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Regional Strategy: Infrastructure

Lois Auta, Vijay Iyer, Sabine Ulrike Dall'Omo, Ghida Fakhry, Popo Molefe

As Africa has the fastest growing population in the world, and also is home to the youngest population on the globe, pressure is being felt in cities, with travel and power infrastructure being cited as among the biggest challenges to growth. Panellists at a World Economic Forum (WEF) on Africa dialogue on Friday discussed the challenge.

Vijay Iyer, Vice-President and Chief Operating Officer, Multilateral Investment Guarantee Agency, said the benefits of the African Continental Free Trade Agreement (AfCFTA) will be driven by the ability to create infrastructure to deliver benefits: from roads to border controls. He noted that there is a deficit in infrastructure and AfCFTA is a compelling argument to ramp up and ensure that the potential benefits are met.

However, when it comes to attracting foreign direct investment, what needs to be considered is how investors perceive the environment into which they are investing, as well as the political and business environment and the skills base, said Iyer.

These considerations are vital when it comes to working with the private sector in partnership on infrastructure projects, said Iyer.

Sabine Ulrike Dall'Omo, Chief executive, Siemens Southern and Eastern Africa, added that regional integration is required to enable infrastructure development, and it is not always easy to integrate borders as they generate revenue for government through taxes. This, she says, is why governments are sometimes sceptical about involving private companies, as they may see their revenue base eroded.

Dall'Omo added that, when cross-country collaboration takes place, it is vital to address people’s needs, so that things change for the better.

Local collaboration

Transnet Chairman, Popo Molefe, provided an example of a project in which Transnet is seeking to collaborate with the private sector. Transnet is planning to issue a tender next year for South Africa’s first terminal to import liquified natural gas.

The Richard’s Bay Natural Gas Network offers an opportunity for private sector investment, as well as offtake for local companies. Molefe said the project is also an opportunity to respond to some of the challenges that Eskom has, and the energy can supplement the power utility’s output.

Molefe added that Transnet is promoting inter-Africa trade, and welcomes minority partnerships.

However, Dall'Omo noted that investors needed to be assured of returns. She said that, sadly, “nobody will invest in Africa for the sake of people”, as there needs to be a commercial aspect.

Iyer added it was critical that the assets needed to pay for themselves and, in cases where the pay-off period was several decades long, new models needed to be found because these periods were much longer than the time investors had patience for.

There were, however, aspects that give hope for infrastructure development in Africa, said Iyer. This includes the growing youth aspiration, and a young population that is entrepreneurial, and innovative, which gives us the right tools to help future growth.

In addition, said Iyer, governments are getting better at collaborating and finding solutions together. “We can hope for a much better future for regional infrastructure, regional integration, and the investments that have to come with it.”