Developing Infrastructure to Encourage Economic Transformation: Interview with Kalilou Traoré from ECOWAS
Bridges Africa met with Kalilou Traoré, the Economic Community of West African States’ (ECOWAS) Commissioner for Industry and Private Sector Promotion
Commissioner, it is widely recognised that the lack of infrastructure is one of the most significant structural constraints hindering the African continent’s economic development. Why is infrastructure so important?
[Kalilou Traoré] Infrastructure plays an essential role for growth, competitiveness, job creation and the fight against poverty. By infrastructure, I mean the considerable physical structures that are needed for social, economic, political, and scientific activities, among others. However, accessing basic service infrastructure is still a significant challenge in a certain number of developing countries, especially in Africa. According to recent statistics, at least 663 million people worldwide still do not have access to safe drinking water. By 2025, 1.8 billion people will live in areas with absolute water scarcity. Approximately 60 percent of the world’s inhabitants do not have Internet access and 1.2 million people still live without electricity. At least a third of the world's rural population does not have all-weather roads.
Therefore, infrastructure helps facilitate human activity, in particular by lowering the cost of various economic activities and by improving their quality. This is why it has an essential role to play in the economic transformation of the African continent. Modern infrastructure is especially needed for national land-use planning and to meet regional integration objectives within the various regional economic communities. The weakness of infrastructure in Africa is well known and it is a significant hindrance to our capacity to face international competition.
On a regional level, developing infrastructure that can support economic development is a priority for ECOWAS. What approach have the community and its member states adopted in this respect? What tools have been developed and what are the current and future major projects?
[KT] One of the objectives of ECOWAS’ 2020 Vision is to better interconnect countries. These connections mainly take place through economic and social infrastructure such as roads, telecommunication systems, and energy, as well as sea and air transport. ECOWAS has put in place master plans for building infrastructure in these different areas.
For example, the master plan for the energy sector intends to increase the production capacity to over 10,000 megawatts by 2020. Several hydraulic and thermal power stations are being built. The plan also intends to increase interconnection between countries, and some programmes are already in place, among which the CLSG Project to interconnect Cote d’Ivoire, Liberia, Sierra Leone, and Guinea. The expansion of the underwater pipeline that currently connects Nigeria to Ghana all the way to Mauritania and Morocco is also in the works. When it comes to transport, the master plan intends to connect countries in the region from West to East, namely by building a coastal road that will connect Dakar to Lagos and a trans-Saharan road from Dakar to Kano, in northern Nigeria. Several sections of these roads are already in use. When it comes to telecommunications, a major regional project on fibre optic interconnection has almost been completed. Regarding air transport, the rules have been harmonised to ensure transport safety. Finally, when it comes to sea transport, the region is working towards creating a regional coastal navigation services company in order to provide an alternative to road transport along the coast and to lower costs.
In May 2017, ECOWAS will organise a roundtable of donors to fund priority projects within the community’s development programme. Eight major projects have been identified, in the transport, health, water, and agriculture sectors.
How do these efforts complement the work conducted within the framework of the Programme for Infrastructure Development in Africa (PIDA) on a continental level?
[KT] PIDA is the main guidance programme of the African Union (AU), NEPAD, and the African Development Bank (AfDB) when it comes to investment priorities, policies, and programmes in the transport, energy, water, and information and communication technology sectors between 2011 and 2030. The programme aims to set up an engagement framework with African development partners who are willing to support infrastructure on a regional and continental level. ECOWAS works closely with the African Union, NEPAD, and the AfDB. Provisions are taken to ensure regional and continental consistency, particularly in light of the expected establishment of the continental free trade area.
The essential role of infrastructure in development has long been recognised by African policy-makers. What are the main barriers to its development?
[KT] The annual investment that Africa needs to fill the infrastructure gap over the next few years is estimated to be over 100 billion US$. This is a sizeable amount that cannot be provided by our states’ budgets, which is one of the reasons why public investment has been so slow to materialise. Furthermore, private investment is still insufficient. To lower the infrastructure gap, we need to significantly increase investment and rely more on the private sector. Governance, capabilities, and efficiency also need to be improved in order to better leverage the resources granted to infrastructure.
