Sunday, August 17, 2008

African infrastructure development takes priority

The New Partnership for Africa’s Development (Nepad) Business Foundation (NBF) has established a project management office (PMO) to facilitate private sector participation in infrastructure development in Africa.

Through the PMO, the NBF seeks to mobilise its members to work together towards the attainment of Nepad’s objectives.

These objectives include the eradication of poverty and to place African countries, individually and collectively, on a path of sustainable growth and development.

Over the next few months, the NBF will engage in extensive consultations and deliberations with key partners in government, the private sector and civil society across Africa and internationally, to facilitate private sector participation in infrastructure development in Africa. This will be done under the infrastructure sector working group leadership of construction group Aveng’s Hylton MacDonald, and the South African Association of Consulting Engineers’ Roelof van Tonder.

NBF CEO Lynette Chen says, “The underlying message is that Africa must pool its resources. This is taking into consider- ation that there are many small African countries across the continent, which individually are unable to offer attractive returns to potential investors.

This has a big impact on essential infrastructure development, owing to limited investment, which depends on economies of scale to ensure the viability of projects. If these smaller economies actively embark on pooling their resources, this will result in enhanced regional development and economic integration, and will improve the area’s competitiveness internationally to foster infrastructure development projects in the regions.”

The inception of independence left many African countries with the unevenly distributed infrastructure of its colonial past. Limited infrastructure built during that era was largely driven by the objective of connecting natural resources to export markets, and little or no consideration was given to the sustainable economic development of the continent.

The establishment of Nepad, in 2001, inspired a renewed interest in infrastructure development in Africa. Much of this interest centres on the need to grow private sector participation in the provision of infrastructure. This interest emanates from the growing realisation that developing Africa’s physical infrastructure is critical to ensuring poverty eradication, and to set the continent on a course towards sustainable economic growth and development.

Infrastructure plays a pointed, often decisive, role in determining 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, a number of initiatives within Africa and internationally are emerging, aimed at scaling up investment in Africa’s infrastructure. The establishment of several technical and financial instruments, such as the Nepad Infrastructure Project Preparation Facility at the African Development Bank (ADB), the Infrastructure Consortium for Africa (ICA), the Investment Climate Facility and the Pan African Infrastructure Development Fund, with a potential collective investment of over $10-billion, will add further impetus to infrastructure development in Africa.

Additionally, Nepad’s development of the Short-Term Action Plan (Stap) has set a new approach to infrastructure development. Stap was a response to the challenges facing infrastructure development under four areas. The first area was facilitation. The second was capacity building initiatives. The third area was investment in physical andcapital projects. The fourth area was the studies required to prepare future projects.

The result of Stap is that the ADB has made over $3,6-billion available for several Nepad Stap projects while commitments by Organisation for Economic Cooperation and Development countries reached more than $7,7-billion in 2006, up from about $7-billion in 2005. The European Union is expected to allocate over €5,6-billion over the next five years to Stap projects.