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What’s infrastructure got to do with it?

Shanta Devarajan's picture

Yesterday’s side-event at the U.N. summit on the Millennium Development Goals on “Scaling up Africa’s infrastructure to meet the MDGs” was unusual for three reasons. 

First, it was on infrastructure, a topic that is not usually associated with the MDGs, but—as the moderator Jeff Sachs pointed out—is central to meeting all the MDGs, either through its impact on economic growth, or through the effects of electricity, transport, and ICT on maternal and child health, for instance. 

Second, the event brought together African policymakers (including President Wade of Senegal, and Ato Neway, the chief economic adviser to the Prime Minister of Ethiopia), private-sector actors (including the CEO of Ericsson and the head of General Electric Africa), and people from African and international organizations to discuss how to scale up Africa’s infrastructure. 

Third, there was a genuine discussion, with participants asking each other questions—and getting answers!

The discussion pointed out several dilemmas in promoting infrastructure in Africa. 

  • Private investors want some assurance of return on their infrastructure investments, which, in turn, means appropriate prices and regulations for electricity, say.  Yet, Africa already has some of the highest electricity tariffs in the world, and it may be difficult to raise them even higher.
  • Ato Neway said that, because mobile telephones were so profitable, the Ethiopian government is keeping it in the public sector, plowing back the profits into expanding access; when they have reached universal access, they will sell the company to the private sector.  Jeff countered that Ethiopia has one of the lowest mobile telephone penetration rates in the world, and they could increase access faster by selling licenses to private companies, as other countries have done.  President Wade also pointed out that Senegal’s experience of going from a state-owned economy to a private one was painful, with several firms going bankrupt.  The implicit message was: the sooner they sold the phone companies the better.
  • Several speakers, including President Wade and Fu Yang of China Development Bank (who mentioned that China can build 10,000 km of road in one day) pointed to the lack of capacity in African governments to appraise, concession, regulate and manage infrastructure projects.  The Head of GE Africa responded that few companies (including GE) have the capacity to do everything that is needed for an infrastructure operation; they usually contract parts out to specialized firms.  But in many African countries, they run up against local-content requirements.

The candor of the discussion and energy in the room left me optimistic that we can resolve these dilemmas.  As Jeff said in his closing remarks, we may be at an inflection point in African infrastructure.

Comments

Submitted by Francois B. on
Allegedly a good thing: Private investors want some assurance of return on their infrastructure investments, whichin turn, means appropriate prices and regulations for electricity, say Allegedly a bad thing: Ato Neway said that, because mobile telephones were so profitable, the Ethiopian government is keeping it in the public sector So...it is legitimate for foreign corporations to collect rent on African utilities, but not for the state? That seems to me a double standard.

Francois: Thanks for the comment. The government can collect "rent" on African utilities by taxing the private companies, and even by selling licences. This is how most countries operate their mobile phone systems. By collecting the rent directly and having just one company, the Ethiopian government is missing out on competition among mobile companies, something that often leads to better service and innovation.

Submitted by Anonymous on
Take a look at the Kenyan success story on mobile phone systems. African governments can and will greatly benefit if they privatize their utilities. Needless to say this will promote innovative ideas and a huge “multiplier effect” will trickle down to the common citizenry.

Submitted by CHRISTIAN OKOYE on
THERE WILL STILL BE LOW PACED DEVELOPMENT IN AFRICA .UNTILL THERE IS INTERCONNECTIVITY OF AFRICAN STATES ,WHERE BY SOMEONE CAN TRAVEL FROM CAPE TO CAIRO ON ROAD WITHPOUTH CROSSBORDER PROBLEMS INCLUDING ROAD BLOCKS CUSTOM ETC

Submitted by Kabir Hamisu Kura on
Now I see the light at the end of the tunnel. With discussions on infrastructures in Africa, I now believe we are on the road to achieving the MDGs. Infrastructures are very critical to meaningful development any where. When roads are bad, no effective communication, inconsistent power supply etc. How can we develop? However, the masses need to be taking into consideration, so that they benefit from the Public Private Partnership rather than what is now obtainable. That is, low income earner spending greater part of their earnings on services that are not yielding desired results.

