Workshop on Accelerating Implementation of MultiCountry Projects and Programs under NEPAD Lusaka, 26

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Workshop on Accelerating Implementation of
Multi-Country Projects and Programs under
NEPADLusaka, 26 June 2007
Financing of Cross-Border Projects Issues and
Opportunities
Alex RUGAMBA Coordinator
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Outline of the Presentation

• Africas infrastructure situation
• Trends in financing infrastructure projects
• Key Issues in infrastructure development
• Opportunities for cross-border projects
• Conclusions

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Africas Infrastructure Situation

• On-going Africa Infrastructure Diagnostic Study
  (AICD) sponsored by the ICA shows
• Africas infrastructure costly and uncompetitive
  high power costs, road freight 2-4 times as high
  as US, road freight delays 2-3 times as long as
  in Asia, high but falling ICT costs.
• Low access to power and low reliability
  negative impact on growth in Africa due to the
  energy crisis
• Infrastructure has been identified as a key
  impediment to Africa achieving 7 growth rate
  necessary for attracting investments, reducing
  poverty and meeting the other MDG goals

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Africas Infrastructure Situation

• Regional integration is central to the
  infrastructure agenda
• Power uneven distribution of energy resources
  and need for economies of scale
• Transport 15 landlocked countries with high
  transport costs and issues with cross-border
  transit facilitation need for improved air
  safety
• Water 60 international rivers
• ICT Eastern-southern Africa no access to
  trans-oceanic cable

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Trends in financing infrastructure projects

• Areas of Intervention in Cross-Border Projects
• Energy ( especially Electricity )
• Transport (Road, Rail and Air Transport)
• Shared Water Resources
• ICT (Optic fiber cables and backbones)

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Trends in financing infrastructure projects

• Spending on cross-border projects on the rise
  with most resources coming from multilateral
  agencies (WB, AfDB and EC/EIB)
• Demand for financing of cross-border projects
  growing faster than available resources
  unfunded pipeline of projects
• PPI trends are encouraging but only in certain
  niches
• New players China and India making an important
  contribution
• Public expenditure has improved but maintenance
  still under-funded
• Considering all sources, we now stand at about
  50 of needs estimated by the CFA Report
• Transport and Water sectors remain under-funded

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Investmentsin Regional Projects1999-2006
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Cross-Border Projects in AfDBs Programme 2007
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Cross-Border Projects in World Bank Programme
2008
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For Scaling up Cross-Border Projects

• We need
• Increased resources from Multilateral
  Donors
• Replenishment of IDA-XV and ADF-XI is
  key.
• Scaled-Up Participation by Bilateral Donors
• Increased Private Sector Participation

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Key Issues in Infrastructure Development in
Africa

• Inadequate legal and policy frameworks of
  governments Does the law allow private sector
  participation or PPP?
• Rule of law and governance
• Is the enforcement of contracts secured by
  the law?
• Need for strong project ownership of the
  governments and inclusion of infrastructure needs
  in national and sectoral development plans
• General cost of doing business still high in many
  countries making it hard for Africa to compete
  e.g. 47 of firms use generators

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Key Issues in Infrastructure Development in
Africa

• Lack of projects with appropriate scale
• Complexity of mounting and implementing regional
  projects
• Under-developed capital markets
• Insufficient capacity of governments and regional
  institutions to prepare and develop projects to
  bankable level
• Need to take into account the climate change
  agenda in infrastructure development

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Key Issues related to Investment Climate

• International Private Businesses
• - Regulatory arrangements over the long term
• - Transparency of contract award procedures
• - Expropriation risk, Foreign Exchange Risk
• - Division of risks with other parties
  concerned
• - Steady supply of raw materials
• Local Private Businesses
• - Transparency of contract award procedures
• - Fair regulation, contract enforcement,
  timeliness of
• government payment

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Opportunities for Financing Cross Border Projects

• Increased focus on improving connectivity in
  Africa through NEPAD STAP and MLTSF
• Creation of larger markets and greater
  cross-border transactions through FTA and Customs
  Union initiatives of RECs - COMESA, SADC, EAC,
  ECOWAS etc. aim a single FTA
• Regional infrastructure being used to support
  market integration Aid for Trade
• Increased possibilities of development through
  Public-Private Partnership - reducing debt burden

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Opportunities for Financing Cross Border
Projects

• On-going initiatives for improving the business
  climate in Africa Investment Climate Facility
• Reduced conflicts on the continent allowing the
  preparation of projects e.g. Inga Dam Project
• Improved coordination for infrastructure
  development among African institutions - AU
• Improved coordination between RECs example of
  COMESA, EAC and SADC in infrastructure sector
  Tripartite Task Force
• Collaboration among the project preparation
  facilities tunnel of funds IPPF/DBSA/AFD/IFC/E
  IB/WB etc.

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Opportunities for Financing Cross Border
Projects

• International commitments to scaling up
  expenditure on infrastructure in Africa
  including for capacity building and project
  preparation facilities
• New financing instruments EU-Africa
  Infrastructure Trust Fund, PAIDF etc.
• Increased support for private participation in
  infrastructure in Africa - PPIAF
• Local currency sources offer a new potential for
  infrastructure projects local capital markets
  example of KenGen IPO

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Example of a Cross-Border ProjectMaputo
Development Corridor

• Comprising Port and Terminal, Road, Rail, Border
  Posts
• Passing through industrial and primary production
  areas from Maputo to Johannesburg (560 km)
• Involving substantial Public and Private
  Partnership investments
• Opening export/import markets for Swaziland and
  Botswana as well

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Maputo Development Corridor

• Before and After the Project

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Maputo Development Corridor

• Throughputs at Maputo Port 1996 - 2003

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Conclusions

• Shared strategic vision, political will and
  strong commitment among countries concerned is
  key for the success of cross-border projects
• Good coordination among national line ministries,
  regional sector institutions, RECs, AU and other
  stakeholders is essential
• The ability to raise capital and manage private
  sector participation in infrastructure has
  increased in most sectors
• Further progress is required on harmonisation of
  the policy, legal and regulatory regimes between
  countries
• Further progress also required on development of
  new funding instruments and mechanisms for
  implementing cross-border projects

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• Thank youICA Secretariatc/o African
  Development BankPO Box 3231002 TUNIS
  BELVEDERETUNISIAwww.icafrica.org