Since colonialism was largely motivated by economic exploitation of land, minerals and raw materials to catalyse the expansion of capitalism and European industrialism; most colonies were forced to grow one or two cash crops which resulted in neglecting food production and import-substitution[1]. In addition, European expatriate firms were encouraged to export natural resources, repatriate all surplus capital, and given unlimited opportunities to import manufactured goods from the metropolitan countries[2]. This resulted in little, or no, investment in Africa during colonialism and in the exclusion of the majority of Africans from all direct economic and trade activities.
In the absence of post-colonial violence, this infrastructure deficit is the most persistent and severe challenge faced by post-colonial African governments. Even in South Africa, which attained independence from colonial influence in 1910, the Apartheid programme of separate development has resulted in infrastructure deficits in most African communities, particularly townships and the former Bantustans. So how are African governments dealing with this infrastructure deficit and what policies are in place in the SADC region?
African countries are now the beneficiaries of various forms of infrastructure and investment finance, predominantly from foreign sources. Due to poorly developed domestic financial markets, many African countries rely on foreign or donor finance for infrastructure investment. Foreign institutions engaged in infrastructure investment in Africa can be characterised as follows:
- Sovereign Development Finance Institutions and Concessional Lending Banks, including: US Agency for International Development, UK Department for International Development, Kreditanstalt für Wiederaufbau (KfW), Japan International Cooperation Agency, Asian Infrastructure Investment Bank;
- Private Banks, including: JP Morgan, HSBC, Deutsche Bank;
- Multilateral Institutions, including: The International Monetary Fund, World Bank, European Union (EU), African Development Bank (AfDB); and
- Multinational Companies, whereby a plethora of companies invest across different sectors but mostly through Public-Private Partnerships (PPPs).
Currently in SADC, only a few countries can sustainably rely on domestic sources of infrastructure finance. Therefore, most governments approach foreign financial institutions for funding toward government investment programmes. Most countries maintain a system of incentives such as a set of targeted and strategic industrial and trade policies to attract foreign direct investment (FDI) from multinational companies. In addition, most governments implement fiscal and monetary policies to absorb external economic shocks and to maintain enticing macroeconomic conditions to attract development finance from sovereign development finance institutions, concessional lending banks, and multilateral institutions as part of a broad national development plan.
Table 1: SADC Investment and Infrastructure Development Snapshot
Source: UNCTAD 2016. UNCTADStat Database, ibid.; AfDB 2016a. Africa Infrastructure Development Index 2016, African Development Bank: Abidjan. Available At: https://www.afdb.org/ [Last Accessed: 14 March 2017]; IMF 2017a. World Economic Outlook Database, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 14 March 2017].
In SADC, countries that have been the most attractive to foreign multinational companies include Angola, Mozambique, South Africa, Zambia, and Namibia[3]. Most of the investment has been in extractive industries and agriculture, which is partly a legacy of colonialism and due to structural constraints in most African economies. In some cases, countries receive development finance that is negotiated at a bilateral level and administered by the government. Typically, governments would work through national departments to facilitate and administer the development finance depending on how it is earmarked and disbursed.
At a regional level, SADC countries have a Regional Indicative Strategic Development Plan (RISDP) which provides the main framework for integration. The RISDP’s key areas of regional cooperation and integration include: politics, defence and security, trade & economic integration, infrastructure development, food security, natural resources, social and human development, and cross-cutting areas like gender, HIV/Aids and environment. Most notably, under the infrastructure development sectors prioritised are energy, tourism, meteorology, ICT, transport, water and sanitation, and maritime, ports and inland Waterways. Investment on infrastructure, particularly transport, is vital for SADC trade activity, and has been the largest attraction of FDI in Angola, South Africa, and Mozambique. FDI in the region has been volatile, partly due to difficult business environments and lacking or poor infrastructure availability.
To fast-track regional infrastructure development, the SADC Project Preparation and Development Facility (PPDF) was introduced. The PPDF was introduced particularly to finance projects in the transport, energy, ICT, water and sanitation, and tourism related infrastructure sectors[4]. The PPDF is managed by Development Bank of Southern Africa (DBSA) and has so far allocated preparation funding to the tune of USD 3.5 million towards the development of the multi-country Regional Interconnector Transmission Line Project[5]. The Project, which will benefit Mozambique, Zimbabwe and South Africa, is expected to create a conducive environment for investment in the region. Financial contribution from the German government through the KfW as well as the EU through its regional office in Gaborone will play a huge role in the success of the PPDF in the region.
The region has made significant strides in terms of regional infrastructure development and have included private investors. Dedicated national road agencies have led to transport infrastructure being more established than other infrastructure sectors in the region. In particular, the three primary corridors (the North-South Corridor, the Maputo Corridor, and the Dar-es-Salaam Corridor) are the focus of most development. However, challenges persist as funding and technical capacity are still lacking. Efforts have been made to attract private investors and a SADC Public Private Partnership Network was introduced to facilitate project development and act as an advisory hub in the region. Infrastructure development needs to be prioritised in order to attract the level of investor attention worthy of the region. Weak infrastructure has long been cited as the reason for relatively low levels of investment, the region has responded to address this, but there is certainly still more to be done.
By Trevor Mbedzi
[1] Boahen, A. A. 1987. African Perspectives on Colonialism, John Hopkins University Press: Baltimore.
[2] Rodney, W. 1973. How Europe Underdeveloped Africa, Bogle-L’Ouverture Publications & Tanzanian Publishing House: London and Dar es Salaam. Available At: http://abahlali.org/ [Last Viewed: 16 February 2017]; Boahen, A. A. 1987. African Perspectives on Colonialism, ibid.
[3] UNCTAD 2016. World Investment Report 2016: Investor Nationality – Policy Challenges, United Nations Conference on Trade and Development: Geneva. Available At: http://unctad.org/ [Last Accessed: 21 February 2017].
[4] SADCPPDF 2017. About the PPDF, on the SADC Project Preparation and Development Facility Website, from http://www.sadcppdf.org/ [Last Accessed: 22 February 2017].
[5] SADCPPDF 2017. About the PPDF, ibid.
