Developments in Infrastructure and Natural Resources 7th Session of the Committee on Regional Integration and Trade 2 - 3 June 2011 Addis Ababa, Ethiopia

Developments in Infrastructure and Natural Developments in Infrastructure and Natural ResourcesResources

7th Session of the Committee on 7th Session of the Committee on Regional Integration and TradeRegional Integration and Trade

2 - 3 June 20112 - 3 June 2011

Addis Ababa, EthiopiaAddis Ababa, Ethiopia

• Report gives overview of developments in infrastructure and natural resources at • Global• Regional; and • National levels

• Identify challenges impeding development • Provides an overview of what ECA is doing. Also identify

what ECA could do

Structure of ReportStructure of Report

• Infrastructure section excludes ICT and WaterInfrastructure section excludes ICT and Water• Efficient infrastructure and services key to Africa’s social Efficient infrastructure and services key to Africa’s social

and economic developmentand economic development• Electricity powers health and education services as well Electricity powers health and education services as well

as boosts business productivityas boosts business productivity• Road networks provide links to global and local markets Road networks provide links to global and local markets

for goods and services for goods and services • Safe water supplies save time and stop the spread of Safe water supplies save time and stop the spread of

diseasesdiseases• ICTs provide access reduces transaction costsICTs provide access reduces transaction costs• Functioning infrastructure is key to human well being Functioning infrastructure is key to human well being

and poverty reductionand poverty reduction

Infrastructure

• Much of Africa’s current infrastructure is in poor state, Much of Africa’s current infrastructure is in poor state, depressing productivity by 40% and contributes to higher depressing productivity by 40% and contributes to higher cost of doing businesscost of doing business

• Road density is extremely lowRoad density is extremely low• Rail density is low, variations in gauge types, most pre-Rail density is low, variations in gauge types, most pre-

existing rail lines damaged or destroyedexisting rail lines damaged or destroyed• Poor transport infrastructure accounts for 40% increase in Poor transport infrastructure accounts for 40% increase in

transport costs for coastal countries, up to 60% for transport costs for coastal countries, up to 60% for landlocked countrieslandlocked countries

• 80 Ports, small, inaccessible by large modern vessels, 80 Ports, small, inaccessible by large modern vessels, inadequately dredged, inappropriate berths; old merchant inadequately dredged, inappropriate berths; old merchant fleetfleet

• 15 States with no access to ports; Africa’s freight costs at 15 States with no access to ports; Africa’s freight costs at about 250% of the global averageabout 250% of the global average

Infrastructure

Africa’s Infrastructure deficit

Low Income countriesSub Saharan Africa Rest of the world

Paved road density

31 134

Total road density

137 211

Mainline density

10 78

Mobile density 55 76

Internet density

2 3

Generation capacity

37 326

Electricity coverage

16 41

Improved water

60 72

Improved sanitation

34 51

At the global level…At the global level…• G-20 meeting in Seoul, South Korea pledged support G-20 meeting in Seoul, South Korea pledged support

for Africa’s integration agenda through the promotion of for Africa’s integration agenda through the promotion of trade facilitation and regional infrastructuretrade facilitation and regional infrastructure

• Created a high level panel to report to report back to Created a high level panel to report to report back to next meetingnext meeting

• The Infrastructure Consortium for Africa (ICA) The Infrastructure Consortium for Africa (ICA) established by G8 to coordinate financing for Africa’s established by G8 to coordinate financing for Africa’s infrastructureinfrastructure

• This is likely to be expanded to G20 to accommodate This is likely to be expanded to G20 to accommodate some of Africa’s large funderssome of Africa’s large funders

Developments in

infrastructure

At the regional level…five key programmes..At the regional level…five key programmes..• The NEPAD STAP (2002-2010) developed some 120 The NEPAD STAP (2002-2010) developed some 120

priority projects (studies, capacity building, facilitation priority projects (studies, capacity building, facilitation programmes, and investment projectsprogrammes, and investment projects

