Strategic and practical imperatives for building Africa’s infrastructure

November 2019  |  EXPERT BRIEFING  |  SECTOR ANALYSIS

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Africa’s future is tied closely to its ability to trade and create opportunities for economic investment. This clearly needs infrastructure investments and improvements to be prioritised, opening the doors and smoothing the passage of people, material, energy and communication.

That such infrastructural development has not advanced fast enough is a sign of both strategic and practical challenges, despite positive intent by most stakeholders. The objectives identified by regional bodies such as the Southern African Development Community (SADC) certainly point the way to a more prosperous future. These goals include market integration, macroeconomic convergence and the strengthening of financial and capital markets; they will be important steps forward, as will be deeper monetary cooperation and enhanced competitiveness within its member countries.

But it is widely recognised that a lack of ability to deliver key infrastructure services, such as water, transportation, gas, telecommunication and power, is frustrating these objectives, and generally restricting development and growth. It is encouraging that the African Union – through its official development agency, the New Partnership for Africa’s Development (NEPAD) – is focusing on investments in infrastructure development to promote economic growth and integration. This is being influenced by the ambitions and expectations of countries such as China, which has played a leading role in boosting foreign direct investment (FDI) into the continent.

There are various factors that make the process of planning, building and maintaining infrastructure in Africa very challenging. At the highest level, the right political climate is vital, as levels of stability and political will can be dealmakers or dealbreakers. The agenda of global powers can be either a help or a hinderance. Corruption within the system – particularly within the implementing bureaucracies and their contractors – has the effect of depressing the level of efficiency at best, and frustrating entire processes at worst.

Sources of funding or finance are often difficult to secure, and both planning and implementation can suffer from a lack of capacity, frequently emanating from a shortage of specific skills and experience. This has led to public-private partnerships (PPPs) becoming more prominent in Africa, as a strategy demonstrating both sectors’ buy-in and commitment at national and local levels. The remote location of many infrastructural projects, and the resulting logistical demands, adds to the difficulty of researching and rolling out the necessary developments. Importantly, this remote locality also tends to retard the efficient maintenance of infrastructure.

Against this challenging background, however, there are strategic imperatives that can improve the likelihood of success of an infrastructure project. For instance, it is important to align the development objectives of African countries and regional structures with the objectives of major developers and investors. Trade-offs will no doubt be required, but it is vital that the decisions and investments should support regional and national interests. Also, determining the need for an infrastructure project should be based on objectives, rather than solely on political choice or leverage. This helps to avoid unrealistic future goals or even complete ‘white elephants’ with little social and economic value, as this tends to undermine investor confidence.

Clarity and purpose in a project can help create a solid foundation on which a practical and systematic feasibility study process can be initiated. Such a process – which advances from concept stage into pre-feasibility and feasibility stages before becoming detailed – is vital but frequently lacking. All too often, infrastructure projects move from concept to detailed phase, undermining both the search for financing and the overall sustainability of the project. Ideally, this preparation should include an operational feasibility with attention paid to maintenance planning, as well as a technical feasibility, economic feasibility and schedule feasibility. A vital component is also environmental and social sustainability, which is an issue that funders focus on in their risk assessments. Value engineering tends to be lost if these steps are not followed.

The large international funders of infrastructural projects generally have demanding lending criteria based on global best practice. These organisations include the African Development Bank, the International Finance Corporation and the World Bank. Their stringent requirements draw on decades of experience in the various risks that can derail infrastructural initiatives. The terms on which they lend are also guided by the growing importance of issues related to environmental, social and economic impact.

These funders prioritise aspects like proper planning, permitting and cost efficiency in a project. They examine how the project plans to deal with social licence issues, with resettlement being a particularly sensitive area. The effects of climate change on Africa, and its impact on specific projects, are also on their agenda. Climate change is today one of the key cross-cutting issues that funders will want addressed by proponents of infrastructure projects. In addition, they stress the importance of independent due diligence reviews and reporting; it is vital that third-party experts – who do not have any vested interest in the project – give their professional view on all aspects, to confirm the veracity of the technical studies and plans.

A key challenge of project development in Africa is that the process and content often do not align with the requirements of international funders. It is therefore useful to involve funders early in the project development process. If project risks are not addressed to the satisfaction of the potential funders, achieving bankability becomes difficult. This becomes highly disruptive to the project, leading to delays in implementation or even the shelving of the project.

This can be avoided by taking a systematic approach to infrastructural projects and setting out a clear process through the stages of initiation, planning, execution, monitoring and control, and closure. Planning and budgeting for maintenance is also important. In the initiation stage, the project’s value and feasibility are measured. This includes the feasibility elements – where the project’s goals, timeline and costs are assessed to determine if the project should be executed. It balances the requirements of the project with available resources, ensuring that there is a business case and that it makes sense to pursue the project.

The planning stage should then be guided by a project plan with a detailed schedule and budget; this sets out guidance for obtaining resources, acquiring financing and procuring the required materials. It gives the project team direction for achieving quality outputs while managing risk, creating acceptance and dealing with obstacles. It also outlines how project benefits are communicated to stakeholders.

The plan creates the basis for the project execution stage, where project management pursues deliverables to satisfy the client. Leaders in the project team allocate resources and coordinate the team members involved in their various tasks. This generally involves a range of skills across relevant disciplines. Among the various tasks is the ongoing compliance with legal permit requirements, such as those set out in the environmental authorisation – as well as any covenants in the contracts between the funders and the project proponent or owner. Lenders will generally require independent consultants to undertake external audits of project compliance.

Monitoring, evaluation and control – throughout the whole project life cycle – have always been important in infrastructure projects. Indeed, they underpin overall project deliverables and performance milestones. However, they are most often neglected – leading to time and cost overruns as well as the potential for scope creep during project implementation, execution and operational phases.

The close-out phase of a project is as important as all the other phases. The hand-over to the client of the completed project by the lead contractor or consultant needs to include all completion documentation and drawings, so that the project can be commissioned and operated effectively. Closing out a project starts at the beginning of the project, to set up and manage the documentation that is generated during the project life cycle. Remember that once the project is closed out and commissioned, the operational phase has significant impacts on the client with regards to return on investment as well as social and environmental impacts. Effective document management control is therefore critical throughout the project’s life.

When a project reaches the end of its operational life, closure planning is required. This calls for specialised technical studies in advance, which flag the impacts of closure and set out strategies to mitigate or avoid negative impacts – while building on positive impacts for a post-closure scenario.

Despite myriad challenges, Africa has capacity to accelerate its infrastructure development. It needs to more fully embrace the demands of best practice in initiating and pursuing infrastructural projects – and it has the expertise to do this. A focus on these standards and processes will materially improve the development efforts of national, regional and continental agencies, as they work to raise living standards and attract investment.

 

Bruce Engelsman, Steve Bartels and Darryll Kilian are partners at SRK Consulting (SA). Mr Engelsman can be contacted on +27 21 659 3060 or by email: bengelsman@srk.co.za. Mr Bartels can be contacted on +27 11 441 1111 or by email: sbartels@srk.co.za. Mr Kilian can be contacted on +27 11 441 1111 or by email: dkilian@srk.co.za.


BY

Bruce Engelsman, Steve Bartels and Darryll Kilian

SRK Consulting (SA)


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