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Blueprint for Africa's infrastructure deficit

2 June 2015

The challenge of how to address Africa's massive $100+ billion annual infrastructure deficit is a step closer to being met, following a three-year project by the World Economic Forum (WEF) aimed at promoting public-private co-operation and identifying solutions to the bottlenecks that cause large infrastructure projects in the region to fail.

The WEF-led Africa Strategic Infrastructure Initiative (ASII) was launched in 2012 and has consisted of two phases:

Phase 1 – Fostering public-private collaboration: a methodology was developed to identify projects that were suitable for public-private collaboration and acceleration. Out of 51 individual programmes already earmarked under the African Union Commission's Programme for Infrastructure Development in Africa (Pida), three potential pilot programmes were selected: West Africa Hub, Rail and Port, Beira Nacala Corridor and the Central Corridor.

At the outset of 2014, heads of state and business agreed to accelerate the Central Corridor in East Africa as a pilot project, given its potential for opening up landlocked countries and supporting secondary markets in the region.

Phase 2 – Pilot acceleration: this was initiated in June 2014 with the Central Corridor, an integrated multimodal transport programme (port, rail and road) spanning Tanzania, Burundi, Rwanda, Uganda and Democratic Republic of Congo (DRC). With an estimated $18-billion (R220-billion) investment requirement, acceleration work initially focused on the quality and quantity of data, aligning stakeholders, championing transparency and improving planning principles.

With these barriers reduced, work has progressed to the stage where 23 cornerstone prioritized Phase 1 projects among the 121 sub-projects have undergone an independent technical review and been showcased at a market sounding – valued at $9.7-billion.

Co-operation

"The work that has been achieved since 2012 not only demonstrates that it is possible for the public and private sectors to co-operate effectively on large-scale infrastructure projects in Africa, it also proves that there is strong interest among financial investors to participate in programmes such as the Central Corridor. With interest rates remaining at historic lows, we now have a window in which to turn this interest into action," said Alex Wong, the head of Global Strategic Infrastructure Initiative at WEF.

Apart from project prioritisation and acceleration, the initiative has continued to develop innovative ideas and informative publications that support the delivery of African infrastructure. There is a paradox within infrastructure financing: while there is plenty of private-sector interest in financing bankable projects, the available project-preparation resources are insufficient to advance the projects to a bankable state.

This means the pipeline of well-prepared projects is meagre, and investment opportunities are limited. A new report called A Principled Approach to Project Preparation, prepared in collaboration with The Boston Consulting Group and launched on 1 June, outlines a new approach to Infrastructure Project Preparation Facility (IPPF). It involves enhancing private-public collaboration during the earlier stages of projects, and designing them for effective and sustainable operation.

"Early-stage project preparation and financing has been a perennial problem with African infrastructure projects, with the private sector understandably wary of contributing financially during early stages. However, we are confident that with a well-designed IPPF, we can now offer investors a reassuring vehicle that will enable us to bring them on board as early as possible," said Patrick Dlamini, the chief executive and managing director of the Development Bank of Southern Africa and co-chair of the ASII.

Nepad hand over

With Phase 2 at its conclusion, the WEF will be handing the initiative over to the New Partnership for Africa's Development (Nepad) Agency on 3 June. Nepad will continue the work and replicate the acceleration for further pilots, using the tools and processes created over the past years, and adapting and enhancing them as they systematically progress through the remaining Pida programmes.

The WEF will continue its contribution by facilitating public-private collaboration on infrastructure, with particular focus on sustainable development and financing.

More than 1 250 participants are taking part in the 25th World Economic Forum on Africa in Cape Town, from 3 to 5 June. The theme of the meeting is "Then and now: reimagining Africa’s future".

Source: World Economic Forum