To Address Infrastructure Needs Africa Must Tap International Capital
Local communities must be involved in infrastructure development at every step of the way, said Cyril M. Ramaphosa, Deputy President of South Africa. Infrastructure is for the betterment of people’s lives and is important that 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 over the past 21 years – since the advent of democratic government – has taught it important lessons, said 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. South Africa has situated a coordination agency within the president’s office, enhancing and centralizing the government’s own management capacity; improving transparency, particularly with regard to tenders, which are often a point of corruption; and effectively “crowding in” the private sector.
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.
Colin Dyer, President and Chief Executive Officer, JLL, USA, 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.
Dyer listed four key factors to attracting international capital: transparency on costs and returns, and purchase and selling prices; reliable judicial systems to protect ownership; low levels of bureaucracy; and low levels of corruption. Dyer added that many countries in Africa are, in fact, success stories in terms of these criteria, but these stories are not being told. “The press loves to stream problems and whisper success,” he said.
John Rice, Vice-Chairman, GE, USA, 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, 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 Rice.