The African Development Bank (AfDB) says that the continent’s geography is not conducive to single-country projects.
On such basis, the bank recommends a regional approach to infrastructure development to ensure service efficiency and maximise resources.
“The continent could save US$ 2 billion a year in energy costs by utilising the existing regional power pools to their full potential. For example, developing the continent’s largely untapped hydropower potential through investments in regional infrastructure such as the Grand Inga Project would generate financial returns for Africa’s power pools of 20 to 30 percent, and as high as 120 percent for the Southern African Power Pool,” the bank says in its recently-published 2011 Africa Development Report.
The Grand Inga Project is a planned US$80 billion hydroelectric plant on the banks of the Congo River in the Democratic Republic of Congo.
Construction is scheduled to start in October next year and when complete, it will become the world’s largest plant of its kind, generating more power than the largest hydropower project in the world – the 18 000 MW Three Gorges Dam in China which became operational in 2009. Inga is expected to bring electricity to half of the African continent.
Founded in 1995, the Southern African Power Pool is a cooperation of the national electricity companies in Southern Africa under the auspices of the Southern African Development Community (SADC).
Its members have created a common power grid between their countries and a common market for electricity in the region. SADC has identified the Grand Inga Project as a priority.
Similarly, AfDB says that developing a transnational highway network linking all capitals in sub-Saharan Africa could result in trade gains of up to US$ 250 billion over 15 years.
“Developing regional hubs, particularly in maritime and air transport infrastructure would also boost efficiency,” the report adds.
Regarding airlines, the bank says that regional hubs could improve efficiency not only in capital investments but also in operation and asset maintenance.
It gives the example of Ethiopia Airlines which has emerged as a hub on the east coast and has become a major African carrier dominating international and domestic markets alongside South African Airways and Kenya Airways.
Its aviation training centre, which was established in 1956 to train domestic technicians and pilots, has become a regional hub servicing numerous African carriers.
“As of 2008, Ethiopian Airlines had the highest number of destinations, serving 35 African cities in 26 countries, and accounted for 45 percent of all the seats on routes served by one carrier. They are currently increasing and modernizing their fleet to increase passenger traffic by about 175 percent by 2018,” the report says.
However, the bank notes that while cross-border infrastructure projects are transformative, they are also challenging relative to single-country projects.
“Differing priorities across borders and poor coordination of national projects with a regional dimension, among other factors, explain the slow progress in completing strategic investments such as the Trans-African Highways initiative. Inadequacies in project preparation are also particularly evident in regional projects.
“In addition, these projects have markedly higher transaction costs and complex risk factors for potential financiers. They involve multiple financiers, requiring careful coordination to ensure that transactions are efficient and effective. Moreover, execution of multinational projects requires full, effective cooperation among countries and in some cases, harmonization of policies, rules and regulations,” AfDB says.
The solution the bank proposes is in the form of innovative planning, procurement, and financing. It cites initiatives such as South Africa’s Presidential Infrastructure Champion Initiative (the “Zuma initiative”) and the Programme for Infrastructure Development in Africa (PIDA) as significant steps in the right direction.