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Friday, 27 July 2018 12:44

SADC’s infrastructure challenges: Time to switch to a regional funding model?

Written by  Chelsea Markowitz and Ali Parry

Ambitious plans have been formulated in recent years to put the African continent onto a more sustainable economic development path, with industrialisation as the focal point.

Widely recognised as a stimulant to economic growth and a catalyst for poverty alleviation because of its job creation potential, industrialisation lies at the heart of most African countries’ economic development plans. Building competitive industries, including making use of modern technologies, is in turn heavily dependent on efficient infrastructure. In fact, an explicit objective of the 2030 Development Agenda as articulated in the Sustainable Development Goals (SDGs) is to enhance infrastructure in ways that help to alleviate poverty and narrow economic divisions in society, while ensuring environmental and social responsibility.

The African Development Bank (AfDB) has estimated that the continent’s infrastructure development needs amount to between $130 billion and $170 billion each year. Yet there is an annual funding shortfall of between $67 billion and $107 billion, which means that many of the envisaged projects either do not materialise at all or are poorly implemented. Most African countries are grappling with sluggish domestic economies, rising debt levels, climate change and the cost pressures of rapid urbanisation.

The need for rapid infrastructure development in Africa is a given, but how are African countries to overcome their financial and capacity shortcomings in this arena? Should the response to these problems be international, regional, or both?

From an African perspective, the overarching development strategy for the continent is the AU Agenda 2063, which incorporates two infrastructure-related initiatives: the Action Plan for the Accelerated Industrial Development of Africa (AIDA) (published in 2008) and the Programme for Infrastructure Development in Africa (PIDA) (launched in 2010).

In reaction to the challenges associated with driving stronger economic performance at a regional level ‒ particularly through industrialisation and infrastructure development – the SADC Heads of State adopted the SADC Regional Infrastructure Development Master Plan (RIDMP) in 2012 and the SADC Industrialisation Strategy and Roadmap in 2015, with the latter aimed at boosting economic growth, high technology usage, value-added manufacturing and industrial employment in the region. The RIDMP is generally aligned to PIDA and will, according to the SADC Secretariat, help to consolidate the SADC Free Trade Area and the COMESA-EAC-SADC Tripartite Grand Free Trade Area.

The RIDMP’s estimated capital requirement is a hefty $500 billion, which needs to be found if the Plan is to be rolled out. With this in mind, SADC member states agreed to set up a Regional Development Fund (RDF) (first conceived of in the 1992 SADC Treaty) to mobilise resources primarily from member states, but also from development partners and the private sector. In 2017 a decision was taken to operationalise the RDF, which hinges on approximately $1 billion in initial seed funding being made available. Once operationalised, the RDF will provide financial support for the implementation of various RIDMP-linked infrastructure projects, while also helping countries to forge ahead with their economic integration and industrial and social development initiatives. High up on the SADC industrialisation agenda is the need to develop regional value chains to promote stronger intra-regional trade. In view of this, the development of cross-border regional infrastructure is a major priority.

In our next blog, we will look at SADC’s infrastructure needs in more detail and determine where the RDF can be most effective as a vehicle for tackling the region’s infrastructure deficit.

Authors: Chelsea Markowitz and Ali Parry