEPAD’s Short-Term Action Plan (STAP) is about US$8.1 billion. Half of the STAP
is to be financed by the private sector. The African Development Bank (ADB) is
currently financing a total of US$372.5 million for NEPAD STAP projects with a
total requirement of US$1.96 billion, and the World Bank had committed to
US$300 million by 2005. The ADB had, by 2005, another US$600 million in
potential projects lined-up and the World Bank a further US$210 million.

SADC: Although often portrayed as the most important and successful regional
economic institution in Africa, the Southern African Development Community
(SADC) has been mired in a continuous process of reorganisation and
redefinition, this tautology reflecting an absence of political will and
organisational capacity as well as the difficulties of forging a coherent, unified
agenda among 13 diverse and geographically disparate countries. SADC is
apparently well aware of the mounting infrastructure problems hindering
integration, trade and development. At the Heads of State annual summit in
2003, a Regional Indicative Strategic Development Plan (RISDP) was adopted, a
ten-year programme designed to ‘connect the region’. The RISDP proposes
‘100% connectivity to the regional power grid for all members by 2012;
liberalise[d] regional transport markets by 2008; and harmonised water-sector
policies and legislation by 2006’. In spite of such planning, SADC has been
unable to prioritise regional infrastructure projects. As a result, the 400 ‘priority’
projects remain largely unfounded and well short of the US$6 billion targeted.
Currently US$10 million of the SADC Secretariat’s US$16 million annual budget is
funded by member-states, the remainder by donors. Donors were, by 2005,
supplying another US$30 million to SADC projects, though this amount has been
steadily falling over the past few years mainly on account, from donor feedback,
of SADC’s failure to prioritise and expedite projects.

COMESA: The Common Market for Eastern and Southern Africa (COMESA)
commenced in December 1994 when it was formed to replace the former
Preferential Trade Area (PTA), which had existed since 1981. With its 20 member
states, a population of over 385 million and annual import bill of about US$32
billion, COMESA forms a major market place for both internal and external
trading. COMESA is currently funded by contributions from member-states
(calculated on a formula of GDP/trade/population, with no state to contribute
more than 17% of the total US$6 million (which Zimbabwe, Kenya and Egypt do)
and no less than 1% (which Seychelles does). The remainder of the annual
budget of US$30 million is made up of donor contributions from mainly the World
Bank, African Development Bank, USAID, and bilateral donors such as France.
Like other African RECs, COMESA has a number of infrastructure development

programmes, most of which are still in the discussion or ‘feasibility’ stages.
Indeed, COMESA’s own staff admit that the infrastructure schemes ‘have not
really taken off’. Nonetheless, COMESA has prioritised four groups of
infrastructure projects: transport and trade facilitation; air transport; lake
transport; and telecommunications.

ECOWAS: The Economic Community of West African States (ECOWAS) has
identified regional infrastructure as key to real economic integration. Leaders of
the region have therefore agreed to accelerate priority infrastructure projects in
areas of transport, communications and energy, including a West African Gas
Pipeline (WAGP) Project, a West African Power Pool (WAPP), various
telecommunications initiatives and the development of trans-highway corridors.
The ECOWAS Fund is the initial driver and supporter of the various infrastructure
projects ranging from trans-highway networks, to oil and gas pipelines – all of
which contribute to the economic development of the region. Besides the political
and economic progress that has been achieved in the West African region in
recent years – which will help to facilitate joint infrastructure initiatives and
better integration – ECOWAS has received substantial support from a broad
range of international organisations, notably the World Bank, which has
reportedly pledged US$2.3 billion to infrastructure projects in the ECOWAS

EAC: Institutional development in the East African Community (EAC) has
focused on rail and, to a lesser extent, road transport in an effort to improve
trade facilitation. In line with the NEPAD STAP, priority projects for the EAC
include: concessioning of the railways in Kenya and Uganda (which occurred in
October 2005 when a 25-year concession was sold to Rift Valley Railways which
plans to spend US$25 million in Kenya and US$15 million in Uganda in the next
five years), Tanzania and TAZARA; rehabilitation of selected railways for
concessioning; and the East African Road Network. IN the latter regard, in 2003,
the World Bank confirmed the availability of US$400-500 million for the EAC
states’ national road sector programmes for the next three years and the EU has
pledged an additional €375 million over a five-year period. ADB has also pledged
continued support for the regional projects.

