Why is the proper structuring of major infrastructure projects in Africa a priority?

Why is the proper structuring of major infrastructure projects in Africa a priority?

Financing projects upstream, building partnerships between public and private operators,
AUDA-NEPAD accelerates its efforts to advance the continent’s development. 

Since the Dakar Financing Summit in June 2014 and President Macky Sall’s push to advance high-impact projects across the continent, including those of integrated corridors with a regional dimension, ambitious national and transnational projects have been presented each year. According to the last figures released by the Infrastructure Consortium for Africa (ICA) in 2018, the level of Africa’s infrastructure commitments have exceeded US$ 100 billion, for the first time, a 24% increase compared to 2017. African governments were the main source of infrastructure financing, with US$ 37.5 billion dollars (37% of total commitments), followed by China, which committed 25.7 billion dollars (25% of total commitments). For its part, the private sector only contributed by US$ 11.8 billion (12% of total commitments). Given the high potential for significantly heifer private sector investment, our efforts must be concentrated in structuring infrastructure to meet investment requirements.

The time required to properly develop and structure infrastructure projects is long, in the best case usually between taking between three to seven years before reaching financial close. Moreover, according to an Okan / CEO Forum report, 83% of African Public-Private Partnerships are abandoned, not because of lack of funding, but because they are poorly designed or not commercially viable. Project development costs for large-scale PPP infrastructure projects can account for 5% to 10% of the total project investment.

To avoid this loss of time and money, AUDA-NEPAD and its partners have developed a series of tools to support the preparation and financing upstream of Africa’s regional and national infrastructure projects to enable more effective definition and structuring aligned with investor requirements. Related funding mechanisms are required to cover the costs of project development including project management, transactions advisory, technical studies (pre-feasibility, engineering, feasibility, socioeconomic development, environmental), business plans, financial models, among others.

The high level of technical challenges, from the complexity of the different environments to the the transnational nature of certain infrastructure projects – such as the 330 KV transmission project of Niort Core crossing four countries (Nigeria, Niger, Benin, Burkina Faso) – require a very high level of expertise and the mobilization of many international operators, therefore resulting in additional costs.

Thanks to specific technical assistance mechanisms, such as the SDM (Service Delivery Mechanism), the preparatory studies for the construction of the 1,000 km section between Abidjan and Lagos have mobilized joint financing of US $ 22.7 million from the AfDB and the European Union. A team of experts worked for 18 months during the preparatory phase in Lagos to enable the establishment of the Abidjan-Lagos corridor. This project has led, within ECOWAS, to the signing of a multilateral treaty between the Heads of State and Government of Benin, Côte d’Ivoire, Ghana, Nigeria and Togo, creating a supranational authority, the Abidjan-Lagos Corridor Management Authority (ALCoMA), a first in Africa. ALCoMA will facilitate the management and coordination of the entire project cycle, from preparation to construction, including operation and maintenance.

Following the same inclusive and integrative logical thinking, the LAPSSET megaproject in East Africa, estimated to cost in total US$ 25 billion, is an example of a significant government initiative aimed at establishing transnational partnerships between public and private institutions. Projects in development include Lamu Port in Kenya, a normal gauge railway line linking Juba to southern Sudan and Addis Ababa in Ethiopia, the development of a broad road network, two pipelines in southern Sudan and Ethiopia, an oil refinery in Bargoni, Kenya, three airports, among other projects. This ambitious series of projects involve a cross-section of national and international investors, both debt and equity.

In order to facilitate and deepen the  public-private dialogues required to remove one of the main obstacles to infrastructure development on the continent — the lack of consideration of private sector constraints in the implementation of major projects — the Continental Business Network (CBN) was launched on the sidelines of the World Economic Forum in Cape Town, South Africa, in June 2015. Private sector leaders are systemically invited to share their advice and capacity in order to advance the critical infrastructure projects being advised by AUDA-NEPAD.

It is crucial that we work actively to fill our infrastructure gaps – by addressing the broader issue of integrated approaches to infrastructure development while building partnerships with key stakeholders: the private sector, institutional investors, African governments and willing development partners.

