Sustainable trade infrastructure in Africa: A key element for growth and prosperity?

12 February 2016

Photo credit: "Hanging gardens of One Central Park, Sydney" Rob Deutscher, Creative Commons, Creative Commons Attribution-Share Alike 2.0 Generic license, http://bit.ly/1PP2xrB.

In order to trade goods and services efficiently, to become a more active partner in global and regional trade, and to connect to global value chains, it is crucial for every region and country to offer solid trade infrastructure. Improved trade efficiency strengthens conditions for increased technology transfer, innovation, and production capacities, which stimulate the creation of additional jobs and contribute to poverty alleviation. 

 

Infrastructure needs throughout the world have never been greater. They shape our environments and largely determine our livelihoods today and in the future, reason why infrastructure lies at the core of the United Nation’s Sustainable Development Goals. Rapid global population growth and increasing urbanisation mean that huge investments in infrastructure are required to ensure social well-being throughout the world; according to the OECD, 75 percent of the infrastructure that needs to be in place by 2050 does not yet exist. In order to fulfil these requirements, an estimated annual global investment of US$5 trillion in infrastructure will be needed in the coming decades. This unprecedented and fundamental development represents a major opportunity to create the backbone of a sustainable and resilient future and pave the way for increased exchanges of sustainably produced goods and services.

Towards sustainable and resilient infrastructure

Moving from conventional infrastructure to sustainable and resilient infrastructure has the potential to improve the livelihoods of billions of people across the globe. By promoting and mainstreaming the systematic financing of eco-efficient technologies and socially inclusive development—for example, in urban and rural planning—we have the potential to contribute greatly to the preservation of natural resources, climate change mitigation, and the reduction of social imbalances.

Sustainable infrastructure supports the development of dynamic societies which can meet the needs of the people living within them today, without jeopardising the ability of future generations to also meet their needs. Examples of sustainable infrastructure features include smart grids that allow for the efficient use of energy and increased use of renewable energy; construction designs and technologies that reduce energy and water consumption; transportation systems that allow for efficient, low-impact mobility for the exchange of goods and services; and urban planning techniques that increase the use of public transportation and create a stronger sense of community.

However, such infrastructure requires additional financing, which should be made available not only by the public sector, but also by the private sector: institutional investors such as pension funds, mutual funds, insurers, and family offices. This is important in industrialised countries as well as emerging economies such as China, India, Indonesia, Brazil, and South Africa. To channel more of these funds towards sustainable infrastructure, the added value offered through the sustainability aspects of projects has to be demonstrated to capital markets and the aforementioned institutional investors. Evidence is growing as to the great added value offered by sustainable infrastructure compared with conventional infrastructure. Benefits include the potential risk mitigation features of sustainable infrastructure, which can reduce implementation, resource, and credit default risks. Furthermore, sustainable infrastructure may offer competitive returns by potentially reducing project construction and operational costs, for example through improved resource efficiency.

How can the benefits of sustainable and resilient infrastructure be clearly demonstrated to investors and public sector planners, so as to facilitate a common understanding between these actors, and to enable increased capital flows towards sustainable infrastructure? Global Infrastructure Basel (GIB), a Swiss non-profit foundation based in Basel, has been working with a wide range of stakeholders across regions and sectors to produce a standard which can achieve this goal. SuRe®, the Standard for Sustainable and Resilient Infrastructure, was launched at COP21 in December 2015 in Paris, and provides a basis upon which infrastructure projects can be certified as "sustainable" and "resilient." The Standard is an important development for the infrastructure sector, because it (1) enables project developers to design more sustainable infrastructure, (2) provides the public sector with a means of transparent project selection, and (3) demonstrates sustainability and resilience to financiers, enabling them to confidently direct funds to the most sustainable infrastructure projects. GIB and its multiple stakeholders have the vision that infrastructure—be it an energy plant; transit or transport infrastructure; or a water utility—should not only deliver its service efficiently, but also help to tackle the world’s largest sustainability challenges stemming from population growth, rapid urbanisation, underdevelopment of rural areas, social inequalities, excessive use of finite resources, and carbon-intensive lifestyles. GIB’s work and the SuRe® Standard push for transformative actions in the field of infrastructure development and finance and contribute to sustainable development and the strengthening of community resilience.

One region with the greatest potential for transformative change towards sustainable infrastructure is Africa. As a result, GIB has a focus on Africa for the implementation of the SuRe® Standard.

