So Many Projects, So Little Funding

By Vivienne Sequeira, Infrastructure Director, The Corporate Council on Africa

2015 marks the first year that sub-Saharan Africa inaugurated its first light rail system in Addis Ababa. The rail will serve the commuters from the southern industrial zones to the center of Addis Ababa. A construction of a second line is underway to move people from east to west of the city.  Soon, 60,000 Ethiopians in the capital will benefit from the $475 million transportation project.

Other large transportation projects, such as the rail road linking Addis Ababa to Djibouti, will be operational in 2016 and similar projects are being developed throughout the continent.  Transport corridors serve as economic multipliers as they not only facilitate trade but also promote regional integration.  One such project underway is the Trans-Kalahari Railway project, a multibillion undertaking that will link Botswana’s Mmamabula coalfield to Namibia’s Walvis Bay port.  Similarly, the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) corridor is progressing despite the challenges posed along its route. AKL’s Chairman and CEO Richard Herbert, a Corporate Council on Africa member gave a compelling presentation on the project which brings together a consortium of companies such as GE, Bechtel, DLR and Honeywell to name but a few, as members of President Uhuru Kenyatta’s cabinet validated the progress. In West Africa, the Abidjan- Lagos corridor contributes close to 65% of the economic activity of the ECOWAS region.  

While most countries in sub-Saharan Africa have developed extensive plans and “vision” documents for the next 10 to 50 years to address the gaps in their infrastructure and outline strategies, the funding for most projects remains grossly unmet. The World Bank estimates that close to $100 billion a year is needed to address the infrastructure needs of the continent. 

Funding such major projects has been a feat in itself. In several countries like Ethiopia, transportation has been bolstered by financing from China. The African Development Bank (AfDB) and the World Bank have been the lead development financing institutions (DFIs) to provide funding for infrastructure projects across the continent.  Lately, other nations such as Brazil, India, Japan, South Korea, and Turkey have grown their presence in funding the infrastructure space. From the United States, the Millennium Challenge Corporation (MCC) and the Overseas Private Investment Corporation (OPIC) have been the most active agencies supporting infrastructure projects, while the U.S. Trade and Development Agency (USTDA) has successfully supported project preparation. 

The introduction of the Africa50 fund has also enabled an initial aggregate amount of $ 830 million. Ashared vision to find new ways to accelerate the provision of infrastructure, Africa50 is expected to transform and scale up investments in infrastructure. 

So many Projects, So Few Bankable ones

One of the biggest hurdles for infrastructure has been the lack of adequately prepared project documents. To address this need the AfDB has funded a special unit, the Program for Infrastructure Development in Africa (PIDA), to support the implementation of various regional and continental infrastructure projects. PIDA’s main focus includes ICT, energy, transport and water.  The role of the African Union has been to push for a continental effort to improve infrastructure and drive the Alexandria to Cape-Town and the Dakar-Djibouti corridors. 

Future Trend: Africa’s Blue Economy

Infrastructure experts and leaders are now looking beyond land transportation. Earlier this year, a special session brought together a group of experts from the United Nations Economic Commission for Africa (UNECA) with the goal of “Harnessing the Blue Economy for Eastern Africa’s Development.”  

This effort is aimed at developing the numerous opportunities in the maritime domain. According to Antonio Pedro, UNECA’s Director for Eastern Africa, the continent’s blue economy “encompasses among others: mining, energy resources, fisheries and marine life, tourism and maritime transportation and trade, and several other developmental sectors.”  The African Union’s 2063 Agenda estimates that Africa’s Blue Economy represents almost three times the size of its landmass and will be seminal in the transformation of littoral and island nations’ economies. 

Once coastal nations gain the ability to patrol their waters, they will be able to put an end to illegal fishing, tap into their underwater resources and develop maritime trade and transportation. With the majority of ports in Africa reaching saturations points, there is a pressing need to develop safe ports. Kenya (Lamu), South Africa (Durban), Namibia (Walvis Bay) are but a few of the recent nations that have expanded their port facilities. 

As transportation increases in and around the continent, and the costs of shipping products decreases, the continent will increase its competitive edge. A steady commitment to funding transportation projects will engender significant returns. This is part of what President Hage Geingob termed “a New Africa”, a continent able to effectively combat poverty.

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