UMA: In the 1990s, the Arab Maghreb Union undertook a number of
programmes to improve basic infrastructure in the region, particularly in the
transport and communication sectors. However, while the potential in various rail
and telecommunication projects does exist, the lack of political commitment from
the members of UMA continues to hinder any serious progress to region-wide
infrastructure initiatives.

ECCAS/CEEAC: Plagued by conflict, instability, poverty and underdevelopment,
the Central African ECCAS region has been slow to implement any infrastructure
initiatives of relevance. But rich mineral deposits and the recent discovery of
exploitable oil reserves have prioritised infrastructure programmes in the region.
The stakeholders involved include the private sector, international organisations
(notably the World Bank), donor organisations and the respective governments
of ECCAS. The ECCAS region is reported to have close to 100 infrastructure
projects under discussion, most of which are still in the ‘talk-shop’ phase or have
achieved little or no progress since the STAP was detailed. A study on electrical
networks funded by the ADB was launched in January 2004. In September 2003

US$3.44 million was secured from the African Development Fund (ADF). The
assessment will cost approximately US$3.7 million with the ADF Grant
accounting for 93%, the remainder being met directly by ECCAS. The Chad-
Cameroon Pipeline Project is the most significant development in the region.
Launched in 2000, the project is expected to stretch over a 25-30 year period,
involving the development of 300 oil wells in southern Chad with a 1,070 km
pipeline to storage facilities off the Cameroon coast. With an estimated cost of
US$3.7 billion, the project is the largest private infrastructure investment in sub-
Saharan Africa. The project is funded 19%:81% by the World Bank, and an
international consortium consisting of Exxon Mobil and Chevron Texaco both
from the US, and Malaysia’s Petronas.

AFRICAN DEVELOPMENT BANK: The ADB Group consists of three separate
lending institutions: The African Development Bank, which had a subscribed
capital at end of 2003 of US$32 billion, though only 13 regional member states
are presently eligible for ADB loans and investments; The African Development
Fund, offering development finance on concessional terms to low-income regional
member states that are unable to borrow from the Bank on non-concessional
terms, and whose subscribed capital at end of 2003 was US$18.7 billion; and
The Nigeria Trust Fund, established by the government of Nigeria to provide
financing for projects of national or regional importance in the poorest regional
member states of the ADB. Its subscribed capital at end of 2003 was US$559

The ADB’s functions are constrained by long-term risks such as the high-
indebtedness of 32 regional member states and persistent conflict in several. The
ADB, consequently, puts emphasis on both the African Peer Review Mechanism
and the African Union’s nascent Peace and Security Council to strengthen
governance and encourage stability. The ADB group has already approved
US$372.5 million for NEPAD infrastructure projects, and has committed to
providing an additional US$580 million to project preparation (feasibility studies,
for example). Total group lending in 2003 amounted to US$2.62 billion. In
addition to allocating its own funds, the Bank Group has also mobilised US$67.8
billion in co-financing with external partners benefiting 802 projects.

represents an important resource in identifying potential and ‘bankable’ projects
as well as initiating partnerships among public and private-sector entities. Among
development finance institutions based in South Africa, the DBSA carries the
mandate for infrastructure projects, which in this context refers to energy,
transport, ICT, water and sanitation and tourism. The South African government
is the only shareholder and the minister of finance, currently Trevor Manuel, acts
as governor. The DBSA has an independent board of directors and has two
operational clusters: The Africa Partnership Unit, which supports NEPAD
infrastructure projects; and the International Finance Unit, which finances SADC
initiatives. Support comes in the form of investment (grants, loans, concessions
and equity investment), technical advice and public-private-partnerships (PPPs).
It tends to prefer public initiatives and works closely with the South African
national treasury to involve black economic empowerment entities in PPPs. DBSA
disbursements are disproportionately tilted toward projects within South Africa.
Of a total R2.73 billion allocated in 2003/4, R2.32 billion went to projects and
proposals within South Africa, and the remaining R414 million was divided

