View: Momentum builds as heavyweights get behind infrastructure
The momentum behind a multinational effort to build the infrastructure that can transform sub-Saharan African economies is finding its expression in a welter of announcements about new initiatives and projects. As well as giving substance to claims that long-stalled Programme for Infrastructure Development in Africa projects can mobilise the huge resources they need to be built (AE 254/21), these initiatives – which now include the Global Infrastructure Facility (GIF), unveiled at the IMF/World Bank Group (WBG) annual meetings – are, in essence, the product of years of analysis of why ‘transformational’ projects from the Grand Inga dam downwards have never left the drawing board.
As well as headline announcements of huge new project finance flows, this long process of analysis of the few genuine success stories and many failures is finding an expression in greater attention to detail. Supporting early-stage project development – which will be a key theme of the Infrastructure Consortium for Africa’s 25-27 November annual meeting in Cape Town – is one area often overlooked by project sponsors; with many governments lacking resources, capacity and know-how to adequately develop complex schemes, donors are taking a more muscular approach to preparing projects from the earliest stages.
WBG president Jim Yong Kim gave prominence to infrastructure – second on his agenda only to Ebola (AE 286/26) – as he launched the annual meetings on 9 October. The GIF is very much a creation of its time: a new partnership initiative, which will involve the main multilateral and bilateral lenders and donors, but which is aimed at mobilising the private sector to help tackle the massive infrastructure deficit now facing developing countries, which are estimated to need $1trn/yr in extra investment through to 2020. Kim lined up with the heads of some of the world’s largest asset management and private equity firms, pension and insurance funds, and commercial banks to launch GIF. He told his opening press conference: “With public purses stretched, it’s significant that the heads of some of the world’s leading institutional investors will be signing up as partners in the GIF. Institutional investors have deep pockets. Insurance and pension funds have some $80trn in assets, but less than 1% of pension funds are allocated directly to infrastructure projects and the bulk of that is in advanced countries.”
The GIF should “crowd in the tens of billions or more, potentially, that’s now sitting on the sidelines waiting for good investments”. This is the sort of partnership being advocated by Sustainable Energy for All, Africa50 and other such initiatives. Kim summed up the rationale: “We’ve been hearing loud and clear that the money’s out there. The real challenge… is a lack of bankable projects, a sufficient supply of commercially viable and sustainable infrastructure investments.”
Reflecting the view that new – and potentially more muscular – approaches are needed to make projects work was an 11 October statement by the WBG’s International Finance Corporation (IFC). This marked the signing of a project services agreement with Republic of Congo to assess the feasibility of developing the long-planned Sounda Gorge hydropower scheme on the Kouilou River. The IFC said it would carry out detailed engineering, environmental, social, and market studies and a legal analysis over the next 18 months to design a project in accordance with its rigorous standards. IFC said it would “consider options for developing the project, including through public procurement and public-private partnerships”. Normally, this would be the formal responsibility of a government agency.
It has taken years of failure for the international community to come to this level of understanding of the extent of the African infrastructure challenge and what is needed. Positive results will be expected to emerge well before 2020, if even only some of the goals now being spoken of are to be achieved. The testing ground will be projects like Sounda Gorge.
This article was published in Issue 287 of African Energy