As you explained, implementing an efficient infrastructure network calls for significant investment, and the financing issue is often seen as a major challenge. Do you think that, by better mobilising its own resources and by allocating them strategically, the continent has the means to tackle this challenge?
[KT] Financing infrastructure is a huge challenge when it comes to the size of the gap, but also when it comes to the high cost of the materials and technology needed. This requires mobilising all the necessary means, whether on a national, international, public, or private level. On a continental level, several studies have suggested that more resources could be mobilised by using the income from raw materials to finance infrastructure. This is why ECOWAS has launched the development of FODETE, a fund to support infrastructure projects in the energy and transport sectors, which will be financed by a levy on certain exports of raw materials. The studies are now complete and have already received technical approval. The political approval will take place in the weeks to come. When it comes to countries and regional agencies, initiatives have also been taken to meet this challenge. However, they are more or less successful as our states are faced with many development constraints, in every sector.
What role can foreign financing – public or private – play? How can it be attracted and best used to complement internal resources?
[KT] As I mentioned, mobilising internal resources is not enough to meet the infrastructure challenge, both on a financial level and regarding the transfer of technology. External financing is very demanding when it comes to the security of the business environment. This type of financing typically requires feasibility studies, which can be particularly expensive. This is also one of the reasons behind FODETE. This fund will help finance these studies in order to make it easier to raise the financing needed to carry out various infrastructure projects.
Our action, on a public level, is to do our utmost to satisfy investors and financial institutions in order to mobilise these resources. Furthermore, we have been working to set up a regional cooperation network for public-private partnerships (PPPs), an especially important tool for financing infrastructure. ECOWAS has also launched programmes to improve the investment framework, in particular through the project of a common investment code. We have also implemented a regional investment guarantee mechanism with ATI (African Trade insurance). All these programmes aim to attract the investments that the region needs to carry out major projects such as infrastructure projects.
Although it is not new, the infrastructure issue seems to be gaining more and more attention at the multilateral level, in particular with the creation of the Global Infrastructure Forum, the second iteration of which will take place in April. According to you, what should we expect from this type of effort at the global level?
[KT] We should expect more engagement and more consistency for international community initiatives on infrastructure financing. We now know that we cannot win the fight against poverty and ensure social inclusion if infrastructure implementation is not at the top of our priorities. That is why the implementation of infrastructure was identified as a requirement to meet the Sustainable Development Goals (SDGs). Infrastructure financing must therefore be a priority for development aid and international cooperation, particularly since, due to the level of our countries’ economies, the amortisation of the infrastructure takes a long time, something that not all investors and finance providers are ready to accept. The Global Infrastructure Forum was commissioned by the Addis Ababa Action Agenda on financing development in order to help bridge the infrastructure gap. The Forum should help better harmonise and coordinate initiatives from respective partners.
In conclusion, faced with the level of the infrastructure gap, which is a real leaden weight for the industrial sector, what do you think the key to success will be for the region?
[KT] The regional manufacturing industry represents less than seven percent of the regional GDP. Despite all our efforts, industries can only be competitive if the appropriate infrastructure is in place. Industries are therefore among those who benefit the most from infrastructure. In addition to general infrastructure, which consists of transport, energy, and communications, the industrial sector has specific infrastructure needs to speed up investment and increase competitiveness. This relates in particular to the establishment of industrial zones and their connection to service networks. Furthermore, ECOWAS is in the process of implementing a regional quality infrastructure, which will help harmonise regional standards, provide the necessary certifications to companies and products, and connect analysis and metrology laboratories. All this comes at a price and requires significant public and private investment. We have therefore been working with several donors and agencies to develop various structured financing, mixed financing, PPP, and crowd-funding methods. ECOWAS intends to organise the first ECOWAS Industrial Exhibition and Forum in Abidjan this year. It will be a platform for dialogue between politicians, backers, industrialists, and all development stakeholders.
This interview was conducted on 7 March 2017.