among initiatives in the other SADC countries. Within South Africa, the DBSA’s
key concern is supporting initiatives to promote both job creation and labour-
force diversification. An ongoing concern remains rand/dollar volatility; rand
strength in the past year resulted in an 11% decrease in overall new financing
approvals, most of which affected the SADC countries. In sectoral terms, the
DBSA funding portfolio in both South Africa and SADC was dominated by water
infrastructure (38% of new approvals) and commercial infrastructure (31%).
Other sectors included energy (13%), communications infrastructure (5%), and
social, sanitation and roads infrastructure (3% each). As with the ADB, projects
and initiatives related to poverty reduction remain a high priority.

key donor for Africa infrastructure: DFID gives more than £1 billion to Africa,
plus contributes about 20% of the EU and World Bank’s Africa funds. With regard
to DFID there are three key trends with aid funding towards African
infrastructure: First, not to fund new capital projects but rather to create an
enabling environment for the management and maintenance of existing projects.
The public-private partnership schemes identified above are a key element in
DFID’s strategy towards attempting to encourage private sector investment and
management in African infrastructure. Second, to establish funds (through petrol
taxation) for long-term maintenance and rehabilitation. Third, to fund budgetary
support (about 70% of aid expenditure in the case of DFID for example) rather
than direct aid.

financial assistance to African infrastructure projects beyond technical assistance
(i.e. advice) with public-private partnerships and with privatisation programmes.
In the case of extreme humanitarian situations as with Liberia, money has gone
to infrastructure construction.

JAPAN: Most Japanese aid to Africa has comprised technical assistance (i.e.
spending on Japanese themselves), small-scale African projects, and soft loans.
A prominent feature of Japanese bilateral aid is the significant proportion of
loans, representing 55% of total bilateral ODA in 2002. This is easily the most
extensive use of loans of any DAC country. In 2001, Japan spent US$7.45 billion
on bilateral ODA worldwide, with US$1.09 billion (14.6%) going to Africa, the
latter made up of technical co-operation (25.3%, US$276 million), and grant aid
(61.9%, or US$675 million). Technical assistance involves the dispatching of
experts, invitation of trainees to Japan, loans of equipment, and volunteer
activities. This is managed by the Japan International Co-operation Agency
(JICA). Grant aids are generally made through the local embassies, providing no
more than Yen10 million per project.

FRANCE: France contributes around 25% of the European Development Fund.
Bilateral aid in 2001 amounted to €2.65 billion (61% of it for Africa, incl. North
Africa) as against €4.2 billion in 1995. Topping the list of partner countries is
Egypt (€243 million), followed by Morocco (€181 million), Côte d’Ivoire, Senegal
and Tunisia.

CHINA: Chinese aid to Africa is heavily tied and completely opaque. It might be
expected that infrastructure spending will increase to key countries, especially
those in the oil and gas sectors. Importantly, there is considerable evidence of

the participation of private Chinese rail and road construction companies in
building African infrastructure, and it is suspected that much of this is a loss-
leader for the Chinese government.

NORWAY: The total Norwegian aid (including humanitarian, etc) for Africa was
NOK 3.6 billion in 2002, 4.1 billion in 2003 and 4.2 billion in 2004. Support for
infrastructure (Transport and Storage, Communications, Energy, and Water
Supply and Sanitation) was around NOK 350 million annually in 2003 and 2004.
More than 50% of this is energy-related.

TAIWAN: Taiwan’s annual aid budget to Africa totals an estimated US$100
million, excluding the cost of regular African delegations to Taiwan.
Approximately US$30 million was, for example, committed annually to formal aid
projects in Senegal alone, Taiwan’s key African diplomatic partner until its
decision in late-2005 to shift recognition to mainland China, focusing on road,
clinic, dam and training-centre construction. Much of the total is today spent on
handouts/budgetary support for those six countries (Burkina Faso, Chad, The
Gambia, Malawi, Sao Tomé and Principe, and Swaziland) which continue to
recognise Taiwan as the Republic of China.

