Infrastructure boost for Africa needs good management at heart

SDIP is an initiative hosted by the World Economic Forum (WEF) and the Organisation for Economic Cooperation and Development and its Africa hub will coordinate African regional activities of the initiative. It has been set up with a mandate to support financing of the UN’s Sustainable Development Goals through blended finance, an innovative approach to development finance that combines funding from private investors and lenders, governments and philanthropic funds.

“The SDIP Africa hub is an important first step to accelerate the engagement of SDIP members on the continent. We envision the hub building local capacity to advance blended finance best practices for infrastructure investment and ensure a consistent pipeline of projects for the initiative from Africa,” said Terri Toyota, head of foundations community and development finance, member of the executive committee, WEF, speaking at the World Economic Forum on Africa, held in Kigali recently.

African members of the SDIP include the Development Bank of South Africa (DBSA), the Senegal Strategic Investment Fund and the Industrial Development Corporation of South Africa. Worldwide, SDIP has reviewed projects representing $30bn in value, more than half of which are located in Africa. African projects assessed by the SDIP have a combined value of more than $20bn.

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In addition to supporting blended finance for the 16 projects, the African hub of SDIP will also facilitate the exchange of best practices across its network of institutions.

“The DBSA believes the SDIP initiative, and its goal of delivering $100bn in infrastructure projects within the next five years, will make a meaningful contribution and also help build local capacity and solutions by bringing together African and global private- and public-sector organisations,” said Mohan Vivekanandan, group executive, strategy, DBSA.

Meanwhile, local communities must be involved in infrastructure development at every step of the way, warned Cyril Ramaphosa, Deputy President of South Africa. Infrastructure is for the betterment of people’s lives and it is important they feel a sense of ownership by being given full opportunity to benefit from the construction and from eventual delivery, he added.

South Africa’s experience of filling a gigantic post-apartheid infrastructure deficit during the past 21 years has taught it important lessons, said Mr Ramaphosa. One of these is that coordination of all projects at the highest level is critical to the best division of resources and to timely completion.

Partnerships with the private sector have been particularly successful in the energy sector, with companies being given licences to develop generation capacity largely independent of government interference, and selling power into the national grid, he said.

Colin Dyer, president and chief executive officer (CEO) of JLL in the US, said developing countries’ domestic capital markets are very shallow and will take time to strengthen and deepen. But the urgency of the infrastructure task requires financing right now, which means international markets have to be tapped.

Mr Dyer listed four key factors to attracting international capital: transparency on costs and returns, as well as purchase and selling prices; reliable judicial systems to protect ownership; low levels of bureaucracy; and low levels of corruption.

John Rice, vice-chairman of GE in the US, said inclusive growth is impossible without electricity, citing figures showing that 500 million in Africa are “in the dark”. This has to change and quickly, he said, and highlights the need for nimbleness and urgency on the part of governments and bureaucracies in addressing power gaps. “Speed matters,” he said, lamenting how important projects are allowed to “languish” due to political electoral cycles.

Equally, potential financers express eagerness to invest in infrastructure because of a clear and urgent need for it, but then allow enthusiasm to wane as they proceed to “define risk in the old-school ways,” noted Mr Rice.

Dana Hyde, CEO of US-based Millennium Challenge Corporation, said initiatives such as Power Africa are cause for optimism in electrifying Africa.