Submitted by Tesfaye on
Shanta: Thank you for sharing this thought provoking and timely topic. In my opinion, each African country has, of course, its own unique economic factors, capacity, stages and policies, which may determine its approach to infrastructure investment and growth plan. However, I hope African countries agree on the following principles: 1. Infrastructure growth is key to economic growth 2. An all out (100%) private or public ownership and management of infrastructure (transporattion, comm, power) may not always work. In fact, it could be harmful to economic growth (depending on the country's stage). 3. In principle a smart PPP (Public-Private-Partnership) model will be ideal to many countries. For instance, if we take the case of Ethiopia, the country will benefit if it opens up its telecom industry to the private sector (at least make it a share). This will bring to the country know-how, technology, management and technical skills, which is badly needed for ICT growth and proliferation. In fact, 100% state ownership could lead to corruption in addition to inefficency and lag in growth. On the other hand, full private ownership could also lead to risk such as restricted access to low income people, rent collection etc. Incidentally, if there was at least partial competion and private sector participation in the ICT sector and ETC (Eth. Telecom Corp) in Ethiopia, perhaps we would have gotten an efficent and less expensive Internet access by now, perhaps with more than 50% coverage. Compared to the huge investment the govt. spent on telecom, the reward has been meager and deplorable so far!

Submitted by Steve Doe on
The leaders of many African countries say that they want their countries' development to be private sector-led. Yet their actions are to the contrary. A change of government is almost guaranteed to result in the new government reneging on existing contracts signed by the previous government. Why would any private investor waste his/her time and money investing in infrastructure in Africa at the risk of losing the capital? There is a saying that money flows where it is treated best and the BRIC nations seem to be the ones treating money best so that is where most of the foreign direct investments are flowing. Until successive African governments create a stable business environment where private property and contracts are honoured, it will be difficult for Africa to make significant progress in private sector-led infrastructure development.

Submitted by Rohit on
I hail from the UEMOA region in Africa (the francophone Economic Union in West Africa). Recently all countries in the UEMOA have taken steps to limit the axle load the trucks are carrying, which apparently is a prerequisite for finding joint funding for this Infrastructure project. As a result the transport rates have jumped up by 25%. The landlocked countries in the region are facing the worst by way of rising commodity prices. Price increases are especially felt in the cost of low cost commodities like cement where transport cost is nearly 40% of the landed cost and other essentials like foodgrains. This feels like a criminal waste in these countries where they have so little to go by, not to mention the additional fuel wasted for every ton transported. I wonder how this is a positive development and actually does contribute to attainment of the MDGs. Whoever makes these policies and imposes these restrictions needs to understand that roads have to be built stronger to support greater axle loads instead of the other way round. This is the need of the hour especially for the landlocked countries.

Submitted by daniel c. on
Thanks for your coment Rohit. What is your evidence to say that transport rates have jumped 25% in the UEMOA area as a result of steps taken to respect axle load regulations? I would be very interested in the source, and I am quite skeptical on a direct causality… I see this issue as a problem of redistribution if the causality above could be proved. The fact is that many roads in the region with life expectancies of , say, 15 years, are not usable anymore after 3 years because of overloaded trucks. This is a lot of money being lost by the governments of the region. Thus, for me the solution would rather go in the direction of enforcing axle load legislation, studying who are the winners and losers, and compensate appropriately – I admit it’s easier to say it than to do it.

My comment to this article : Why only consider road as a transportation infrastructure ? Railway is a main national infrastructure in all developed countries, and China’s large-scale projects demonstrate clearly where the priority is at its best !

Submitted by Anonymous on
Regarding the rate of utility tarriffs in Africa, it will be difficult for any meaningful development to take place if they stay high and above the means of the masses. In normal economic environment privitisation creates competion which eventually leads to improve in services at affordable prices.. Sadly in most cases in Africa, privitisation hardly leads to competition as there is always a favourable dorminant player in the sector. Unless there is a level playing field and transparency in privatising utilities services especially Telephone sector, there is a long way to go!

Having worked in Afghanistan for more than three years managing major infrastructure programs for the UN and USAid, I am adamant that after managing the spending more than 300 million in donor funds in this direction it has done little if anything to alter the economic situation in Afghanistan at all. What is has done is create a sense of self importance for the people who benefit the most, the politicians and the government workers. we create new edifices for them to badly administer government policy while most of the the appointments are done without any merit or competence. Many appointees are simple to keep the power brokers in power. If we spend a million dollars on a project, more than half of it goes out of the country to purchase equipment or materials since there is no commercial manufacturing infrastructure of any note, and this is the failing. If you look at the World Bank economic indicators for industrial growth in Afghanistan, they all point towards an expansion that is totally dependent upon the aid continuing with major growth in the service industry. Who they are servicing are of course are the aid programs. It is only when the funds are directed to assist in small to medium industries to establish that real development will take place. The rest is academic twaddle based on the idea that if they build a road to market then things will improve. It won't if there is no market at the end of the road.