• Commonly acknowledged that success was limited and Commonly acknowledged that success was limited and projects slow to implementprojects slow to implement

• African Action Plan 2010-2015 (AAP) – infrastructure African Action Plan 2010-2015 (AAP) – infrastructure side aimed at speeding up implementation of STAPside aimed at speeding up implementation of STAP

• Key strategy is to highlight high impact, quick gains Key strategy is to highlight high impact, quick gains projectsprojects

• 23 projects (5 energy, 9 transport, 6 ICT and 3 water) 23 projects (5 energy, 9 transport, 6 ICT and 3 water) identified with a net resources requirement of US$ 9.3 identified with a net resources requirement of US$ 9.3 billionbillion

Developments in

infrastructure

• Programme for Infrastructure development (PIDA) Programme for Infrastructure development (PIDA) seeks to establish long term (2010 – 2040) harmonised seeks to establish long term (2010 – 2040) harmonised strategic framework and programme for infrastructure strategic framework and programme for infrastructure development in Africadevelopment in Africa

• Has five sequential stages (to Jan 2012) –Has five sequential stages (to Jan 2012) –– Inception phase; Inception phase; – Planning phase (methodologies, identify challenges); Planning phase (methodologies, identify challenges); – Programming phase; Programming phase; – Consensus building phase; and Consensus building phase; and – approval by Heads of Stateapproval by Heads of State

• Presidential Infrastructure Champion Initiative – seeks Presidential Infrastructure Champion Initiative – seeks to facilitate infrastructure projectsto facilitate infrastructure projects

• 7 initial projects identified – 7 initial projects identified –

Developments in

infrastructure

• Missing links of Trans-Saharan Highway and Optic Fibre project– Missing links of Trans-Saharan Highway and Optic Fibre project– AlgeriaAlgeria;;

• Dakar-Ndjemena-Djibouti Road and Rail project – Dakar-Ndjemena-Djibouti Road and Rail project – SenegalSenegal;;• North-South Corridor Road and Rail project – North-South Corridor Road and Rail project – South AfricaSouth Africa;;• Kinshasa-Brazzaville Road, Rail and Bridge project – Kinshasa-Brazzaville Road, Rail and Bridge project – Republic of Republic of

CongoCongo;;• Water management, river and rail transport projects – Water management, river and rail transport projects – EgyptEgypt; ; • Nigeria-Algeria gas pipeline – Nigeria-Algeria gas pipeline – NigeriaNigeria; and; and• ICT Broadband and link to fibre optic project into neighbouring ICT Broadband and link to fibre optic project into neighbouring

states – states – Rwanda.Rwanda.

Institutional Architecture for Infrastructure Development in Institutional Architecture for Infrastructure Development in Africa (AIDA)Africa (AIDA)

• Main objective is to create an integrated infrastructure Main objective is to create an integrated infrastructure development environment by streamlining efforts into a single development environment by streamlining efforts into a single platformplatform

Developments in

infrastructure

NEPAD PLANNIG

&

COORDINATING

AGENCYRegionalEconomic

Comm-unities

Countries

Specialized Institutions &

Agencies

Private Sector

IMPL

EMEN

TATI

ON

PR

OC

ESS

AfDB +ICA+ DEVELOPMENT

PARTNERS

Council for Infrastructure Development

African Union Assembly of Heads of State and Government

PRC

African Union Commission

Executive Council

DEC

ISIO

N M

AK

ING

PR

OC

ESS

PROJECTS AND PROGRAM PROPOSALS & REPORTING

DECISIONS FOR IMPLEMENTATION

Infrastructure

Advisory Group

At sub regional level..At sub regional level..• RECs have developed infrastructure master plans – these are to be RECs have developed infrastructure master plans – these are to be

part of PIDA programming phasepart of PIDA programming phase• Regional power pools (SAPP, WAPP & EAPP) working towards full Regional power pools (SAPP, WAPP & EAPP) working towards full

interconnectioninterconnection• Regional regulatory bodies (RERA) and ERERA) now functional to Regional regulatory bodies (RERA) and ERERA) now functional to

facilitate harmonized regulationsfacilitate harmonized regulations• In transport, good progress is being made to improve transport and In transport, good progress is being made to improve transport and

trade facilitation measures – several one stop border posts have trade facilitation measures – several one stop border posts have been implemented (eg Chirundu and Malaba) to minimize delays in been implemented (eg Chirundu and Malaba) to minimize delays in border crossingsborder crossings

