He was speaking on the role of governments and the private sector in regional infrastructure development at a meeting in Sandton, South Africa on 28 August 2006. Regional infrastructure in Africa will be driven by the need for reducing transport and logistics costs, developing economic integration and connecting production clusters and markets in the next few years, he said.

Addressing the region’s logistics challenges will require attention to cross-border infrastructure. In Africa the development of regional infrastructure is expected to contribute to and assist growth in cross-border economic activity because of the small size of most of the economies.

Africa’s Ten Largest Economies (ATLEs) contribute 77% of Africa’s GDP which indicates that the rest are too small to survive on their own. These Ten Largest Economies (ATLEs) (South Africa, Algeria, Egypt, Nigeria, Morocco, Libya, Tunisia, Sudan, Angola, and Cameroon) are important destinations for exports and sources of imports and their physical connectivity will feature prominently in Africa’s infrastructure development plans.

There is need to put in place strategies that will use the economic activity in the ATLEs to catalyse development in the poorer smaller states for which improved access to regional markets will be key to economic success.The efficiency of cross-border infrastructure will be an important determinant of Africa’s prospects for economic growth, employment creation, poverty reduction, and social improvements.

Urgent action needed to meet MDGs The African need for regional infrastructure is urgent and inter-connections are required now if Africa is to foster and increase economic growth to meet the Millennium Development Goals (MDGs) of halving the number of people living in poverty by 2015. It is documented that Africa needs to act quickly to attain a GDP growth of 7% if it is to succeed in meeting the MDGs.

The Africa Development Report, published by the African Development Bank (AfDB), shows that the region’s GDP growth rate reached 5.15% in 2004 up from 4.4% in 2003 and 3.7% in the previous five years.

To attain a growth rate of 7% will require doubling investment to US$20 billion a year in infrastructure, according to the Commission for Africa Report, in order to boost trade among African countries and to get economies of scale so that Africa can be competitive at world scale.

To achieve 7% export led growth per annum requires African countries to invest 9% of GDP in infrastructure compared to the present figure of just under 3%. Africa has fallen behind and needs to work fast to close the gap with other regions in terms of economic development.

The African private sector is weak and needs to be supported to play its role in the long term. This implies that the governments will continue to play a major part in infrastructure development by providing resources through their budgets and playing their role of creating a necessary environment for the private sector to flourish, participate and play a role in infrastructure development.

The countries have to define sovereignty when it comes to regional infrastructure development so that they can align their differing interests through the establishment of joint formal institutions to implement the projects on their behalf.

The regional infrastructure requires the sponsoring states to establish agreements which, among other things, must deal with how the benefits of the project will be shared.

The regional projects, because of their large scale, usually require high up-front project preparation costs. The NEPAD Short Term Action Plan requires an investment of over US$ 7 billion and 10% of this figure for preparation of these projects calls for US$700 million.

NEPAD is tackling the problem through the establishment of the Infrastructure Project Preparation Facility at the African Development Bank, but the support for the facility has been very slow from cooperating partners.

Support at the highest state level is critical

African governments have responded by seeking ways of mobilising domestic resources such as pension funds in support of regional projects. Both Nigeria and South Africa have agreed to each contribute US$250 million for the establishment of the fund and on-going discussions with other states are promising.

Support at the highest state level is critical for the success of cross-border infrastructure based on a common regional vision. In this respect, the African governments have committed themselves to providing such leadership through the NEPAD Heads of State and Government Implementation Committee (HSGIC) comprising 20 states - four from each of the five African sub-regions. They have committed to :

 Projects that support both a regional approach to infrastructure provision and regional integration,
 projects that have stalled for political reasons and where NEPAD intervention could be expected to make a difference,
 initiatives that offer solutions to regional policy, regulatory or institutional blockages to regional infrastructure activities, and
 projects that respond to the involvement of the private sector in infrastructure provision.

The private sector, particularly the South African, has a significant role to play in the delivery of cross-border infrastructure on the continent. The private sector brings additional financial and technical resources for cross border infrastructure and shares the risk with governments.

Presently, the majority of African countries are considered International Development Assistance (IDA) or African Development Foundation (ADF) countries by the World Bank and African Development Bank respectively, limiting them to soft loans. This condemns these countries to perpetual poverty since they cannot borrow bank resources.

Hopes pinned on South African business There are many Public Private Partnership (PPPs) projects successfully implemented in South Africa which are being duplicated elsewhere in Africa. It is our hope that South African business will take a longer term view and continue to invest in other African countries in infrastructure development despite the huge envisaged investment in the run up to 2010 World Cup.

The multi-lateral institutions have many key roles to play in regional infrastructure provision :
 Playing a role of honest broker, bringing countries together and acting as a catalyst in regional integration ;
 Provision of capacity support and technical assistance programs ;
 Provision of financial resources to the projects ; and
 Co-ordination of resource transfers from other development partners.

Both the African Development Bank and the World Bank have responded positively to NEPAD through their increase to IDA and ADF resources for regional projects and putting in place internal institutional arrangements in response to NEPAD. They have in the last three years mobilised financing amounting to US$2.2 billion of which they have provided about US$900 million with a pipeline of projects under consideration.

In conclusion Mr. Mochebelele called on the members of the NEPAD Business Foundation to up-scale their support to regional infrastructure working in partnership with governments.

The challenges facing Africa in meeting the MDGs are huge, the role to be played by regional infrastructure is important and the private sector must assume an increasing critical role if we are to succeed in reducing poverty on the African continent.

Source : nepad news, 8 September 2006