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Infrastructure Development and Financing in SADC

Infrastructure Development and Financing in SADC

Policy Spotlight: Regional Infrastructure Development Master Plan in SADC

Infrastructure development is a leading priority for the SADC region. Investments in Infrastructure encourage regional integration and allow the regional economic community (REC) to competitively participate in the global economy, assisting countries to address unemployment, inequality and poverty. As a result, the SADC RIDMP was created and implemented to facilitate the expansion and improvement of infrastructure of a few key sectors, including transport (rail and road), tourism (border structures) and energy. However, without adequate financing to invest in the identified sectors, the SADC RIDMP has very little purpose.

SADC is particularly challenged by an infrastructure deficit – an inability to meet infrastructure demand – and attracting investment in infrastructure development. Not to mention the region’s generally dilapidated and ineffective infrastructure, which necessitates a strong commitment toward infrastructure maintenance and investment. With financial assistance from the EU and the German development bank, Gesellschaftfür Internationale Zusammenarbeit, SADC employed a ‘trade for development’ approach to infrastructure, and established the SADC PPDF.

The SADC PPDF is housed and administered by the DBSA[34]. The main objective of the SADC PPDF is to finance infrastructure related project preparation and development, to bankability phase. The SADC PPDF identifies bankable ventures with high developmental impact, worth more than USD 250,000.0 for donors[35]. In the early stages, the facility receives applications for projects, and conducts various exercises preparing the projects for investment. The PPDF’s mandate is to advance regional integration for the benefit of all SADC citizens. In compliance with the RIDMP, PPDF funding is accessible to SADC member states and multilateral institutions within the region. In light of this, the private sector is not eligible for PPDF funding, unless granted permission from the member states they intend to operate in. A letter of approval from the said member states, together with a PPP is required for projects involving the private sector[36]. Preference is almost always given to proposals that advance priority areas identified in the RIDMP, which are further analysed by the DBSA for submission, pending approval from the PPDF Steering Committee[37].

The SADC region recognises the importance of infrastructure development and investment for economic growth. SADC Member states also acknowledge the role of governments in maintaining conducive, incentivised and investor-friendly national and regional economies. Consequently, infrastructure investment requires the alignment of national and regional political and economic interests to achieve optimum solutions, especially given the regional and cross-border nature of most infrastructure development projects. This is highlighted in the RISDP which was adopted in 2003 and revised in April 2015[38].

The revised RISDP, provides the long-term vision for the SADC community and what they need to achieve by 2050, in order to direct the pace, manner and form of regional integration within the REC. The RISDP concentrates its efforts on the implementation of diverse programmes, in pursuit of its goals of socio-economic development and alleviation of poverty, with infrastructure support as one of its leading priorities[39].

Moreover, SADC member states embark on regular legal exercises to harmonise infrastructure investment regimes, and initiate incentives to attract investors into the region. This is the primary function of the SADC Infrastructure and Services Directorate, which is also supported by the SADC Model Bi-lateral Investment Treaty and Investor-State Dispute Settlement. Although political instability, climate change concerns and security risks, among others, are the chief concerns propagating mixed responses for infrastructure investment in the SADC region. This has not deterred a number of investment projects attracted through tax incentives and domestic development plans, in line with the SADC Protocol on Finance and Investment and the RISDP[40].

As the infrastructure needs of the SADC community increase, and the infrastructure deficit gap widens, the region increasingly relies on PPPs. Contradictions in some of the conditionalities attached to project finance, loans and grants from multilateral and development financing institutions; such as the World Bank, International Monetary Fund, and European Donor Organisations, place national governments under increasingly precarious conditions. Although donor funding alleviates fiscal pressure on national governments, their conditionalities and proposed policies risk jeopardising national development at the expense of investor confidence.

For instance, several proposals that governments with unsustainable public deficits should embark on austerity or fiscal consolidation measures contradicts conventional economic thought; that governments should always follow counter-cyclical fiscal policy which necessitates higher public expenditure to support aggregate demand in the context of slow economic growth. This is a common challenge faced by SADC governments, particularly in the current period of low commodity prices and severe weather deterioration, which affect growth prospects for most African economies due to their structural dependency on commodity and agricultural exports. Hence the increasing reliance on PPPs, as national governments can bypass donor funding, if they successfully mobilise domestic resources.

Despite these challenges and prospects, SADC member states have committed themselves to continuously advance strategies that enhance regional integration efforts. Given the diversity of opportunities in the region; the outlook of infrastructure investment is positive. However, future infrastructure development will rely on the level of coordination and cooperation amongst all relevant parties, including the participation of civil society, public, private or multilateral stakeholders.

By Tafadzwa Mahubaba


[34] SADCPPDF 2016a. Project Preparation and Development Facility, on the Southern African Development Community Project Preparation and Development Facility Website, viewed on 13 February 2017, from https://www.sadcppdf.org/.
[35] SADCPPDF 2016a. Project Preparation and Development Facility, ibid; SADC 2012a. Project Preparation and Development Facility, on the Southern African Development Community Website, viewed on 21 January 2017, from https://www.sadc.int/.
[36] SADCPPDF 2016b. Eligible Entities, on the Southern African Development Community Project Preparation and Development Facility Website, viewed on 13 February 2017, from https://www.sadcppdf.org/.
[37] SADCPPDF 2016c. Assessment Criteria, on the Southern African Development Community Project Preparation and Development Facility Website, viewed on 13 February 2017, from http://www.sadcppdf.org/.
[38] SADC 2012b. Foreign Direct Investment, on the Southern African Development Community Website, viewed on 21 January 2017, from http://www.sadc.int/; Barlow, B. 2015. The Southern African Development Community: IV – Recent Developments in the Economic Programme, on the Helen Suzman Foundation Website, viewed on 13 February 2017, from http://hsf.org.za/.
[39] SADC 2012c. Regional Indicative Strategic Development Plan, on the Southern African Development Community Website, viewed on 8 February 2017, from http://www.sadc.int/.
[40] SADC 2012d. Investment, on the Southern African Development Community Website, viewed on 8 February 2017, from http://www.sadc.int/.

 

 

The March 2017 issue focuses on infrastructure and investment in SADC – What are the infrastructure and investment trends within SADC? what are the key institutions driving infrastructure development and investment? how do we evaluate their impact on regional development? infrastructure bottlenecks in the region? The PESA Regional Integration Monitor, Mar 2017 examines these questions.

Serge Basingene Hadisi

Serge is a Senior Analyst at PESA.

Siyaduma Biniza

Siya is the Executive Director at PESA.

Michelle Livie

Trevor Mbedzi

Tafadzwa Mahubaba

Grace Nsomba

Serge Basingene Hadisi

Siyaduma Biniza

Michelle Livie

Trevor Mbedzi

Tafadzwa Mahubaba

Grace Nsomba

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