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Managing Transnational Infrastructure Programmes in Africa – Challenges and Best Practices Prepared in Collaboration with the Boston Consulting Group

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Managing Transnational Infrastructure Programmes in Africa – Challenges and Best Practices Prepared in Collaboration with the Boston Consulting Group Industry Agenda African Strategic Infrastructure Initiative Managing Transnational Infrastructure Programmes in Africa – Challenges and Best Practices Prepared in collaboration with The Boston Consulting Group May 2014 © World Economic Forum 2014 - All rights reserved. The viewpoints expressed herein attempt to reflect the collective opinion of various individuals who have contributed to the research and development of this report. They do not necessarily imply an agreed position among them or institutional endorsement by any participating company or organization involved in the work or mentioned in the report, or of the World Economic Forum. REF 060514 Contents 4 Foreword 6 Executive Summary 9 Introduction 11 Drawing Some Distinctions 11 A Matter of Terminology 12 A Classification of Transnational Infrastructure Programmes 15 Transnational Infrastructure Globally and in Africa 19 Key Challenges for Transnational Infrastructure Programme Management – and Their Specific Relevance for Africa 20 Financial Challenges 20 Technical Challenges 22 Regulatory Challenges 22 Personnel/Cultural Challenges 23 Governance-related Challenges 25 A Best Practice Framework for Transnational Infrastructure Programme Management 25 Presentation of the Framework and Overview of Best Practices 29 Institutionalized Cross-border Collaboration 32 Integrated Infrastructure Plans and Regional CBA 34 Aligned Delivery Model and Harmonized Concession Framework 34 Bankable Feasibility Study for Transnational Programmes 35 Balanced Cost, Benefit and Risk Allocation, and Harmonized Regulation 37 Competitive, Transparent Tendering and Optimal Financing Structure 38 Alignment of the Construction Process and O&M Requirements 39 Conducive Enabling Environment 41 Conclusion 43 Contributors Managing Transnational Infrastructure Programmes in Africa – Challenges and Best Practices 3 Foreword Increasingly, political leaders around the world share a and to facilitate the delivery of transnational programmes, common vision of regional integration – to open up regional such as the ones included in the PIDA PAP, on schedule, markets, link production clusters in different countries, at cost and at the right quality. These programmes can facilitate the free movement of goods, services and people, make a huge contribution to social and economic welfare and foster political stability and peace. Accordingly, a further by boosting transnational trade, connecting landlocked common ambition is to promote transnational infrastructure countries to world markets and by improving access to, and as a physical backbone of this regional integration, and security of, electricity supply by linking large power plants with initiatives are under way to give greater priority to cross- neighbouring countries. border programmes. We would like to thank the many World Economic Forum In Africa, for example, the Priority Action Plan of the Partner companies and the many organizations which have Programme for Infrastructure Development in Africa generously contributed their expertise and time as members (PIDA PAP) encompasses 51 programmes of regional of the Business Working Group: A.P. Møller-Maersk, Arup, importance in the transport, water, energy, and information ABB, Absa Capital, African Rainbow Minerals, Anglo and communications technology (ICT) sectors, with an American, AngloGold Ashanti, ArcelorMittal, BT, Development investment need of $68 billion. The aim has been to get Bank of Southern Africa, Eskom, Flour Mills of Nigeria, First these programmes implemented by 2020, but the realization Bank of Nigeria, General Electric, Industrial Development of that aim is hampered by the tremendous challenges the Cooperation of South Africa, Leighton Oando, Old Mutual, programmes face, often because more than one country Overseas Infrastructure Alliance, Prudential, Royal Philips, is involved. Although these challenges might arise in any Sasol, SNC Lavalin, Sun Group, Standard Bank, Standard region, they are particularly severe in Africa. The continent Chartered Bank, Telkom SA, Transnet, UBS, United is so heterogeneous – with 34 official languages, in addition Phosphorus, Vale, Yara, Africa Capacity Building Foundation, to a plethora of local tongues, and more than 40 currencies, International Finance Corporation, Mo Ibrahim Foundation, with great variation in the financial capacities of individual NEPAD Business Foundation, The Office of Gordon and countries. Moreover, the maturity of public institutions remains Sarah Brown, The Infrastructure Consortium for Africa and inadequate, and serious shortcomings persist