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Infrastructure II

PIDA: Interconnecting, Integrating, and Transforming a Continent

The Regional Infrastructure That Africa Needs to Integrate and Grow through 2040

Study on Programme for Infrastructure Development in Africa (PIDA)
PIDA Study Synthesis

 

1. Why PIDA? Why Now?

This report summarizes the findings of the Study of the Programme for Infrastructure Development in Africa (PIDA), a programme dedicated to facilitating continental integration in Africa through improved regional infrastructure. Designed to support implementation of the African Union Abuja Treaty and the creation of the African Economic Community, PIDA is a joint initiative of the African Union Commission (AUC), the New Partnership for Africa’s Development Planning and Coordination Agency (NPCA), and the African Development Bank (AfDB).

Infrastructure plays a key role in economic growth and poverty reduction. Conversely, the lack of infrastructure affects productivity and raises production and transaction costs, which hinders growth by reducing the competitiveness of businesses and the ability of governments to pursue economic and social development policies. Deficient infrastructure in today’s Africa has been found to sap growth by as much as 2% a year (Calderón 2008). This is a continental problem that requires a continental solution.

The lack of infrastructure in Africa is widely recognised. The road access rate is only 34%, compared with 50% in other parts of the developing world, and transport costs are higher by up to 100%. Only 30% of the population has access to electricity, compared to 70–90% in other parts of the developing world. Water resources are underused. Current levels of water withdrawal are low, with only 4% of water resources developed for water supply, irrigation and hydropower use, and with only about 18% of the continent’s irrigation potential being exploited. The Internet penetration rate is only about 6%, compared to an average of 40% elsewhere in the developing world.

Deficits like these have a clear impact on African competitiveness: African countries, particularly those south of the Sahara, are among the least competitive in the world, and infrastructure appears to be one of the most important factors holding them back.

The results of the PIDA study will enable African stakeholders to speak with one voice for continental and regional infrastructure development based on a common vision and agenda.

PIDA is grounded in regional and continental master plans and action plans as well as other relevant work undertaken by the African Union (AU), the regional economic communities (RECs), the regional and continental technical agencies (including the lake and river basin organizations (L/RBO) and power pools (PP)), and the concerned countries.

The proposed infrastructure development programme articulates short- (2020), medium- (2030), and long-term (2040) priorities for meeting identified infrastructure gaps in a manner consistent with the agreed strategic framework - based on long-term social and economic development visions, strategic objectives, and sector policies - and buttressed by an implementation strategy for the Priority Action Plan (PAP), 2012–20.

 

1.1 The Promise of Regional Integration

Ensuring that growing demand for regional infrastructure is met, and that infrastructure deficits do not choke off growth, will require a determinedly coordinated regional approach. Because Africa’s economic geography is particularly challenging, regional integration is the best, perhaps the only, way for Africa to realize its growth potential, participate effectively in the global economy, and share the benefits of globalisation. Getting there presents major challenges, as recent experience has shown, but promises ample rewards.

Many of Africa’s 54 countries are small, with populations of fewer than 20 million and economies of less than $10 billion. Their infrastructure systems, like their borders, are reflections of the continent’s colonial past, with roads, ports, and railroads built for resource extraction and political control, rather than to bind territories together economically or socially.

Integration was a goal of the continent’s leaders in the struggle for independence. Kwame Nkrumah established the short-lived United States of Africa in the late 1950s, followed by the Organisation of African Unity (1963–2002), which was succeeded by the AU (2002–present). The process of economic integration gained traction with the 1991 Abuja Treaty that established the African Economic Community. Its article 28 proposed the creation of the RECs as the building blocks of African integration with continental integration to be achieved by 2028.

Integration efforts in Africa, including regional infrastructure, have already resulted in increased trade, as they have in other regions that followed a similar path (Box 1.1). Intra- African (and intra-REC) trade grew significantly from 2000 to 2009 in coastal and landlocked countries alike. But as a share of Africa’s total imports, intra-African imports stagnated at 9% over the period 2000–07, during a time when Africa's share in world exports was growing (from 2.4% to 2.9%) (UNECA 2010).

The essential benefit of regional infrastructure is to make possible the formation of large, competitive markets in place of the present collection of small, isolated, and inefficient ones. Regional infrastructure does this by slashing transport costs (in particular to and from hinterlands and landlocked countries); establishing connectivity so that goods can reach markets and people can exchange information and reach jobs; providing reliable, lower-cost energy for agricultural, industrial, mining, and communications; and developing and sharing water resources in ways that simultaneously increase food production, generate electricity, and protect the continent’s natural environment.

 

Shared regional infrastructure is the only solution to problems of small scale and adverse location. Economies of scale are particularly important in the power and ICT sectors. Big hydropower projects that would not be economically viable for a single country make sense when neighbours share their benefits. Connecting countries to submarine cables requires large up-front investments in cross-border backbone infrastructure. Regional air and seaports are a necessity for a continent with so many small and land-locked countries.

An important benefit of regional infrastructure is its effect on trade within Africa. As regional integration improves the competitiveness of African producers and brings millions more consumers within their reach, Africa will see a swelling of intra- and inter-regional trade as a share of all trade.

