- Urgency of the infrastructure task requires financing now, which means tapping international markets
- Four factors to attracting international capital: transparency; reliable judicial systems to protect ownership; low levels of bureaucracy; and low levels of corruption
- Governments should be more “project-ready”, while private capital must rethink “old-school” risk assessment
- Partnerships with the private sector have been particularly successful in the energy sector
- For more information, please visit wef.ch/af16
Kigali, Rwanda, 12 May 2016 – Local communities must be involved in infrastructure development at every step of the way, said Cyril M. Ramaphosa, Deputy President of South Africa. Infrastructure is for the betterment of people’s lives and is important that they feel a sense of ownership by being given full opportunity to benefit from the construction and from eventual delivery, he added.
South Africa’s experience of filling a gigantic post-apartheid infrastructure deficit over the past 21 years – since the advent of democratic government – has taught it important lessons, said Ramaphosa. One of these is that coordination of all projects at the highest level is critical to the best division of resources and to timely completion. South Africa has situated a coordination agency within the president’s office, enhancing and centralizing the government’s own management capacity; improving transparency, particularly with regard to tenders, which are often a point of corruption; and effectively “crowding in” the private sector.
Partnerships with the private sector have been particularly successful in the energy sector, with companies being given licences to develop generation capacity largely independent of government interference, and selling power into the national grid.
Colin Dyer, President and Chief Executive Officer, JLL, USA, said developing countries’ domestic capital markets are very shallow and will take time to strengthen and deepen. But the urgency of the infrastructure task requires financing right now, which means international markets have to be tapped.
Dyer listed four key factors to attracting international capital: transparency on costs and returns, and purchase and selling prices; reliable judicial systems to protect ownership; low levels of bureaucracy; and low levels of corruption. Dyer added that many countries in Africa are, in fact, success stories in terms of these criteria, but these stories are not being told. “The press loves to stream problems and whisper success,” he said.
John Rice, Vice-Chairman, GE, USA, said inclusive growth is impossible without electricity, citing figures showing that 500 million in Africa are “in the dark”. This has to change and quickly, and highlights the need for nimbleness and urgency on the part of governments and bureaucracies in addressing power gaps. “Speed matters,” he said, lamenting how important projects are allowed to “languish” due to political electoral cycles.
Equally, potential financers express eagerness to invest in infrastructure because of a clear and urgent need for it, but then allow enthusiasm to wane as they proceed to “define risk in the old-school ways,” noted Rice.
Dana Hyde, Chief Executive Officer, Millennium Challenge Corporation (MCC), USA, said initiatives such as Power Africa are cause for optimism in electrifying Africa. “We will get there,” she declared. Hyde said her organization provides competitive grants from the US Government for countries and projects that meet particular indicators, such as good governance. Projects have “country-led design” and are coordinated at the top level of government.
Commenting on the issue of strengthening domestic capital markets, Ramaphosa pointed out that billions of dollars are leaving Africa through complex corporate structures and straightforward tax dodging. “We must close these loopholes to stem the seepage,” he said. He contended that the international financial architecture should be fixed as it favours the rich and debt repayment is often punitive towards smaller country borrowers.
More than 1,200 participants from over 70 countries are taking part in the World Economic Forum on Africa in Kigali, Rwanda, from 11 to 13 May 2016. The theme of the meeting is “Connecting Africa’s Resources through Digital Transformation”.
The Co-Chairs of the 26th World Economic on Africa are: Akinwumi Ayodeji Adesina, President, African Development Bank (AfDB), Abidjan; Dominic Barton, Global Managing Director, McKinsey & Company; Tony O. Elumelu, Founder, The Tony Elumelu Foundation, Nigeria; Graça Machel, Founder, Graça Machel Trust (GMT), South Africa; and Tarek Sultan Al Essa, Chief Executive Officer and Vice-Chairman of the Board, Agility, Kuwait
The World Economic Forum, committed to improving the state of the world, is the International Organization for Public-Private Cooperation.
The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. (www.weforum.org). |