• Progress has also been made in corridor management groupsProgress has also been made in corridor management groups

• and tfrapsort Renewablae enerbgies are being promoted (hydropower, solar, wind, geothermaland tfrapsort Renewablae enerbgies are being promoted (hydropower, solar, wind, geothermal• of coherent policy framework for infrastructure developmentof coherent policy framework for infrastructure development

• Inadequate financingInadequate financing

• Financing socially desirable but non-bankable projectsFinancing socially desirable but non-bankable projects

• High transaction costs due to inadequate infrastructureHigh transaction costs due to inadequate infrastructure

Developments in

infrastructure

At national level..At national level..• Reforms in both energy and transport areas is progressingReforms in both energy and transport areas is progressing• Energy mix is generally widening to improve acces eg Energy mix is generally widening to improve acces eg

– use of gas (West African gas pipeline to deliver gas to use of gas (West African gas pipeline to deliver gas to Benin, Togo & Ghana), Tanzania, Mozambique and SABenin, Togo & Ghana), Tanzania, Mozambique and SA

– Biomass for electricity generationBiomass for electricity generation– Wind energy being exploited (Egypt, Morocco, SA, Wind energy being exploited (Egypt, Morocco, SA,

Kenya, Ethiopia, etc)Kenya, Ethiopia, etc)• In transport investment in ports being scaled up (eg Tema In transport investment in ports being scaled up (eg Tema

and Walvis Bay)and Walvis Bay)• Dry ports becoming common to ease port congestion and Dry ports becoming common to ease port congestion and

improve tax collectionimprove tax collection

Developments in

infrastructure

• Lack of coherent policy frameworkLack of coherent policy framework– policies are not harmonizedpolicies are not harmonized– Strengthen policy coordination at all levelsStrengthen policy coordination at all levels

• Institutional structures for regional projects not well Institutional structures for regional projects not well defineddefined– Ownership and responsibility issues persistOwnership and responsibility issues persist– Underwriting major power projects difficultUnderwriting major power projects difficult

• Inadequate financing sourcesInadequate financing sources– Projects poorly preparedProjects poorly prepared– Risk perception and underwriting complicatedRisk perception and underwriting complicated– Increase PPP participation through long term financial marketsIncrease PPP participation through long term financial markets

• National commitment to regional projects is weakNational commitment to regional projects is weak– Deepen regional cooperation and integrationDeepen regional cooperation and integration– Integrate regional projects in national priorities Integrate regional projects in national priorities

Challenges of infrastructure Challenges of infrastructure

developmentdevelopment

At the global level..At the global level..• Most significant is dramatic increase in demand for Most significant is dramatic increase in demand for

mineral commodities since about 2002mineral commodities since about 2002• Demand increased by 1-2% between 80s and 90s but by Demand increased by 1-2% between 80s and 90s but by

about 7% between 1990 and 2000about 7% between 1990 and 2000• High demand caused mainly by growth in ChinaHigh demand caused mainly by growth in China• Between 1995 and 2005, China’s contribution to global Between 1995 and 2005, China’s contribution to global

output grew from 6% to 12%output grew from 6% to 12%• With growth in India and Brazil, mineral commodities are With growth in India and Brazil, mineral commodities are

assumed to be on a super cycleassumed to be on a super cycle• High demand has created strong geopolitical competition High demand has created strong geopolitical competition

for Africa’s mineralsfor Africa’s minerals

Developments in mineral resources


Chinese influence on world demand for metals

Refined use (2007)

% Share of China (2007)