in the capability The World Bank. of and capacity for managing transnational infrastructure programmes. We would like to make a special acknowledgement of the leadership provided by our Partners, African Union We are delighted to introduce this second report as part Commission, African Development Bank and NEPAD of the activities of the World Economic Forum’s Business Planning and Coordinating Agency. We thank them for their Working Group on Infrastructure in Africa. The Group genuine, relentless interest and commitment to the activities has been created in 2012 by the World Economic Forum of the Business Working Group. in partnership with the African Development Bank, the African Union Commission and the NEPAD Planning The experience, perspective and guidance of all the above and Coordinating Agency and it has been working as people and organizations substantially contributed to a a coordinated business voice to support infrastructure number of remarkable discussions at the Business Working development in Africa and in particular help accelerate the Group meetings in Johannesburg, Cape Town, Dar es Programme for Infrastructure Development in Africa (PIDA). Salaam and the World Economic Forum Annual Meeting 2014 in Davos-Klosters. PIDA was approved by the African heads of state and government at their summit in Addis Ababa, Ethiopia, in Alex Wong January 2012, signifying high-level political buy-in and Senior Director ownership of the programme. Developed by the African Head of Business Engagement (Geneva) Union Commission in partnership with the United Nations Economic Commission for Africa, African Development Bank Pedro Rodrigues de Almeida and the NEPAD Planning and Coordinating Agency, PIDA Director specifically calls for new models of partnership between Head of Infrastructure & Urban Development Industries business, government and donors to implement the 51 Priority Action Plan (PAP) infrastructure transnational projects Elsie Kanza already identified. Director Head of Africa This second report of the Business Working Group, “Managing transnational infrastructure programmes in Africa – Challenges and best practices”, identifies the key hurdles that have to be overcome. It also presents a best-practice framework to guide policy-makers, sponsors and managers, 4 African Strategic Infrastructure Initiative Executive Summary Increasingly, political leaders around the responsibilities and processes are often distributed unequally across the world share a common vision across countries, and to overcome participating countries, it is important to of regional integration – to open up national interest in staffing. In addition, conduct a regional cost-benefit analysis regional markets, link production the multicountry setting increases the (CBA) in order to establish a regional clusters in different countries, facilitate risk of (unilateral) political changes, business case. As a second step, the the free movement of goods, services and tends to delay decision processes involved governments should take an and people, and foster political stability even more. All of these challenges will aligned decision on the delivery model, and peace. Accordingly, a further vary in intensity, of course, according and should harmonize their concession common ambition is to promote to the phase, size and complexity of frameworks – ideally issuing a single transnational infrastructure as a a programme, as well as the enabling concession for the whole facility rather physical backbone of this regional environments within the countries than several concessions in each integration, and initiatives are underway involved. country. to give greater priority to cross-border programmes. In Africa, for example, the Although these challenges might arise When it comes to the programme’s Priority Action Plan of the Programme in any region, they are particularly preparation phase, a bankable feasibility for Infrastructure Development in severe in Africa. The continent is study is needed. Next, the costs, Africa (PIDA PAP) encompasses 51 so heterogeneous – with 34 official benefits and risks of the programme programmes of regional importance languages, in addition to a plethora need to be carefully allocated to the in the transportation, water, energy, of local tongues, and more than 40 involved countries. That work should and information and communications currencies, with great variation in be assigned to a strong, impartial and technology (ICT) sectors, with an the financial capacities of individual respected arbiter, such as a regional investment need of $68 billion. The aim countries. Moreover, the maturity of development bank. The arbiter would has been to get these programmes public institutions remains inadequate, also develop a detailed compensation implemented by 2020, but the and serious shortcomings persist plan for those people adversely affected realization of that aim is hampered in the capability of and
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