Development and Progress Achieved in Infrastructure and Natural Resources Development

1. Development and Progress Achieved in Infrastructure and Natural Resources Development 8th Session of the Committee on Trade, Regional Cooperation and Integration 6 - 8 February 2013 Addis Ababa, Ethiopia

2. Africa’s Infrastructure Challenges 1. Africa’s GDP growth not ALWAYS congruent with poverty alleviation

3. Global Growth and Global Poverty In terms of GDP – Africa performs on par with other developing regions Growth with limited inclusion – little abatement of poverty

4. Africa’s Infrastructure Challenges 2. There is growing infrastructure funding gap in all scenarios

5. Africa has currently a huge infrastructure deficit • At the national level and regional level • Annual investments >$93bn (World Bank) • At the regional level • $38bn between 2012 and 2020 (PIDA)

6. Fiscal flows devoted to infrastructure • Most SSA spend 6-12% of GDP p.a. on infrastructure • Less than $600m p.a. (less than $50 pp – but pales vis-à-vis what is required Inefficiencies & infrastructure funding gaps – leveraging private sector financing through PPPs one options (successful cases – toll roads in SA, telecom in many SSA countries)

7. Africa’s Infrastructure Challenges 3. There is very little private sector participation in infrastructure development

8. PPI is low by international stds but improving • Only in the telecom sector that PPI is more pronounced • Conditions not conducive for PPI in many African counties • Low/non-existent sovereign credit ratings a limiting factor → limits public sector’s ability to use private investors • Key Propositions • Flexible Financing • Efficiency gains

9. Note: Bold: junk high yield speculative bonds, Italics: investment grade and under observation, Underlined: Investment grade and premium

10. Africa’s Infrastructure Challenges 4. Over-reliance on external finance for infrastructure – and trade-offs on local commodities & associated lack of local finance

11. Financing from ODA, PPI & non-OECD financiers comparable but sectoral distribution varies substantially Among the emerging financiers of Africa’s infrastructure, China is by far the largest - channelled through export-import Bank of China Energy & transport sectors largest proportion of financing China’s concentration on natural resource development

12. What has been achieved recently in infrastructure & natural resources development

13. Progress Achieved in INRD 1. Growing investments in African mining sector from OECD and Non-OECD

14. Growth in investment in African mining China imports US$100 billion worth of base metals p.a. & reliant on SSA for cobalt imports Chinese investment in (a) mineral processing (semi-fabrication) operations & (b) infrastructure to facilitate extraction & evacuation of products Canadian mining firms emerge as major players in Africa’s mining industry = from $233m in 1989 to $635m in 1995 and surpassed $20b in 2008 Canadian African mining assets distribution by country (2010)

15. Mineral commodities to transform economies Australia scaled-up investment in African mining countries in recent years Collective investment in last 10yrs. in excess of $20b & projected to +/-$50b in the next 5yrs. ASX-listed companies with operations in Africa Are benefits shared equitably between mining companies & African countries? Most countries redesign fiscal provisions to enhance national benefits accruing from the mining sector

16. Progress Achieved in INRD 2. Africa Mining Vision is taking shape and redefines Africa’s beneficiation of its minerals resources

17. African countries owning and beneficiating their mineral resources Regional developments • Development & adoption AMV by African HoS&G in 2009 • revamping policy & regulatory frameworks to reflect developmental objectives • improving mineral sector governance, • developing economic & social linkages, • revitalizing small-scale mining • creating institutional capacity for implementing the AMV Subregional Level developments • Efforts to harmonize mining codes increased across the continent • Draft ECOWAS Directive Harmonization of Guiding Principles & Policies in Mining Sector • SADC Framework for Harmonization of Mining Policies Standards & Regulatory Frameworks

18. There are remaining challenges to overcome A major challenge is that of weak capacities in value chain Ineffectiveness of regulatory regimes to contribute to creation of equitable & sustainable mineral wealth creation based on a diversified mineral sector, integrated into local & regional economy through optimized linkages. Existing fiscal instruments don’t optimize collection of resource rents, such as windfall and additional profits taxes Artisanal & small-scale mining (ASM) sub-sector faces challenges related to deficiencies in skills, finance, marketing and technology

