Discussions
Operationalising the SADC Regional Infrastructure Development Master Plan
William Mwanza, tralac Researcher, comments on the implementation of the RIDMP in the context of the Short Term Action Plan, highlighting areas where continued efforts are needed
There is a renewed sense of optimism in the Southern African Development Community (SADC) region, with the implementation of its Regional Infrastructure Development Master Plan (RIDMP). Launched at the SADC Summit held in Luanda, Angola in August, 2012, the RIDMP is an ambitious programme that provides a framework for cooperation between and among member States, in the joint preparation and implementation of infrastructure projects in the areas of energy, transport, information and communication technology (ICT), meteorology, water, and tourism. In spite of some progress in developing infrastructure in some areas, this plan represents a bold step towards addressing the infrastructural deficiencies that currently exist in the region, estimated by the World Bank at US$31 billion a year Africa-wide. It is envisaged that the plan would be implemented over three phases: the short term (2012-2017); medium term (2018-2022); and the long term (2023-2027). The importance of this plan cannot be overemphasised. As deficiencies in infrastructure arguably constitute the most critical bottleneck to the regional integration process in Southern Africa, improvements in the region’s infrastructure will go a long way in deepening regional integration in the region by enhancing production and output, and providing more enhanced connectivity for the freer and more effective flow of goods and services throughout the region, and beyond.
In line with this ambitious vision, a SADC Regional Infrastructure Investment Conference was held in Maputo, Mozambique, under the theme “Accelerating Investment in SADC Infrastructure through Sustainable and Innovative Financing”. One of the main objectives of the Conference was to present the SADC RIDMP, particularly the short-term action plan, to potential investors, infrastructure financiers and key development partners. The Conference has come at an opportune time. As we are now one year into implementation of the RIDMP, it has provided a chance to look again at the short term action plan (STAP) designed to guide implementation of projects in phase 1 of the programme. Focus is here laid on certain important aspects of the STAP itself, particularly project preparation and implementation; financing of individually identified projects; and the requirement for enhanced institutional capacity and coordination at all levels.
The STAP
As alluded to above, the short term action plan of the RIDMP lays out projects in the six focus areas that would be implemented between 2012 and 2017. In comparing the current status of the projects as presented in Maputo against the STAP as adopted in Luanda in 2012, one notes that there has been little or no progress in the various projects. Whether this is the actual prevailing situation or points at gaps in monitoring and reporting is not entirely clear at this point. An important feature of the revised STAP, however, is that a number of new transport projects have been included in respect of Tanzania, Swaziland, South Africa and Mozambique. This aspect addresses any prior concerns there may have been of a static RIDMP, where projects are only implemented in three cast-in-stone phases. Projects that will bring about an extremely solid interconnectedness of the region will continue to be identified and planned for. The long lead times of (hard) infrastructural projects mean even though implementation of certain projects may commence in one phase, it is not certain that they would be completed in the same phase. Hence it makes sense to have the RIDMP as a rolling plan, as initially envisaged, and to develop and add as many projects as will be required to have an effectively interconnected SADC region, along the way. That said, a lot of effort would still need to be put into the implementation of phase 1 projects, as this will determine attainment of the set milestones, and indeed the momentum of the overall programme. Considering these a bit more closely, it would seem that, save for a few projects that have secured financing (sometimes covering only the portion of a project in one partner country), most of the projects outlined are at feasibility or pre-feasibility study phase. The need for urgently bringing these up to bankability is therefore greatly apparent. One institutional mechanism that is planned for this endeavour, and has since been approved by the SADC Summit, is the SADC Project Preparation and Development Facility (PPDF), which will be anchored on the RIDMP’s dynamic GIS database. While there has been some progress in its establishment, it is imperative that the operations of the PPDF in bringing the projects to bankability stage be embarked on as soon as possible.
Financing
The prior suggestion of including as many projects in the RIDMP so as to greatly enhance connectivity of the region immediately brings up the question of financing of the different projects.
The current costs associated with the different projects are largely estimates, and peg the STAP at US$63.95 billion. Some clarifications on the project costs have seen this figure revised from US$64.15 billion at initial adoption in 2012, in spite of the additional transport projects that have added an amount of about US$2.8 billion. Without being bogged down in the mathematical details, one thing is clear from the figures of the STAP, and the projected figure of up to US$558.1 billion for the overall programme. These are enormous figures, and will require an enormous injection of financing to realise them. Where such financing will come from is a question that continues to be considered.
SADC Governments themselves are naturally the first providers of such financing and this is well acknowledged in the RIDMP. However, it is also acknowledged that these Governments are mostly faced with tight socio-economic choices based on the scarce resources they have. One would add that this is not helped by political economy considerations that accompany the long lead times of (hard) infrastructure projects, where for example projects with shorter implementation timespans seem more appealing and suited to election intervals. Joint preparation and implementation of projects under the RIDMP is a positive step that SADC Governments have taken in seeking to overcome some of these challenges by harnessing their efforts, including pooling potential sources of finance. Apart from public resources therefore, it has been said that the RIDMP will largely depend on public-private partnerships (PPPs). Some development partners such as the African Development Bank, World Bank, KfW Development Bank, Department for International Development (DfID) and Japan International Cooperation Agency (JICA), are already supporting various projects and different aspects of the RIDMP. The Conference in Maputo also represented a step in trying to reach out to potential investors and partners, in a more coherent way. A report on the Conference is due to be presented at the SADC Summit to be held in Lilongwe, Malawi, this coming month, and it will be interesting to note the progress in financing that the Conference was able to deliver.