We need to engage together across the public and private sectors in collaborative frameworks to further the development of initiatives such as the 5% Agenda to mobilize funding from African pension funds and the Africa Infrastructure Guarantee Facility to scale guarantees, creating the enabling environments required to attract more private capital to Africa’s infrastructure.

Stakeholder Validation Workshop to harmonize African Fuel Standards

Stakeholder Validation Workshop to harmonize African Fuel Standards

The African Union Commission (AUC) in collaboration with the African Refiners and Distributors Association (ARA) hosted a two-day workshop, from 10th to 11th December 2019 – to validate “The Benefits of Adopting AFRI Fuel Specifications Roadmap” which aims to ensure superior fuel quality and significant emissions reduction for achieving clean air in Africa. The harmonized regional and continental fuel specifications are believed to make a positive and lasting impact on economies, air quality, health, and climate.

The purpose of the workshop is to meet with the stakeholders and discuss a draft of the study on the socio-economic benefits of these harmonized specifications to develop a final report to be presented to the AU for its adoption.

The importance of a continental approach in developing the right fuel specifications, and vehicle standards with ambition, yet achievable roadmap said the director of Infrastructure and Energy at African Union Commission, Mr. Cheikh Bedda. “In the context of regional and continental integration, a common approach is ideal for enabling the continent to move together in the same direction. It is even more critical in the new dispensation of operationalizing the African Continental Free Trade Area.” Intra-African trade is expected to rise as access to larger regional markets increase and shared specifications and discourage illegal activity such as smuggling, tampering with product quality. The Harmonized fuel specifications would potentially boost the Intra-African trade therefore, the key to sustainable economic development throughout the continent.

As Africa moves towards cleaner air, the reduction of harmful particles such as particulate matter (PM2.5) emitted from substandard vehicles reduces the concentration of PM2.5 in the atmosphere. The study points out PM2.5 is one of the factors in causing premature deaths, thereby linking its reduction to an increase in the avoidance of the deaths.

As the population grows and urbanization increases, there is an immediate need to develop policies regulating vehicle exhaust emissions and fuel specifications across the continent.  However, as emphasized during the workshop, it is important to consider and continue to address issues regarding the cost and viability of African refiners to secure the support of the member states. Furthermore, the challenges outlined by stakeholders included vehicular control mechanisms, timeframe for quality adjustments for refineries, and cost-effective methods for production and/or import of fuel with higher specifications. 19 stakeholders were in attendance at this workshop representing the ARA and supporting institutions. The Feedback obtained from this fruitful discussion will serve the consultants and the ARA in finalizing the report in support of the application for AFRI specifications once adopted by the AU Policy Organs.  A pan African approach with the backing of the AU would be valuable in facilitating a coordinated and structured implementation of this roadmap to achieving cleaner air. The roadmap for reaching full compliance to AFRI specifications is expected to be presented to the AU in 2020 and its adoption, 2021.

PIDA Week: Private and public sector partnerships key to unlocking Africa’s infrastructure funding

PIDA Week: Private and public sector partnerships key to unlocking Africa’s infrastructure funding

The 2019 Programme for Infrastructure Development in Africa (PIDA) Week opened in Cairo, Egypt, Monday with a clarion call from key players in the infrastructure sector for enhanced partnerships between the public and private sectors to  develop the continent’s infrastructure to spur industrial growth and employment creation.

They agreed that greater economic activity, enhanced efficiency and increased competitiveness on the continent were continually being hampered by inadequate transport, communication, water and power infrastructure.

The lack of infrastructure in Africa is an obstruction to economic growth, hence  the need to expedite infrastructure development projects to achieve the 2063 development agenda,” said  Ambassador Khaled Emara, Assistant Foreign Minister for African Organizations and Communities and Egyptian President’s Representative to the African Union Development Agency (AUDA-NEPAD).

Ambassador Emara further noted that the world, is eager to do business with Africa, but finds it difficult to access the continent due to poor infrastructure.

In his opening remarks, Dr. Ibrahim Assane Mayaki, CEO of the African Union Development Agency (AUDA-NEPAD) spoke on the rationale behind PIDA Week and its objective, highlighted the African Union Development Agency-NEPAD’s strategy in PIDA implementation and reminded delegates of the importance of accountability and political will in order to transform Africa’s Infrastructure.