19. Progress Achieved in INRD 3. Africa’s vast energy resources are being harnessed – albeit at slower rate than escalating demand

20. Has not tapped into vast energy resources 19.5m people in New York consume in a year same quantity as 791m people in SSA, excl. RSA Endowed with vast non-renewable and renewable energy resources BUT Inadequately harnessed

21. Progress Achieved in INRD 4. All scenarios point to the increased of energy demand by 2040 and therefore potential for growth investments and associated development

22. Africa need to invest to energy generation • By 2040: • COMELEC will increase by 6.2% pa (additional 298GW) • SAPP will increase by 4.4% pa (additional 129GW) • WAPP will increase by 8.9% pa (additional 90GW) • CAPP will increase by 7.3% pa (additional 26GW) • EAPP will increase by 6.5% pa (140GW) This translates into big investments = US$40.5b p.a. to 2040 to meet the forecast energy demand (PIDA Study)

23. Progress Achieved in INRD 5. Africa energy infrastructure development is benefiting from recent global (e.g. green economy) and regional (PIDA) initiatives

24. Some of the promising trends in energy Emerging trends in clean or low carbon energy development African power utilities are transforming power generation, transmission and distribution - attracting private capital through PPPs & IPPs Share of hydropower from current levels of less than 15% are increasing Promising natural gas programmes and initiatives & investments in exploration + distribution Global energy partnerships to harness Africa’s renewable energy resources.

25. Moving forward in developing energy infrastructure for regional integration Reshape energy markets through stimulating local demand Drive down costs of technologies though localization (indigenization) & mass production for local consumption Introduce new models in the energy systems Finance own development Invest in R&D by creating (where there are none) or strengthening the existing centres of excellence

26. Progress Achieved in INRD 6. Profound major infrastructure challenges in transport, which negatively impact on trade & regional integration are being addressed

27. Underdeveloped transport infrastructure an impediment • % of road networks in good condition from 4% (DRC) to 90% (RSA) • Extension & maintenance problems (vehicle overloading, lack & poor management of funds allocated to road network • Africa has highest accident rate vis-à-vis vehicles on the road • African railways network has low density and different technical stds • Maritime transport accounts for 92-97% of Africa’s international trade (but safety and security – piracy and & robbery of merchant ships • Underdeveloped inland waterways transport - few internationally-navigable inland waterways • Global share in air transport is very low and accounts for only 3 per cent of the global traffic.

28. Road transport most dominant accounting 90% of intra-African trade • 24 projects & programmes for transport under PIDA PAP relating connectivity & modernization of corridor, ports, railways & air transport • Improvement of road network incl. completion of missing links of TAH • Bamenda-Enugu Transport Facilitation Programme • Funded by AfDB, World Bank and JICA • Increase trade & cooperation between ECOWAS & ECCAS • Dakar-N’djamena-Djibouti and Djibouti Libreville transport corridors • Pre-feasibility studies of missing links • Financed by NEPAD-IPPF • Study on the regional norms of TAH was conducted by AUC/ECA • adopted by African Ministers in charge of Transport & endorsed by HoS&G in Jan 2012

29. Progress Achieved in INRD 7. An integrated approach to transport infrastructure can work better coupled with an integrated corridor approach to infrastructure development

30. Moving ahead robust strategies need to be considered To transform transport sector, these constraints & challenges need to be addressed: Foster regional integration, econ growth, soc. development and poverty reduction • Inaccessible roads • High transport costs • High rate of corruption • Insufficient use of ICT • Security risks • Environmental concerns • Political instability • Prevalence of infectious diseases • Inadequate policies • Inadequate human resources • Integrated approach to transport development policy • Give priority to implementation of PIDA PAP projects • Promote building of missing links in transport infrastructure • Strengthen human & instit. capacities & rehabilitate training institutions • Fully implement YD to liberalize air transport market • Promote dry ports in landlocked countries to facilitate transit operations & decongest sea ports

31. Corridor & integrated approach to Infrastructure development Energy Systems Minerals Transport Systems Development Corridors Beneficiation Industries Research & Development

32. mmehlwana@uneca.org