Submitted by Isiyaku Ahmed on
I think President Wade and Fu Yang of China are right in theri assessment of the problem of infrastruture in Africa but with a little correction. I am talking for and in the case of Nigeria... The truth is we have the capacity to build not just roads but any kind of infrastructure that is required for human and state development. The problem is a lacking of political will plus governance not for the people but for a common good of some set of people.

Submitted by Desire Balazire on
Thank you Shanta. I appreciate the opportunity you often give to public to comment some shape topics related to the development of Africa. I agree with you, The President Wade and the head of GE Africa. It is right that to invest in infrastructure (roads, enery, transportation, mining...) it can booster the development of Africa. We know all that the private sector has an important role for creating income. It is also right that private investors want some guaranties of return on their investments. In Africa we have several challenges to take over i.e. (i) good governance, (ii) planification on the long term, (iii) democraty, (iv) equitable distribution of national revenue, (v) education, (vi) reform of laws and administration... It is a big dream to think that the objectives of MDGs can be reached without solving those challenges in Africa. All countries are not on the same levels of development. I think the targets have to be redefined according to the specific reality of each continent.

My reply : I can’t but agree with Desire’s statement, except I’d add “ (vii) best use of (scarce) financing resources”. For addressing this challenge, Cross Network Synergy (XNS, see above) is both the trigger and the tool, as well as it is the most effective lever for challenge (ii) : planification on the long term ... and reinforcement of state sovereignty.

Submitted by Laurence on
Thanks for the informative post. Jeff Sachs also wrote about this meeting here: http://blogs.ft.com/beyond-brics/2010/09/22/jeffrey-sachs-china-has-left-the-west-on-the-sidelines-in-africa/ He refers to a series of maps that were displayed, indicating Africa’s needs for regional roads, rail, power, and fibre optic grids. Do you happen to have a copy of those maps? If so, are you able to make them available online to readers of this blog? I'm sure those of us who weren't able to attend the meeting would love to see them. Thank you.

Submitted by Mapi on
Laurence: You can find the maps you are requesting here: http://siteresources.worldbank.org/AFRICAEXT/Resources/Africa_Infrastructure_Maps.ppsm Also, please check this website, where you can find other maps of Africa's infrastructure needs, lots of data and other resources: http://www.infrastructureafrica.org/aicd/flagship-report Hope this is helpful.

My comment : Appropriate mapping resources are prerequisites to infrastructure design, planning and development. Therefore geographical maps and information systems (GIS) are of paramount importance for Africa. CESIR supports Laurence’s bid for these maps to be displayed online as soon as possible.

Until we deal with the basics, Africa will not generate real grass roots economic growth, and will the poor still remain impoverished. In every country and continent that has achieved significant poverty reduction. The state provided a few basics and got out of the way of individuals. This enabled them to create real grass roots economic development through entrepreneurship. Entreprteneurship based on the utilisation of applied factual Scientific knowledge and win win trading of skills and product. If we look at my book "To the poor of Africa, Where are you Going?" published on http//www.poorofafrica.com we find plenty of reasons why we have to deal with the basics first and how we should deal with these basics. To enable Africa's real people to create economic growth. Otherwise we will simply be pouring money down the pockets of Africa's notorious Politicians and their elite cronies.... to no ling term benefit.

Submitted by Mac on
Thanks for sending this comments, but the real problem african's infrastructures face is not the accessibility but the creation of these items for development. I remember these public phones what every investor said not to be profitable, but it does even just created and tehse mobile operator recgnise now that africa investment create more profit than elsewhere, because it is more than needed by local people. It just needs institutional regulations and creative innovations to give more access and collect more fundings. New institutional functions need to be implemented to permit private sector investing in infrastructure and so free some pulic finance in some social services. well, public and private sectors are hand-to-hand in creating new infrastructures leadind to development.

