I came out of a fascinating session at the WEF led by the Boston Consulting Group and the Development Bank of Southern Africa (DBSA) titled “Driving Towards Implementation Accelerating Infrastructure along the North-South Corridor”. This effort was a response to the challenge issued by President Zuma and several leaders at last year’s WEF that the time for talk was over and it’s now time for action! Several prominent public and private sector leaders were brought together to discuss the results of the North-South Corridor initiative , the on-going implementation challenges they were experiencing, and potential solutions to be explored.
The North-South Corridor was selected as a pilot due to the current enabling environment that allowed for the various countries to work together on a joint initiative. It began with a high-level assessment of projects that could operationalize the North-South corridor. Prioritization was key as all the projects could not be implemented at the same time. The projects needed to demonstrate that they would integrate the African continent and ensure connectivity. They also needed to display additional characteristics such as rapid implementation and bankability by the private sector. Different highway, bridge and railroad projects where thus prioritized, selected and rolled out in this manner. Several key lessons learned emerged as the speakers and audience members discussed the on-going challenges and proposed solutions that could be implemented.
The need for co-ordination emerged as a major challenge, particularly co-ordination between the various pre-existing government agencies and the newly formed bilateral groups. The initiatives are cross-regional and are led by bilateral groups with similar visions. However to implement the projects meant interactions with pre-existing institutions present in each country – The ministry of public road and transportation for instance. Each bilateral country has their own pre-existing ministry with their own visions and processes which were not designed to be ‘regional’ in nature. Hence co-ordination between bilateral teams and national institutions presented a challenge. A proposed solution was to bring all stakeholders to the table up-front and clarify roles and responsibilities. Another solution was to consider forming SPV’s that are bilateral in nature and are permitted to implement cross-regionally.
Bankability and the role of the private sector:
Bankability in this context refers to the ability for projects to be structured in such a way that it can attract private sector financing. This is currently a challenge as not enough projects are seen as attractive by the private sector. The issue of bankability also led to the question of the role of the private sector. Could the profit-driven private sector be brought in early into projects that may not result in early or sizeable dividends? The answer was yes as long as roles and responsibilities where clarified upfront, and the expectations on ROI and timing were clearly defined.
In order for projects to be bankable for the private sector, they needed to demonstrate key characteristics such as transparency, consistency, accountability and measurability. The private sector is largely driven by ROI objectives which vary from the public sector development impact objectives with its inherent multiplier effect. (ROI however contribute to taxable income and jobs for countries).
Due to these objectives, the private sectors role in the upfront financial leadership of these projects is quite limited. However there are roles that the private sector can play particularly in providing technical and capacity leadership. By bringing the private sector early in the discussions, the private sector can use their technical skill-sets to help structure projects that they can finance down the road – thus ensuring bankability!
For true regional Public Private Partnerships (PPP) to work, it will be important for individual governments to compromise on their sovereignty. Consistency across the regions involved will need to be established so that procurement rules can be carried consistently across borders. Governments particularly have a role to play in terms of leadership with Rwanda’s President Kagame serving as an ideal example. Where there is decisive leadership then the society can move forward. This leadership is needed if the acceleration of infrastructure in Africa objectives is to be achieved.
As Euvin Naidoo – a partner at BCG and the session co-ordinator rightfully pointed out, “Trust = Speed”. For the acceleration of these cross regional projects to take place, a greater level of trust must exist amongst the various stakeholders. One way to establish this is communication; bring everyone to the table to harsh out the issues upfront. Not only does this allow for everyone’s voice to be heard in the establishment of the ideal PPP structure, but it also builds greater accountability and trust in the process, which ultimately will speed up the cross-regional dialogue and project implementation.
I will end with this Chinese quote that one of the leaders mentioned and which for me embodies the true spirit of the collaboration required for successful regional infrastructure integration – “It doesn’t matter if the cat is black or white, as long as it catches the mouse”.