The theme of the Conference itself was timely. It highlighted the recognition for ensuring sustainable and innovative financing of RIDMP endeavours. In addition to direct private sector investment in some of the projects where economically viable to do so, one further example of sustainable financing, whose place is not entirely clear from the current record of the Maputo Conference, is the proposed SADC Regional Development Fund (RDF). Among others, this proposed Fund would have an infrastructure window that would provide financial support for regional infrastructure projects, particularly within the framework of the RIDMP. It is reported that several meetings of the SADC Committee of Ministers of Finance and Investment (COMFI) have been held since 2012, and have considered various operational aspects of the proposed Fund. It will also be interesting to note progress of the Fund as will be presented to the Summit. Regardless of the proposed structure and progress to date, however, what will arguably be the main issue to consider by SADC Member States will be capitalisation of the Fund. The seed capital currently proposed is US$1.2 billion, with the shareholding proposed to be between Member States, the private sector and Cooperating Partners. As will be noted, this figure is far below the estimated cost of even just the phase 1 projects.
In terms of innovation in the approach to financing, it would be interesting to monitor the extent to which Zambia’s new-found approach to funding infrastructural projects by offering international bonds of up to US$750 million could be replicated in other SADC countries. Of course subject to variations in credit ratings and macroeconomic stability of the different countries among other factors, the four-time oversubscription of Tanzania’s offer of US$600 million in international bonds in March, 2013, and plans by Angola to also follow suit, signals the strong potential of this avenue of raising finance to boost implementation of infrastructural projects in the SADC region.
Overall, it is clear that the current and prospective sources of financing for the RIDMP are quite varied. Much as the SADC Secretariat was instrumental in facilitating the Maputo Conference, it would seem at this point that the sourcing of financing is still being pursued independently by respective SADC Governments. The RIDMP does not seem to have a comprehensive financing model or strategy in place, which streamlines the different sources and actors into effective financing arrangements. It is imperative that such a model or strategy be formulated to complement the PPDF, so as to ensure that bankable projects so developed are then met with well-coordinated and effective financing.
Institutional capacity and coordination
Given the intrinsically interconnected nature of the RIDMP and the number of various players involved, it is clear that the success of the programme will depend largely on sustainable and effective institutional coordination at various levels, not only between partner Governments, but also with and by the various actors. Further, institutional coordination will be required not only within the RIDMP process, but also with other areas within the broader SADC regional integration agenda. For example, since it is really the services that will emanate from the developed infrastructure that will be important, there would be need for effectively managing the interface between the RIDMP process and the SADC trade in services agenda, so as to ensure enhanced integration and competitiveness.
One of the main conclusions of the Maputo Conference was the need to develop integrated solutions and establish institutions for implementation of the projects. Financing has been discussed at quite some length, but even here one aspect of particular interest will be the streamlining of SADC’s development finance institutional framework into the RIDMP process. Two components of this system have so far been discussed, namely the SADC PPDF and RDF. Other components (with their associated duties) include the SADC Development Finance Resource Centre (DFRC), for capacity building, advisory services and policy support; the SADC Development Finance Institution (DFI) Network, for cooperation on regional and in-country project financing and resource mobilisation; and the SADC Public Private Partnership (PPP) Network, for promotion of PPPs as an investment instrument. These are all subsidiary institutions of SADC and their prominence in taking forward the RIDMP process is not very clear at this stage. It will be interesting to see the extent to which SADC Governments will harness their support for these institutions, either directly or through development partners, and coordinate so as to keep effectively streamlining their activities for optimal benefits in the RIDMP process. This represents another important issue that would have be factored into any comprehensive financing model or strategy.
Whatever the approach that will be chosen, technical capacity within SADC Governments to facilitate all the intricacies of the different project cycles, involving different actors, in the different areas of RIDMP focus, is of vital importance. In addition to policy and regulatory harmonisation (important for cross-agenda interaction with trade in services for example), enhanced technical capacity has been seen as the second main building block to facilitate progress on preparation, financing, and implementation of the projects. It was hence rightly identified as one of the important endeavours of phase 1 of the RIDMP. Institutional projects in the STAP that include capacity building aspects have been provided for in only four of the six focus areas, namely transport, ICT, meteorology and water, although these are still all at the conceptual stage. There will be value in extending these to the energy and tourism sectors. Given that they are also among the least cost projects in all the sectors, there will also be great value in promptly investing in these, so as to build on existing capacity, and expedite the realisation of benefits of such enhanced capacity vis-à-vis input into the RIDMP process.
All in all, what is clear is that though there are continued efforts in some specific aspects, the RIDMP train has started moving, albeit at a slow pace. On the particular issue of infrastructural development, the work for the upcoming SADC Summit is all cut out. Clear proactive agreement on some of the important issues highlighted will be essential for giving the RIDMP process some much needed impetus.
Sources:
Documents and presentations
SADC Infrastructure Investment Conference 2013 (Summary and Way Forward). Available online at: http://www.sadc.int/documents-publications/show/2106
SADC Regional Development Fund Operationalisation: An update. Available online at: http://www.sadc-dfrc.org/sites/default/files/kufeni_forum_zambia2013.pdf
SADC Regional Infrastructure Development Master Plan (Executive Summary). Available online at: http://www.tralac.org/images/Resources/SADC/RIDMP%20Executive%20Summary.pdf
SADC RIDMP short-term action plan (Revised Annexure II)
SADC-DFRC Newletter, Issue 6, June, 2013. Available online at: http://www.sadc-dfrc.org/sites/default/files/newsletter_june_2013.pdf
Online articles
http://www.trademarksa.org/news/us100-bn-needed-sadc-projects
http://www.trademarksa.org/about_us/programme_news/tmsa-supports-sadc-regional-infrastructure-investment-conference