PRIVATE SECTOR SPENDING: Private investment in infrastructure took off in
the 1990s as governments around the world sought to improve the efficiency of
the basic systems undergirding their economies while seeking the revenue gains
from privatisation. Between 1990 and 2001, US$755 billion was invested in
                                                   approximately           2,500
                                                   projects          worldwide.
         Total Private Participation in            However,               annual
             African Infrastructure                investment has dropped by
                                    Electricity    half since the peak period
                                                   of 1997, not least due to
              4%                    Natural Gas    the Asian financial crisis.
                       0%                             The World Bank estimates
                                                      that     investors    spent
                                                      US$23.4 billion on African
                                                      infrastructure      projects
               67%                                    between 1990 and 2001.
                                    Water and         This was about 3% of the
                                    Sewage            worldwide            private
investment in infrastructure. South Africa, with its advanced economy, relatively
prosperous private sector, and good levels of governance (by African standards)
has been the site of most the projects as measured by dollars invested. Indeed,
private investment in Telkom SA, Vodacom and Mobile Telecommunications
Network accounted for approximately 43% of all private investment in African
infrastructure over a decade. South Africa was also home to the only large-scale
investments in transport infrastructure on the continent: the N3 and N4 toll
roads. Telecommunications, given the relative ease of revenue collection and
worldwide pressure to privatise, has been a favoured sector for investment. Two
other telecommunications projects (Côte d’Ivoire Telecom and Econet Wireless
Nigeria) were among the ten largest investment in African infrastructure.

The sectoral distribution of investment in African infrastructure reflects, almost
exactly, the global experience. Across the world, about 95% of foreign
investment, by dollar value, has been devoted to telecommunications or
electricity. The preponderance of investment in these areas reflects the capital-
intensive nature of the sectors; the relative attractiveness of companies in these
areas; and the relative ease of creating models for revenue creation.

                  Destination of Private Investment in Infrastructure

                         27%                                    South Africa
                                                                Côte d'Ivoire
                                              55%               Tanzania
                                                                Rest of Africa

Over more than a decade, the only large-scale investments in infrastructure that
were not in South Africa or in the telecommunications sector were the
Groupement SHEC electricity project in Mali, the Société d’Energie et d’Eau du
Gabon water and sewage project, and the African Power investment in
Zimbabwe. Private involvement in infrastructure in Africa is still a relatively rare
occurrence. In a total of 43 countries reviewed in 2004 across eight sectors in
Africa, in only 25% of the cases (86 distinct sectors) wass there any kind of
private involvement in infrastructure.

Towards a New Model?

There is no shortage of opportunities for expenditure in infrastructure in Africa,
and no shortage of requirements. Yet a number of problems exist with regard to
expenditure in African infrastructure investment projects which until now have
made this untenable and thus unlikely:

 Commercial underpinning: NEPAD is unlikely to succeed as an
  infrastructure-led development programme, not because it does not intend
  the right things for Africans, but fundamentally, but so long as it puts the cart
  before the horse – placing infrastructure generation as a stimulus for
  increasing productive economic capacity rather than vice versa. This explains
  why most of the NEPAD infrastructure schemes, while all on paper ‘nice-to-
  haves’, are essentially dusted-off versions of extant donor-targeted projects
  hitherto unfunded because of their lack of a sound commercial rationale. A
  secondary problem is that the projects identified by NEPAD must be
  implemented by the regional economic communities, which, as cited above,
  are hobbled by their own constraints. The key stumbling blocks have long-
  since been identified: inefficient regulatory environments, bloated