This is not another conference, not another ordinary week. This is for you, stakeholders in the Infrastructure development space, to own and significantly contribute to change the lives of millions Africans!.As this responsibility has been bestowed upon us, we shouldn’t take this lightly when we engage in the various sessions throughout the week” said Mayaki

“And to quote President Paul Kagame’s report on the African Union reforms, “We have everything needed to succeed. To fail Africa again would be unforgiveable.” he concluded.

African Union Commissioner for Infrastructure and Energy, Dr. Amani Abou-Zeid, said PIDA Week was an important platform to evaluate achievements and challenges the continent is facing in infrastructure development and to plan for the future.

The Commissioner said there was need for Africa to attract private investments and utilize pension and sovereign funds to develop the much-needed infrastructure on the continent.

“We should learn from our mistakes and focus on the projects that we are going to implement in the next ten years. We should learn how we can be more attractive to investment. We should re-draft how we present bankable projects so as to be able to involve stakeholders from the public and private sectors,” she added.

For his part, H.E Dr. Mostafa Madbouly, Prime Minister of the Arab Republic of Egypt, in his keynote speech delivered by Dr. Mohamed Shaker El-Markab, the Minister of Electricity and Renewable Energy, said;

“The implementation of the African development plan, Agenda 2063, is based on providing an advanced infrastructure with sustainable services in light of its commitment to attract investment and promote intra-African trade to achieve the regional and economic integration that our countries and people aspire to.

Since its inception in 2015, PIDA Week has evolved and grown to become the flagship advocacy and marketing event for PIDA, which was formed to drive Africa’s aspirations for infrastructure development in line with Agenda 2063.

More than 700 delegates from across the continent and beyond are attending this year’s PIDA Week which is held under the theme  “Positioning Africa to deliver on Agenda 2063 and economic integration through multi-sectoral approaches to infrastructure development”.

PIDA week kicks off with call for enhanced partnership between public and private sector

PIDA week kicks off with call for enhanced partnership between public and private sector

Africa’s high profile authorities made a call for enhanced partnership between public and private sector in developing the continent’s infrastructure at the opening of the 5th PIDA Week on Monday November5, 2019 in Cairo, Egypt.

Speaking during the occasion Dr. Ibrahim Assane Mayaki, CEO AUDA-NEPAD, pointed out that 80 percent of the infrastructure projects’ costs were funded by public funds adding that there was a huge gap to implement the PIDA regional projects. Dr. Mayaki stressed the need to attract the private sector to the development of regional projects. According to him, CBN was created to serve as an instrument to channel funding.

Dr. Mayaki touched on the need to conduct a deep study on the challenges of accessing financing. He also stressed the need to work on de-risking and guarantee mechanisms.

H.E. Amani Abou-Zeid, AU Commissioner for Infrastructure and Energy, said that the PIDA Week is an important plat form to evaluate the achievements and challenges the continent is facing in infrastructure development and the plan for the future. Abou-Zeid said the African heads of states have demonstrated a strong commitment towards the realization of flagship projects of the Agenda 2063. She said that five regional infrastructure projects from each region were selected adding that a project selection criteria was prepared with a participatory approach to be adopted during the week. She touched on the need to attract private investments and utilizing pension and sovereign funds. “We should learn from our errors and focus on the projects that we are going to implement in the next ten years. We should learn how we can be more attractive to investment. We should re-draft how we present bankable projects so as to be able to bring stakeholders from the public and private,” she added.

The 50 projects selected from the five regions are expected to change the shape of Africa.

Ms. Barbara Schaefer, representative of Germany, noted that Germany was supporting infrastructure development projects in Africa as it understands the need for regional economic integration and overcoming borders. Germany supported various instruments including job creation tool kit and network of women in infrastructure. “We focus on private sector involvement and de-risking mechanisms,” she said.

Mr. Mamady Souare, Manager, Regional Integration Operations Division, AfDB, said the role of the private sector in infrastructure development was fundamental. Souare stressed the need to integrate international and national fundings. With regards to risk Souare said AfDB assists the private sector in doing risk assessment.

