AfDB, Partners Promote Infrastructure Development at AU Summit

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A major multi-stakeholder initiative is paving the way to improved infrastructure in Africa. Officially launched on 24 July 2010 in Kampala, Uganda, on the sidelines of the 16th African Union heads of state and government summit, the Program for Infrastructure Development in Africa (PIDA) has entered the preparation phase.

The sponsors of this continent-wide initiative, the African Union Commission (AUC), the African Development Bank (AfDB) and NEPAD’s Planning and Coordinating Agency (NPCA), presented the progress made so far on the sidelines of the 16th Africa Union Summit, from 30-31 January 2011.

The PIDA aims to develop priority regional and continental integrated infrastructure networks and services in 4 key sectors: transport, energy, ICT and trans-boundary water.

It spans  the short, medium and long-term, up to the year 2030.

PIDA’s emphasis on regional infrastructure development aims at supporting the expansion of intra African trade as well as Africa’s competitiveness in an increasingly globalized world economy.

PIDA will bring together or merge various regional and continental infrastructure initiatives, such as the NEPAD Short Term Action Plan (STAP), the AU Infrastructure Master Plans and the various REC level initiatives into one coherent programme for the entire continent.

This programme will be based on a common vision for the continent’s socio-economic development and in line with the strategic framework and sectoral policy goals developed under the studies.

The program is being developed with intensive stakeholders’ consultations involving the Regional Economic Communities, AU Specialized institutions and Development Partners.

It shall also include an implementation strategy and processes, including a rolling priority action plan over the PIDA horizon.

PIDA will be Africa’s main planning and programming document guiding regional and continental infrastructure development for the short, medium and long-term.

The initiative will guide all future interactions with Africa’s development partners willing to support Africa’s regional and continental infrastructure.. .

AfDB’s View of PIDA

“We in the African Development Bank view the PIDA initiative as a very important and instrumental undertaking that puts  together, on one hand,  a comprehensive and coordinated policy and strategic framework and, on the other, a programme for regional and continental infrastructure in Africa with stakeholders consensus and global partnership for its implementation,” said Alex Rugamba, Director, Regional Integration.

The AfDB is thus very supportive of the initiative and is fully committed to ensuring its success as  demonstrated by the Bank’s role as the Executing Agency for the studies. As such, the Bank is one of the three sponsors of the programme.

“We strongly believe that implementation of this programme will strengthen regional economic integration for Africa’s development,” added Ralph Olaye, Manager, NEPAD Division.

PIDA is designed to be implemented within a broader development strategy to promote economic diversification by removing growth retarding constraints inherent in small markets, realize economies of scale, enhance productive capacities of African economies, enhance trade among African countries and regions, but also serve as a launching pad for Africa’s effective participation in the global economy.

Financing of PIDA

PIDA studies will articulate financing mechanisms for the PIDA priority projects.  However, the AfDB believes that the projects could be financed through a number of different financing mechanisms.
These mechanisms include traditional funding sources but also more innovative sources.
Traditional funding sources include:

  • Domestic resources from national investment budgets
  • Public financing from development partners –, multi-lateral and bilateral agencies grants and concessional loans;
  • Private sector financing – through private-public partnerships and equity investments; using non-sovereign and syndicated loans, corporate or project finance mechanisms, direct investments, non-direct investments using equity funds as well as quasi equity investments;
  • Bonds and capital markets resources.
  • Innovative sources could include:
  • Sovereign wealth funds from countries with fiscal surpluses;
  • Capital from alternative sources such as private sector savings and excess funds;
  • Other domestically generated resources – perhaps through new taxes (to support regional integration).

Role of the AfDB in Financing PIDA

“Infrastructure investment remains a key priority for the African Development Bank; and is one of the four pillars of its engagement strategy with its Regional Member countries,” emphasised Bobby J. Pittman, Vice President, Infrastructure, Regional Integration and Private Sector.

Since its establishment in 1967, approximately 40% of the AfDB’s commitments have been devoted to infrastructure. In 2009 alone, it committed over US$ 6 billion to infrastructure, with US$ 700 million supporting regional infrastructure. Following 2010 capital increase and stepped up allocation to regional projects under the African Development Fund – the soft loan arm of the AfDB Group, the AfDB is better placed to increase its financing for infrastructure projects through both concessional and non-concessional lending.  

“The Bank shall therefore continue with its strategic focus of supporting infrastructure development on the continent and in particular priority regional infrastructure,” added VP Pittman.

Once PIDA is adopted and launched, the Bank shall prioritise its support to both preparation of projects as well as physical investments for the priorities contained in the programme.  

According to Ralph Olaye, “internally, such prioritisation shall be applied when preparing project pipelines, and when allocating resources towards competing projects.”  

The AfDB shall make use of its existing and new financing instruments such as:

  • The AfDB and ADF Public Sector financing windows;
  • Technical Assistance grants such as the NEPAD-Infrastructure Preparation Facility (for project preparation), Fund for African Private Sector Assistance (FAPA - to finance studies and advisory services), the Middle Income Country and other bilateral trust funds hosted by the Bank;
  • Private Sector financing options
    • Public financing for Public Private Partnerships
    • Loans, equity, risk instruments (guarantees and hedging products).
    • Infrastructure Funds/Bonds
  • Climate funds for eligible energy investments, including the newly established Africa Green Fund intended to support climate compatible investments in Africa.

In addition to utilising in-house financing instruments, the AfDB shall make use of  its catalytic role to mobilize additional financing from bilateral and other multilateral partners and shall promote the financing of PIDA projects through various international fora.

The Bank will forge global partnerships for PIDA implementation, through the Infrastructure consortium for Africa which is hosted by the Bank and non ICA members that have indicated desire to participate in bridging Africa’s infrastructure gap.

“The Bank is fully committed to the success of PIDA and shall devote its resources to ensure the success of the programme, which will ensure that actors from the private sector are well integrated in crafting and implementing sound infrastructure fostering Africa’s development” said VP Pittman.