Submitted by Patrick on
You write that Africans face some of the highest power costs in the world, but is that for electricity from a power company (often not available) or the cost for back-up diesel generators? Back-up power runs several times a cost-recovery tariff. The Africa Infrastructure Country Diagnostics (AICD) did a good job of showing how small markets with an inherently high cost structure would benefit from the economies of scale presented by the regional power pools.

Submitted by Nwabu on
Infrastructure has everything to do with progress but there is a problem Washington DC, when you are not on the same page with the big man. Infrastructure is not about economic growth and externalities and what not to him. His thoughts are a little more crude. Why all the IPP, PPP and what not when its all so straightforward. If you have a budget for some road, you take some of the money off the top for yourself and your cronies. Simple! Its that reasoning is why money-losing big budget state telcos were held as firmly as big men know how to while mobile telephony was looked on as a playtoy with people actually willing to pay ridiculous amounts for licenses!! The big man never saw mobile telephony coming but he did everything to either rig the sale of NITEL (to himself), or frustrate the sale of Ghana Telecom, or partly privatize Telkom South Africa while maintaining control. Nigeria provides another classic case in point. 3/4 of the roads are falling apart yet every year the ministry of works gets a huge budget to fix them. Contractors start the job and then quit after one month when no money is forthcoming from the government. This is a government that is earning close to $30-40 billion every year. Where is the money going if its not going to a contractor? Sure the Chinese can build 10,000 miles of road a year but why would Nigeria want them around when the idea is to park govt money in the bank and then siphon off of the interest and give contractors all sorts of stories. Think about $100 million at 6% interest. Electricity is another case in point. Over 15 billion has been expended on PHCN (please have candles nearby) in Nigeria yet they generate power with the prowess of a 4 year old riding a bicycle. But every time privatization is mentioned, the workers will demonstrate and go on a rampage and destroy things and the big men behind the scenes who sent them out there will quietly negotiate with their colleages in government and kill the idea. I note people are celebrating the story somewhere in this blog that says PHCN will be privatized. Lets celebrate when it happens not before. As for Kenya, the govt folks there really dont have much room to manoevre in their crookery. Kenya does not have oil and is heavily dependent on the private sector for tax revenue (and to the good graces of the donor community) so they do a little better with roads.

My comments on the article and its content : First : Why was civil society absent from this event ? Second : What matters isn’t to get answers, but to get the appropriate ones. This result is far from being proven here. Third, about privatization : < The implicit message was: the sooner they sold the phone companies the better.> This “message” is WRONG ! The Ghana’s and Guinea’s PTOs privatizations (i.a.) as soon as 1997 were national catastrophes and a drain on their finances. Fourth : He didn’t precise the quality of these roads. Nor did he mention the respect of a minimum set of state of the art requirements such as usual specifications. In fact, Chinese achievements in the African road sector are questionable in many cases. Fifth : There is mainly a total absence of any governmental long term planning of a nationwide infrastructure deployment. This is a direct consequence of the “Structural Adjustment Plans” which led to the states’ delinquishment and were set to them by the IMF ... and the Worldbank ! Sixth : This isn’t enough to go ahead ! Infrastructure, whatever its domain, is The African Issue N°1 ; this is universally recognized. What’s more, infrastructure needs huge amounts of financing resources. That’s why CESIR proposed Cross-Network Synergy (XNS) i.a. to the Worldbank, EIB, ADB, etc, as a tool and methodology to secure both strong economies in infrastructure implementation (CAPEX), and cross-fertilization in infrastructure usage. Apparently and regretably, the Worldbank forgot this contribution of CESIR that was the on the agenda of the WB-CESIR video-meeting in last february, maybe because it was made by an NGO and, what’s more, for nothing ... One of the implicit consequences of XNS is the come-back of national medium and long term planning as well as the setting-up of a national strategic database supporting the former. Useless to say that XNS, nor even basic synergies between different kind of infrastructures, were not even mentioned during this “high profile meeting”. This was a regretable hole. However, it’s never too late to catch up. Especially when the future of Africa is concerned. That’s why CESIR is ready to illustrate the principles of XNS and to demonstrate in concrete terms the amount of economies that its application allows consequently, to all those who are interested in saving financial resources and achieve proper development This concerns especially infrastructure managers and governemental authorities, as well as technical highschools and universities in African countries. CESIR : website : www.cesir.net mail : cesir@cesir.net)

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