Mr. Robert Lisinge, Chief of Energy, Infrastructure and Services Section, UNECA, highlighted the political and regulatory risk the private sector faces. “Different countries have different investment climates. There is lack of capacity to prepare bankable projects,” he said. He also noted most African countries lack the capacity to negotiate with the private sector. The UNECA has created a division that works on these issues. Currency stability was the other challenge Lisinge cited.

A representative of the African Import Export Bank noted that the bank has been working on capacity building, and derisking mechanism, which are key to unlocking capital. The bank is working with 51 out of the 54 member states. The representative highlighted the need to work on inter-state guarantee to allow the flow of goods between countries. “Access to information is a huge gap and we created a trade information portal,” she said. She also indicated that access to foreign currency is a challenge.

Representative of the EU Mrs. Carla Montesi, reaffirmed the commitment of the EU in supporting Africa’s regional economic integration. According to Motensi, the EU has provided one billion euro for energy, transport and ICT development projects in the past seven years.  The need for infrastructure financing is very high. It has never been enough and this calls for the involvement of the private sector. Last week the EU pledged to extend 1.6 billion euro grant at the African Investment Forum.

H.E. Ambassador Khaled Emara, Assistant Foreign Minister for African Organizations and Communities and Personal representative of the President of the Arab Republic of Egypt to AUDA-NEPAD, stated that weak infrastructure in Africa was obstructing economic growth.  Ambassador Emara stressed the need to expedite infrastructure development projects to achieve the 2063 development agenda.

Since its inception in 2015 PIDA Week has evolved and grown to become the flagship advocacy and marketing event for the PIDA program and specifically projects in need of financing. The format of the event provides an opportunity to engage and exchange information on PIDA in particular and infrastructure development in general.

More than 700 delegates are participating in the PIDA Week 2019, which is being held under the theme “Positioning Africa to deliver on Agenda 2063 through multi-sectoral approaches to infrastructure development.”

By Kaleyesus Bekele – PIDA Journalist Network

PIDA 2019 need for financial resources

PIDA 2019 need for financial resources

While the infrastructure and infrastructure services gap in Africa remains high, there is increasing activity and investment efforts on the continent against a background of an ambitious long-term plan for closing Africa’s infrastructure gap, called the Programme for Infrastructure Development in Africa (PIDA), that African heads of state and government endorsed in 2012.

PIDA PAP1 consisted of over 400 projects, including 54 energy projects (hydropower plants and interconnectors), 236 transport projects,114 for ICT sector and 9 transbundary water projects. These sectors are sensitive to the adverse impacts of climate change, such as droughts, heat waves, and more frequent and intense floods and especially water and energy sectors.

The energy projects include 10 hydropower plants of over 22 gigawatts capacity, notably the Inga-3,which is under negotiation for financing  and the Grand Ethiopian Renaissance Dam it is under construction.

The infrastructure projects identified in PIDA require investments in the order of $360 billion by 2040.

Of the $81.6 billion invested, 42.1 percent came from national governments, 23.8 percent came from China, and 24.1 percent came from bilateral donors, multilateral agencies and African institutions. By contrast, the private sector accounted for just 2.8 percent.

All this shows theres a need for more financing from private sector.To that effect efforts have been made to provide a legal framework for private sector investment infrastructure.

Most of the investments were in transport (41.7 percent), energy (30.4 percent) and water (16.2 percent) all sectors that are sensitive to the adverse impacts of climate change.

Closing the Gap

Africa’s infrastructure and the huge investments needed to close the gap are very much at risk from climate change. There is thus an urgent need to ensure that climate resilience is integrated into the planning and implementation of infrastructure investments on the continent.

Furthermore, major investments will have to come from the private sector, so there is growing demand for institutions to declare climate risk exposure of their investments. This presents a great opportunity for Africa.

Based on best practices and experience from all the continent As an infrastructure development latecomer, Africa can take advantage of advances of lesson learn and new technology, the falling costs of low-carbon technologies, and the need to diversify and strengthen the macroeconomic basis of economies.

It can also learn from the experiences of other global regions in order to leapfrog and build infrastructure that is, from the outset, robust, resource-efficient, and able to perform both today and in tomorrow’s uncertain climate.

This year PIDA week is being held in Cairo, Egypt under the theme Positioning Africa to deliver on Agenda 2063 and economic integration through multi-sectorial approaches to infrastructure development.