Regional infrastructure also exploits and advances synergies among sectors. One salient example is multipurpose dams that store water for irrigation, domestic and industrial consumption, hydropower generation, navigation, environmental needs, and flood control. Another example of synergy is provided by power transmission lines that carry fibre-optic cables and road projects that incorporate the laying of communications cables. A third is that of “virtual water trade strategies” that allow water-scarce countries to rely on water-rich countries for imports of water-intensive agricultural goods (Box 1.2). Only planning performed on a regional level can focus on and fully exploit such synergies.

 

 

1.2 The Challenges

The challenges of regional integration are illustrated by the pitfalls encountered in implementing regional infrastructure policies to date, as well as by the mixed experience of infrastructure and regional projects under preparation and implementation.

1.2.1 Unfinished business: the imperative of aligning infrastructure policies

Although Africa’s framework of continental and regional policies is fundamentally sound, those policies have not been thoroughly and consistently written into national legislation, even after treaties are signed and ratified. Where regional and continental infrastructure policies do appear in national legislation, too often they are not enforced.

The iconic example is the axle load limit for trucks. Without a harmonised and enforced rule, international movement of trucks from a country or region with a higher load limit damages roads in countries with a lower load limit. Similarly, in ICT, the lack of harmonised regulation is a major obstacle to the construction of needed regional backbones by private operators.

At bottom, continental and regional policies approved by ministerial committees or conferences of heads of state are no more than declarations of intent—intent to improve the delivery of common goods through continental integration; intent to facilitate trade and connectivity through harmonised standards and regulations; intent to cooperate on planning and delivering essential parts of regional networks that all agree are desirable.

But at every step, harmonisation is voluntary. In the absence of formal legal authority to see that continental and regional policies are written into effective national laws and regulations and to compel national authorities and utilities to follow through on their commitments, the regional institutions must rely on cooperation, consensus, and good will, which too often are in short supply.

Missing, as a result, are consistent national policies, regulations, and norms among countries that share regional infrastructure. The ensuing profound lack of harmonisation of laws, standards, and regulations complicates the processes of planning and financing vital regional projects while impeding cross-border economic activity.

The transport sector provides a striking illustration of the economic impact of lack of harmonisation that goes way beyond the axle load limit problem. Conflicting policies and practices hinder international trade, compounding the impact of poor physical infrastructure. As a result, transport costs in Africa are up to 100% higher than in other world regions.

Policy harmonization is a problem affecting all regional groupings, including the European Union and the Association of Southeast Asian Nations (ASEAN). Short of the judicial processes used extensively in Europe to achieve harmonization but not available in African regional groupings, a solution lies with peer review. Both the EU (under the Maastricht Treaty) and ASEAN are using the peer review process with a degree of success. NEPAD has experience with the African Peer Review Mechanism (APRM). An analogous approach may be useful in ensuring policy harmonization in infrastructure across African countries.

1.2.2 Difficulties in the physical implementation of regional projects

The PIDA Study assembled and reviewed a panel of case studies of the efficiency of current regional infrastructure in each sector, as well as regional projects and programs under preparation or under construction.

The review revealed that the lack of alignment and financial problems were the principal drags on efficiency.

Lack of alignment with national and regional priorities is a primary failure factor, as good ideas become orphan projects. For example, segments of the Trans-African Highways (TAH) that correspond to the priorities of the country involved have been built, but segments that do not fit country priorities have stagnated.

Finding financing is another problem. Raising finance and reaching financial closure are complicated for regional projects (even those undertaken in the public sector with grant financing) because of the number of actors involved. At every turn, there is the risk that the interest of one partner will waver or that a commitment will not be met. Experienced project promoters and developers are needed to help projects clear the many hurdles to financial closure.

Financial distress bedevils regional projects in the transport and power sectors. Regional railways, even those under private concession, earn revenue that is insufficient to cover operating expenses, provide maintenance, or support expansion. Road maintenance suffers from lack of financing even where roads funds have been established. Cash-starved utilities make unreliable offtakers for fledgling regional projects. The result has been steady deterioration of existing infrastructure to the point where portions of the network have become unusable.

There are exceptions to this dismal picture. Participants in the ICT sector enforce strict payment discipline through prepayment of services. Other examples are the well-maintained Maputo corridor (a toll road built and operated by a private group) and regional facilities (such as container ports) that cater to creditworthy clients.

Implementation of infrastructure is always complex—the more so in the case of regional projects with many stakeholders.

 

Africa’s continental (AUC/NPCA) and regional organizations (RECs and their technical agencies) have been keen to assist in promoting and developing regional infrastructure. They have been successful in implementing “soft projects” (policy, planning and feasibility studies) financed by donor grants. However, their mandate, procedures, and staffing generally are ill adapted to infrastructure civil works. (A notable exception has been the OMVS, Box 1.3.) The continental and regional organizations, also generally lack the capacity to borrow.

Experienced developers in the private and public sectors have implemented successful regional projects.

Even with a competent developer regional projects encounter delays. One major cause is the time needed to establish a responsive and comprehensive contractual framework—whether or not the private sector is involved. Another has been the difficulty of mobilizing finance for project preparation (there are dozens of project preparation facilities with differing operating rules and insufficient resources on their own for the preparation of a large complex project) and for construction. Most successful projects have benefitted from the involvement of the full array of donors using a combination of equity, loans, and guarantees. This has been the only way to bring some projects to closure, but it is time-consuming.

Read the full report.

 

PIDA is an initiative for the development of infrastructure in Africa being led by the African Union Commission (AUC), the NEPAD Secretariat and the African Development Bank (ADB).

 

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