Private Sector and Infrastructure in Africa: The State Still Has a Role to Play

29/07/2010
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The achievements of Pprivate infrastructure projects are increasing in Africa, according to a study published recently. The study, presented which was released at the 2008 start of the African Economic Conference of 2008  and published in July 2010, notes that Sub- Saharan Africa recorded has seen the emergence of 357 private infrastructure projects between 1990 and 2007, representing investments of more than 68 billion US dollars.

According to theis study entitled "Private Sector Participation in Infrastructure in Africa" produced and directed by Jerome Afeikhena, the telecommunications sector attracted the largest share of these investments, followed by the transport sector.

The study is part of a series of publications released made official in July 2010 by the Economic Commission for Africa (UNECA) and the African Development Bank (AfDB), following a peer review. Some 18 studies have been published, focusing on development issues in Africa. These studies aim to build on country the experiences in the continent’s of the countries’ development process on the continent to improve the effectiveness of public policies.

The 357 projects identified by Mr Afeikhena were carried out after a wave of privatizations that marked the 90s in developing countries. Faced with the lack of maintenance challenges and poor public infrastructure management of public infrastructure, these countries turned to the private sector to develop and manage infrastructure projects. This attitude was welcomed and encouraged by the multilateral development banks.

Mr Afeikhena nonetheless warns that proponents of privatization have been too optimistic. "There was a policy mistake in the assumptionsince there was a belief that infrastructure projects would be financed by the private sector. In fact, for many reasons, including the business climate and the profitability of projects, private investment has been limited in terms of volume, sectors and countries".

Mr Afeikhena also points out that despite the fact that expected progress has been rather disappointing compared to expected results, the successful cases of privatization have actually led to the expected benefits in terms of cost reduction, quality of service and areas covered by the service.

Despite such progress, the gap in African infrastructure is enormous, especially in the vital energy sector.

The mixed results of this wave of privatization does not mean that we go back to the old formula of all-state, but the opposite, insists the author explained. One lesson learned is that the needs are simply too large to be met by the private sector alone. It can only fill a fraction of the 38 billion US dollars of annual investment needed over the next 10 years, to fill the gap in the catch up Africa’s set back in this sector.

Another lesson to be drawn from this experiment in privatization is the need to strengthen reforms, both in the legal and regulatory frameworks, to further consolidate the business climate and strengthen public participation in these projects. The state remains a central player in these operations, despite contrary concerns, to identify and facilitate private sector participation in activities where it is most likely to succeed.

Moreover, in the medium- term, the public sector should not only provide a "passive" support approach ofto financing or guarantees, but also promote the transfer of expertise, technologies and the strengthening of national capacities. "The development of successful projects requires factors which are rare in developed countries. These are time, money and cutting edge skills" highlights the study notes. In addition, the private sector funding is does not always suitable for correspond with all types of infrastructure projects and inwith all developing countries.

In collaboration with Besides the State, the domestic private sector in Africa is now better positioned to initiate funding. Contrary to a foreign investor, In addition, the African investor is better protected against currency risks and political risks and now has better local sources of funding, as many countries haveing successfully sought launched in major international financing.

Finally, the author places emphasis the growing need for insists that a regional approach to infrastructure projects is. needed more than ever. Regional projects offer the advantage of strong economies of scale, and can enjoy the active support of regional organizations, including the New Partnership for Africa's Development (NEPAD).