Why PPPs hold the key to regional infrastructure

JUST OVER a week ago, the African Development Bank’s Board unanimously approved the establishment of “Africa Growing Together Fund (AGTF)”, a US $2 billion trust fund created with China to enable the Bank respond to the growing needs of its member countries and private sector clients. At the same time, the Governors urged the Bank to finalize and implement its resource mobilization strategy to help generate internal resources for the development needs of the continent. That was all good news for the African continent’s desire for her urgent development prerequisites. We are now nearly a decade and a half into the new millennium and a major drawback to trade among African countries remains the poor infrastructure. Thanks to regional efforts at improving critical infrastructure such as railways that will connect countries along the Northern Corridor, Kenya, Uganda and Rwanda. In comparative terms, our continent lags behind the rest of the world in all aspects of infrastructure development—quality, quantity, cost and access. To illustrate this further, seventeen years ago in 1997, Africa, excluding S. Africa, had 171,000 kilometres of paved roads—about 18% less than Poland, a country roughly the size of Mugabe’s Zimbabwe. As strenuous efforts to complete the trans-Africa highways continue, the quality of existing roads is deteriorating. In 1992, about 17% of sub-Saharan Africa’s primary roads were paved, but by 1998 the figure had fallen to about 12% according to the World Bank. Today more than 80% of unpaved roads are only in fair condition and 85% of rural feeder roads are in poor condition and cannot be used during the wet season. In Ethiopia, 70% of the population has no access to all-weather roads. In most of Africa, roads are concentrated in urban areas or around coastal ports trade routes established during the colonial times for the overseas shipment of commodities. Far fewer roads link neighbouring countries in regional networks. Bad roads, aged vehicles and lax regulations also cost lives. The continent’s road fatality share is three times as large as its share of motor vehicles. In a sample of African countries, 3,339 deaths per 1,000 vehicles were recently reported. In comparison, the average death rate in the world’s 10 most highly motorized countries were 2-3 per 10,000 motor vehicles just a few years ago. Crude estimates show that $ 18-25 billion per year is required to provide adequate infrastructure in Africa. The continent currently only invests about $ 5 billion annually. As Prof Button says “most African governments are in no position to provide this on any significant scale”. International agencies have traditionally been major contributors. Al haji Bamanaga Tukur, former Director of the Nigerian Port Authority has suggested that commercialization of infrastructure delivery may be the answer. He says that the private sector in Africa has tremendous capacity to develop infrastructure if there is a transparent and supportive policy environment. It is important to note that the state does not abdicate its role as the dominant provider of infrastructure, especially in rural areas where development remains dependent on public or donor funding. As Ernest Dolor of Seychelles observes, private investors will rush into sectors with quick returns, such as mobile telephones, but “it does not make economic sense (for them) to become engaged in many of the infrastructure developments that we need to implement in Africa”. These include building roads at great cost and little or no returns in remote rural areas. In Ethiopia, for example, bringing 90% of the population within 20kms of an all-weather road would cost an estimated $4 billion equivalent to 75% of annual GDP. In any case, the record of the private sector in infrastructure investment in Africa has been poor. For instance between1984—1994, private companies financed projects worth $4.34 billion, according to Economic Commission for Africa. In comparison, Latin American private companies invested $ 10.5billion in infrastructure during the same period. Some countries in Africa have started introducing innovative ways of bringing the state and the private sector into joint ventures to raise capital. In South Africa, the BOT (Build, Operate, Transfer) and FROM (Finance, Rehabilitate, Operate and maintain) systems rely on private finance to design, construct and maintain roads. Once the roads are built, private operators charge tolls to recover costs and realize a reasonable return on investments before transferring ownership to the state. In parts of Africa, road funds overseen by Public-Private Boards have been established. They are run independently, include road users on their boards and are subject to external audits. Money is raised from vehicle licenses and user fees and jobs are contracted out to private developers. One lesson that Rwanda could take from this is for government to encourage the private sector to engage in areas, which have previously been a domain of the state. Road construction and maintenance is one such area. After all, if communications have been privatized, why not think of privatizing some of our roads especially the highways. While adequate infrastructure remains an essential component of trade among African countries, increased regional trade in turn could stimulate the growth of regional transport networks. We should endeavour to pull out of the persistent trade patterns inherited at independence. This has been a major setback to Africa’s development. As Professor Adebayo once observed, “as long as Africa’s trade pattern does not change in form, content and direction, the impetus to alter the continent’s infrastructure systems will remain timid”.

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Why PPPs hold the key to regional infrastructure