    bureaucracies at the national and regional level, lack of liberalisation and a
    general failure to identify markets sector by sector. These constraints
    notwithstanding, NEPAD may offer advantages in terms of providing a stamp
    of approval for investors or to pressure countries on governance issues. This
    echoes the sentiments expressed among current and potential actors.
    Technical experts at the European Union, for example, confirmed the view
    that NEPAD had simply dusted off extant projects that lacked a commercial or
    even donor-funding rationale. An aid based strategy for infrastructure
    development has not yet offered a commercially-sustainable basis for
    development in Africa; while the long list of projects detailed by both the
    RECs and NEPAD amounts, in this light, to little more than a note to Santa
   Confusion of donors: The lack of uniformity between donors does not help.
    Each and every donor has their own strategy, reporting structure and,
    understandably perhaps, national objectives. This is a failing that is, of
    course, not unique to infrastructure spending.
   National capacity: Every region and sub-region in Africa has blamed poor
    infrastructure for inadequate growth, development and integration on the
    continent. Despite this, little progress has been achieved in launching region-
    wide initiatives and delivering on them. Faltering national commitment and
    the absence of comprehensive plans for implementation remain recurring
    problems throughout Africa’s regions.
   Regional weakness: In its 2003 review, the ADB, as the lead institution on
    NEPAD infrastructure development, identified a number of key obstacles,
    including: Lack of clarity as to what NEPAD really is; Lack of clarity as to what
    is expected of the RECs and countries; Lack of definition regarding linkages
    between countries and RECs; Lack of financial and technical capacity in the
    RECs; and a Lack of alignment of REC programmes and NEPAD programmes.
    NEPAD has asserted that its programmes are different in two respects from
    previous African infrastructure schemes: First, in terms of engaging the RECs
    to kick-start projects ‘which have been there for a long time but have been
    blocked.’ Regional infrastructure is prioritised in line with the recognition that
    individual national economies are alone too small to compete in international
    markets; and, Second, to restore a focus of development activity and
    spending on both infrastructure and agriculture. Yet, to take SADC as an
    example, member-states continue to pick and choose areas and issues of
    commitment. For example, the ratification of the 21 SADC protocols has been
    a long, drawn-out process. And under the terms of the SADC free trade
    protocol members are expected to have liberalised 85% of trade by 2008; yet
    what countries say and what they do in this regard, are two different things.
    Despite the development of the SADC RISDP, these failings have been
    exacerbated by the advent of NEPAD and the creation of the African Union,
    and failure to co-ordinate activities between them. There is also the fear
    sensed by SADC (and other regional bodies) that NEPAD will shift focus away
    from regions, and dilute their ability to raise funds for infrastructure projects
    – even though it is NEPAD’s stated function to shift projects and focus to the
   ‘Lack of Indians and too many Chiefs’: The Secretarial ability of both
    NEPAD and the RECs and their political authority to motivate and expedite
    projects is limited, reflecting both a lack of regional and continental
    consensus and a general unwillingness to cede sovereign authority, in spite of
    the rhetoric to the contrary, to supra-national control.

   An indistinct revenue model for private investors: Private investment in
    African infrastructure projects is inherently risky. There are the normal
    dangers of investing in Africa: political instability, weak human resource
    bases, underdeveloped financial systems, poverty, and crime. In addition,
    infrastructure investments, if they go beyond no-cash management contracts,
    require an excellent ongoing relationship with government as the private
    investor will be required to put up a large amount of capital to build and
    rehabilitate basic infrastructure systems but will only reap returns years later.
    In addition, government must not interfere with the infrastructure project so
    that the private investor can operate the enterprises on a commercial basis
    and therefore make a profit. This has proven to be a problem in the past in
    Africa as governments have come under political pressure to lower tariffs
    being charged on basic services such as water and therefore violated basic
    operating assumptions. Similarly, the tariffs on most road projects have been
    renegotiated, sometimes several times, over the course of the project to
    reflect evolving economic circumstances. Finally, governments must continue
    to promote pro-development policies generally over a long period of time so
    that economies can prosper and infrastructure investments can therefore
    garner the rewards of high demands. If the political elite is not fully behind
    private participation in infrastructure, there is no chance of the project being
    a success. For these reasons, most private investment in African
    infrastructure have been low- or no-cost management contracts that expose
    investors to minimal risk while they operate infrastructure systems for limited
    periods of time. Also relatively popular have been concessions which require
    investment of only limited amounts of money and that give private investors
    rights to operate for defined periods of time. Demonopolisation of
    infrastructure sectors to allow new entry has been less popular and outright
    privatisation of infrastructure investments relatively rare.
   Distortion of the commercial focus: Aid expenditure has not only failed to
    offer a sustainable means of developing infrastructure, but has undermined
    the attempts to generate the domestic financial mechanisms and, most
    importantly, the mindset to fund development from within. Governments
    approach the private sector on infrastructure projects much in the same way
    that they approach donors – where they see this, at least in part, as a
    philanthropic gesture rather than a way to make money.
   Government involvement in infrastructure: This, as in other areas of the
    world, tends to ‘crowd out’ private investors, and corrupt the tender and
    priority-setting process. Paradoxically, the unlikelihood in most African
    countries of private investors being able to garner significant domestic
    partners means that foreign investors in African infrastructure will largely be
    alone and will have to work hard to develop a constructive relationship with
    individual African governments. They will also have to place a premium on
    regulatory quality and lack of corruption when selecting destination countries
    because, as foreigners investing significant sums up-front, they will be
    especially vulnerable to the pathologies that mar so many African
   Good governance and demand: There exist only a small number of
    countries across the continent where good governance and demand for
    infrastructure services correlates. Profitable investment in infrastructure may
    of course eventually occur in many African countries if the right conditions
    develop and if there is enough government commitment. However, in
    identifying likely target countries now, a premium has to be put on overall