It is worth mentioning  that AUC and NEPAD are preparing the next phase of PIDA

In his opening remarks AUDA-NEPAD CEO Dr Ibrahim Mayaki said Infrastructure is clearly inscribed in Agenda 2063 which recognizes the role of infrastructural development as a means to accelerate development, maintain or improve current growth rates.

He added that World Class Infrastructure Criss-crosses Africa One of the intended outcomes of PIDA is to address issues of economic marginalization and social exclusion by facilitating the creation of economic opportunities and decent employment.

The CEO further said that it is estimated that up to 15 million new jobs could be created through the construction, operation and maintenance of PIDA projects. And many more will be created through increased economic activity on the continent that infrastructure development will bring.

Adding that AUDA-NEPAD has developed the PIDA Job Creation Toolkit- AFRICAN UNION DEVELOPMENT AGENCY-NEPAD which serves to demonstrate the job creation potential of PIDA projects. The Toolkit is already in operation.

Regarding the implementation of the AfCFTA, “we will support the work of the Secretariat that will be based in Accra, Ghana. I believe that our capacity to work on “soft infrastructure” and help remove nontariff obstacles to intra-trade on the continent will be key for the success of this free-trade area” he noted

Dr Mayaki underlined accountability African Union’s Programme for Infrastructure Development in Africa (PIDA) and its associated instruments has enabled the continent to make remarkable progress in the reconstruction, rehabilitation and development of infrastructure on the continent.

AU Commissioner for Infrastructure and Energy, Amani Abou-Zeid said that the PIDA Week is an important plat form to evaluate the achievements and challenges the continent is facing in infrastructure development and the plan for the future.

Abou-Zeid said the African heads of states have demonstrated a strong commitment towards the realization of flagship projects of the Agenda 2063. She said that five regional infrastructure projects from each region will be selected adding that a project selection criteria was prepared with a participatory approach has been adopted yesterday.

She touched on the need to attract private investments and utilizing pension and sovereign funds. “We should learn from our errors and focus on the projects that we are going to implement in the next ten years. We should learn how we can be more attractive to investment. We should re-draft how we present bankable projects so as to be able to bring investments from the public and private,” she added.

Barbara Schaefer, representative of Germany, noted that Germany was supporting infrastructure development projects in Africa as it understands the need for regional economic integration and overcoming borders. Germany is supporting various instruments including job creation tool kit and network of women in infrastructure. “We focus on private sector involvement and de-risking mechanisms,” she said.

Mamady Souare, Manager, Regional Integration Operations Division, AfDB, said the role of the private sector in infrastructure development was fundamental. Souare stressed the need for blending international and national fundings. With regards to risk Souare said AfDB assists the private sector in doing risk assessment.

Robert Lisinge, Chief of Energy, Infrastructure and Services Section, UNECA, highlighted the political and regulatory risk the private sector faces. “Different countries have different investment climates. Capacity issues-There is lack of capacity to prepare bankable projects,” he said. He also noted most African countries lack the capacity to negotiate with the private sector. The UNECA has drafted a model law for regional infrastructure. Currency stability was the other challenge Lisinge cited.

A representative of the African Import Export Bank noted that the bank has been working on capacity building, and de-risking mechanism , which are key to unlocking capital. The bank is working with 51 out of the 54 member states. The representative highlighted the need to work on inter state guarantee. “Access to information is a huge gap. We created a trade information portal,” she said. She said access to foreign currency for instance USD,  is also a huge challenge, she added.

Representative of the EU Mrs. Carla Montesi, reaffirmed the commitment of the EU in supporting Africa’s regional economic integration. According to Motensi, the EU has provided one billion euro for energy, transport and ICT development projects per year in the past last seven years.  The need to bridge the financing gap is still present.Last week the EU pledged to extend 1.6 billion euro grant at the African Investment Forum.

HE Ambassador Khaled Emara, Assistant Foreign Minister for African Organizations and Communities and Personal representative of the President of the Arab Republic of Egypt to AUDA-NEPAD, stated that weak infrastructure in Africa is obstructing economic growth.  Ambassador Emara stressed the need to expedite infrastructure development projects to achieve the 2063 development agenda

By Angel Navuri – Guardian reporter