% Share of China (2000)

Aluminium (kt) 12267 32.5 13.0

Copper (kt) 4800 26.2 11.8

Zinc (kt) 3750 32.1 14.9

Lead (kt) 2548 30.6 10.1

Nickel (kt) 345 24.9 6.0

Tin (kt) 150 39.9 18.6

Crude steel (Mt) 437 32.3 16.3

Iron ore imports (Mt) 379 48.2 15.6

At the regional level..At the regional level..• The African Heads of State and Government adopted the The African Heads of State and Government adopted the

African Mining Vision in February 2009African Mining Vision in February 2009• Over-arching objective is to create a - Over-arching objective is to create a -

“Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”

• It is seeks to integrate Africa's natural resources sector It is seeks to integrate Africa's natural resources sector into continent's social and economic development thruinto continent's social and economic development thru– Value addition to mineral productsValue addition to mineral products– Social and economic Infrastructure developmentSocial and economic Infrastructure development– Transparency and equityTransparency and equity– Building human and institutional capacitiesBuilding human and institutional capacities


At the regional level..At the regional level..• ECA and AUC created an international study group to

explore how Africa’s mineral regimes can transform mining into a broad economic development tool

• Work of the ISG group is complete and an analytical framework report compiled

• Report being edited prior to printing• An action plan is also being developed for implementing

the vision• The action plan and ISG report will be considered by the

African Ministers of Mining in September 2011


Main findings of ISG Report: • Exploit current global competition and resource glut by

encouraging contracts that promote development• Strengthen environmental and social practice through

greater local and community participation – explore legislated CSR to provide certainty and uniformity

• Improve revenue transparency, sharing and use on developmental projects through improved governance eg EITI, EITI++

• Improve use of tax instruments, especially strategic use of royalties and resource rents


• Explore use of price discovery instruments eg auctions to include development objectives – for ex infrastructure and economic linkage development

• In optimizing mineral linkages, pay attention to collateral economic and social use to promote integrated spatial resource use

• Strengthen institutional capacities to manage mineral sector especially in tax structuring, contract negotiations, value chain auditing, monitoring transfer pricing, etc

• Encourage regional cooperation to share developmental capacities eg developing regional economic and social infrastructure


At the sub regional level..At the sub regional level..• RECs are harmonizing their mining policies and codes• SADC has developed and is implementing a framework

for Harmonizing Mining Policies• ECOWAS has also adopted a draft ECOWAS Directive

on Harmonization of Guiding Principles and Policies in the Mining sector

• These efforts aimed at sharing capacities for mineral development

• RECs are also the implementation vehicles for the AMV


At the national level..At the national level..• A number of African countries are rewriting their mining

codes (DRC, Ghana, Namibia, Tanzania, Zambia, etc) • New codes seek to improve competitiveness of mining

sector to private sector investment• More important, new codes also seek to re-negotiate

fiscal aspects of mineral contracts which are seen as unfair (eg Tanzania, Zambia)

• CSR issues are also being strengthened - issue is whether CSR should be mandatory of discretional

• New codes also seek to strengthen public participation especially by communities affected by mining


• Mineral regulatory regimes continue to be ineffective in promoting broader social and economic inclusion

• The mineral sector is not integrated in domestic economies, still commodity export oriented. Need to emphasize local content and value addition

• Human and Institutional capacities are very weak – promote more capacity building programmes eg in contract negotiations, tax structuring, value chain auditing to check transfer pricing

• Implementing of environmental and social responsibilities is weak. This needs strengthening

• Small scale and artisanal mining is not making its full contribution – this needs institutional support in a number of areas.

• Mainstreaming AMV into national mineral development regimes

Challenges in mining

Thank You

7th Session of the Committee on Trade, Regional Cooperation and Integration2 - 3 June 2011

Addis Ababa, Ethiopia

Documents

Developments in Infrastructure and Natural Resources 7th Session of the Committee on Regional Integration and Trade 2 - 3 June 2011 Addis Ababa, Ethiopia