       government regulatory competence, the relative amount of corruption, and
       the level of development. Regulatory competence is critical because the profit
       models of private investors will be affected by government decisions for many
       years after the initial investment. In general, regulatory quality is low in
       Africa: procedures like gaining import-export permits and clearing goods from
       customs are far more difficult, on average, in the region than elsewhere in the
       world. However, there are important variations that should be noted in any
       continental analysis. For instance, the World Bank estimates that to enforce a
       contract in Botswana, a country with relatively high regulatory quality, it
       takes 22 procedures and 56 days. In Angola, an extremely poorly governed
       country, it takes 47 different procedures and 941 days. Understanding the
       variance between countries is critical because so much money is lost to poor
       governance in the developing world. According to the World Bank, the
       number of potential infrastructure projects is a multiple of those successfully
       implemented. The Bank notes that, ‘Nightmare stories abound of investors
       experiencing lengthy delays or project cancellations because of political,
       administrative, and legal impediments.’ Across the developing world,
       underestimating corruption, bureaucratic delays, organised crime and other
       non-conventional risks on averaged erode expected returns by 8-10%. Some
       84% of projects initiated in emerging markets in the late 1990s did not meet
       financial targets and 26% failed. It is undoubtedly the case that the record in
       Africa, on all accounts, is much worse. Governments that have a relatively
       low level of corruption are also more likely to abide by long-term contracts
       and allow private investors the years necessary to recoup investments.
       Finally, as market demand is a critical determinant of the viability of
       infrastructure development, investors are more likely to find success in
       countries that have relatively high per capita incomes. It is also a simple
       reality that it is much easier to operate infrastructure projects in those African
       countries that are at least approaching middle-income status and therefore
       have relatively robust financial and labour markets.10
      Infrastructure is not enough: Finally, as with aid projects generally,
       money is seldom the problem, but rather finding effective and efficient means
       to expend it is. Aid on infrastructure can only work if the right policies to
       encourage investors, both foreign and local, in productive sectors, is devised
       and implemented. Put differently, Africa has to make things to sell and have
       the appropriate infrastructure to assist in this process. Also, the provision of
       basic infrastructure has to go hand-in-hand with institutional capacity-building
       for the public sector agencies managing these facilities. And there are things
       that can be done apart from infrastructure that will make a difference –
       indeed, an overwhelming focus on infrastructure will reinforce notions of a
       ‘silver-bullet’ approach to African development. Using existing infrastructure
       better would be a good place to start, including removing unnecessary
       bureaucratic and policy obstacles, which often go hand-in-hand with vested
       political interests. As the World Bank has noted, ‘Currently, entrepreneurs
       face more business obstacles in sub-Saharan Africa than in any other region.
       The combination of high regulatory costs, unsecured land property rights,
       inadequate and high-cost infrastructure, unfair competition from well-
       connected companies, ineffective judiciary systems, policy uncertainty, and
       corruption makes the cost of doing business in Africa 20-40 percent above
       that of other developing regions. Firms in the region, particularly small and

10   I am grateful to my colleague Jeffrey Herbst for this insight.

     medium-sized companies, also complain of high financing costs, or little or no
     access to credit.’11

Conclusion: Some New Thinking Necessary?

