The value of infrastructure in an emerging Africa

With the adoption of the New Partnership for Africa's Development (NEPAD) in 2001, there has been a renewed interest in infrastructure development in Africa, with much of the debate centering on the need to enhance private sector participation in the provision of infrastructure. The apparent interest emanates principally from the growing realisation that developing Africa's physical infrastructure is critical to ensure poverty eradication and to set the continent on course towards sustainable economic growth and development. Infrastructure plays a pointed, often decisive-role in determining the overall productivity by lowering transactional costs, facilitating the free movement of people and goods as well as unlocking the vast economic potential of African countries.

As a result, we are now seeing the emergence of various initiatives aimed at scaling up investment in Africa's infrastructure both within Africa and internationally. The establishment of several technical and financial instruments such as the NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) at the African Development Bank (ADB), the Infrastructure Consortium for Africa (ICA), the Investment Climate Facility (ICF) and the Pan African Infrastructure Development Fund (PAIDF) with a potential collective investment of over $10bn and many more will certainly add further impetus to infrastructure development in Africa

Through NEPAD, the development of the short-term action plan set the stage for a new approach to infrastructure development. As a result, the African Development Bank-NEPAD's lead agency for infrastructure-has mobilised over US$3,6bn for several NEPAD STAP projects while commitments by OECD countries, predominantly by members of the Infrastructure Consortium for Africa reached more than US$7,7bn in 2006, up from about US$7bn in 2005. The European Union alone is expected to allocate over €5,6bn over the next five years. The pending conclusion of the NEPAD Medium to Long-Term Strategic Framework (MLTSF) and the Africa Infrastructure Country Diagnostic, being carried out by the African Development Bank and the Infrastructure Consortium for Africa is set to open up new opportunities for investment. Even though, infrastructure development in Africa has been largely driven by the public sector, the appetite for private sector participation is growing considerably.

Therefore, the NEPAD Business Foundation has identified the need to enhance private sector participation in infrastructure development as an imperative, hence the recent establishment of the project management office. Through the PMO, the NBF seeks to mobilise the totality of its membership which range from consulting engineers, contractors and financing institutions to work together towards the attainment of the NEPAD objectives. “The underlying message being that Africa must pool its resources,” says Lynette Chen, CEO of the NBF. Consequently, over the next few months, the NBF will be engaging in extensive consultations and deliberations with key partners in governments, private sector and civil society across Africa and internationally. This will be done under the leadership of infrastructure sector jointly headed by, Hylton MacDonald of the Aveng Group and Roelof van Tonder of the South African Association of Consulting Engineers.

“If we take into consideration, that there are many small African countries across our vast continent, this results in smaller countries being unable to offer attractive returns to potential investors. This ultimately has a major impact on essential infrastructure development due to limited investment which is dependent on economies of scale to ensure the viability of projects. Should these smaller economies actively embark on pooling their resources, this will result in enhanced regional development and economic integration and will improve their competitiveness internationally to foster infrastructure development projects in their regions,” adds Chen.