Aid flows to Africa appear deliberately opaque: the point is apparently to be seen
to be giving rather than to chart the flows and their efficiency. Exact figures on
aid infrastructure flows are impossible to determine both given the percentage
towards budgetary support (which is then potentially spent on infrastructure
under recipient national government programmes), as well as the degree of
overlap between regional and national projects, and regional, national and
continental projects such as NEPAD.

More than half of aid given is tied to the donor through debt relief, technical
assistance, emergency relief and interest charges. Until now, together the EU
and World Bank contribute 60% of concessional aid spending in Africa. Britain
also remains key: DFID gives more than £1 billion to Africa, plus contributes
about 20% of the EU and World Bank’s Africa funds. Until Gleneagles, there were
five trends with aid funding towards African infrastructure: First, not to fund new
capital projects but rather to create an enabling environment for the
management and maintenance of existing projects. Second, to focus on long-
term maintenance and rehabilitation rather than construction. Third, to fund
budgetary support (about 70% of aid expenditure in the case of DFID, for
example) rather than direct aid. Fourth, that there is negligible spending by
donors on infrastructure; this is confined to poorer countries elsewhere such as,
in SADC, Zambia, Mozambique and Malawi. Fifth, donors have been largely of the
opinion that projects such as toll-roads and other self-funding initiatives are a
non-starter outside South Africa, given low levels of population income.

The infrastructure schemes of regional bodies are wide-ranging and ambitious in
scope, but until now historically of very limited value in terms of delivery. There
is much process, but little delivery, and an increasingly negative aid environment
towards these bodies. NEPAD essentially replicates many extant regional
integration schemes, previously dismissed and disregarded on the basis of their
commercial viability and fundability. Regardless of the status of NEPAD projects,
it is the design of NEPAD to transfer all implementation responsibilities to the
RECs, the RECs thus being the level at which most donors would need to engage.

In trying to improve the impact and extend the legacy of aid, much recent
attention has been on improving skills. As Eritrea’s president Issaias Afewerki
famously put it in 1998, ‘If you teach someone to fish, instead of giving him fish,
then he has a sustainable future. … in the long term, success can only come from
inside us.’ Eritrea is not a good example given its subsequent lurch towards war
with its neighbour Ethiopia and Issaias’ internal security crackdown, destroying
any governance value. And although training efforts should not be abandoned,
their impact cannot be isolated from the need for general improvements in
governance and the related need for a meritocracy in which they can be


employed. They are at best an ‘over-the-horizon’ solution, taking much longer
than the tenure of current political leadership.

Hence the debate around aid has to shift, fundamentally, to find ways in which
such transfers can be used as a seed – a catalyst – for higher rates of growth in
the short-term, even though some African states will still require aid as a form of
charity for humanitarian relief.

No one doubts the value of improved infrastructure to development. The main
challenge is thus for Africa to devise a new formula for using aid in a manner
that is both commercially sustainable and provides those services which will
encourage wider private sector investment in the economy.

A fresh focus on private-public-partnerships in infrastructure could assist. This
requires, however, first the identification of those sectors in which the return of
capital – whether public or private – is greatest from a perspective which
emphasises long-term returns in terms of human welfare, productivity and
economic growth. Understanding the drivers – the likely sectors – of economic
growth country-by-country and prioritizing them is a necessary first step in this
regard. A second is the attraction of private funds on a matching basis for
infrastructure projects, inherently serving to reduce risk and encourage a long-
term investment view. Third, the identification and establishment of a suitable
management structure for these funds on a commercial basis by the public-
private consortiums involved.

From a business perspective, this would apply a commercial logic to project roll-
out; from a partner-governmental perspective it would offer both the necessary
expertise and the efficient use of funding resulting in a positive donor-
government-business delivery cycle. This type of management structure
necessarily privileges and prioritises those African states that have a
demonstrable capacity to deliver this management and related policy reliability,
thus differentiating and favouring those with good governance records.


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