Africa and sustainable infrastructure

Africa understands the potential of sustainable and resilient infrastructure to increase economic and social development. A variety of examples demonstrate how African countries are actively taking part in initiatives fostering sustainable infrastructure, which contributes to sustainable trade and improves inter-connectivity as a precondition for strengthening the pillars of sustainable trade. Some of the following examples are already at an implementation stage; others are still in a planning phase.

Inclusive commercial agriculture in Africa

The Chiansi irrigation infrastructure project is a unique agribusiness partnership between the public and private sectors in Zambia that has helped 126 smallholder households to enter the mainstream of commercial agribusiness through the installation of irrigation infrastructure. Phase 1 has seen 148 hectares of smallholder-owned land receive year-round irrigation with crops being grown under commercial management. Smallholders have been actively involved in day-to-day farming, received a dividend from the commercial farming operation, and gained access to market garden style irrigated plots for their own use. Phase 2 will involve the construction of major bulk water irrigation infrastructure that will ultimately serve up to 3800 ha of land following future expansion phases. Phase 2 will also include infield infrastructure and market garden plots, further enhancing the incomes of approximately 600 local smallholder households. The project is transforming a poverty-stricken area of rural Zambia into a highly productive agricultural zone.

Sustainable urban food production linked to renewable energy generation and the development of Small and Medium-Sized Enterprises

The Tshwane Food and Energy Center is a project proposed by the City of Tshwane Metropolitan Municipality in South Africa. The aim of the project is to reduce poverty and promote sustainable economic growth in poor rural areas by empowering local landowners and farmers. In doing so, it will encourage landowners to become farmers; ensure that the participating small-scale farms are commercially viable; and promote the production and use of renewable energy sources. The Center will be located on municipal land covering 500 ha of farm area and will benefit around 75 families. It will consist of three main components: (1) a central farm with energy and agri-support services (agribusinesses, training, model farming, livestock, livestock structure support for small-scale BEE farmers, financial services); (2) small scale BEE farms interlinked with the central farm; and (3) supportive renewable energy businesses, including solar power and biogas production facilities. The project will be conducted over a period of 5 years from 2015 to 2020, though the availability of funding will determine its progress.

Poverty reduction by proper land use planning

The population of Dar Es Salaam has almost doubled over the last ten years and now stands at 4.7 million. Over 70 percent of the population lives in informal settlements with poor or few basic services/infrastructure.The area’s challenges to meet the needs of a growing population are complicated by its susceptibility to flooding and sea level rise due to climate change. Devastating floods in 2011 forced the city to relocate many residents, although financial limitations mean that many thousands more remain in flood prone areas. Furthermore, relocation also often requires moving people away from their former economic activities. To address this difficulty, the Bunju Satellite Town project proposes the development of a satellite town to meet the needs of the local population in the Mabwepande area. The new satellite town is both safe from floods and close to main roads and a growing port. The satellite town plots will be zoned for residential, commercial, and industrial uses. The implementation of the town will be based on plots selling for cost recovery, and those who purchase these plots will be required to adhere to sustainable development conditions. An initial loan for the first phase has been secured from the TIB Development Bank, owned by the government of Tanzania.

Road passenger transportation

Mayne Transportation Limited is a private passenger bus and haulage transportation company, registered in Ghana in 2009. It proposed a project to provide affordable long distance bus and transit bus transportation to the people of Ghana and its neighbouring countries and to haul goods such as agro-food products, agriculture products from farming communities to the market, bauxite, manganese, and petroleum products. The target groups for the project will be the poor; school children; market women; businessmen and women; local tourists; underprivileged people; and mining companies. Included in this project is the construction of four or five ultra-modern multi-purpose bus terminals with modern technologies.

Conclusion

Many countries in Africa have great potential to be better integrated into global trade and international value chains, thus creating more jobs and offering better income possibilities for the ever-growing population. To harness such potential, the private and public sectors need to work hand in hand. A successful integration of the African markets into the global market place will, however, only be possible if the right trade infrastructure is in place. This trade infrastructure can only be developed with additional resources from national and international capital. Transparent, stable, and clear investment framework conditions, as well as procurement mechanisms and coherent corresponding regulations must be in place to attract more private sector funding. In addition, public know-how on the functioning and legal framework requirements on public-private partnerships must be available. Last but not least, to encourage sustainable and resilient infrastructure development, local public sector and/or national institutions should incorporate sustainability and resilience elements in their infrastructure design requirements. This is precisely where the GIB-foundation, with its approach towards the standard on sustainable and resilient infrastructure (SuRe®) and associated capacity building, could contribute most.

 

Author: Hans-Peter Egler, CEO of Global Infrastructure Basel (GIB).

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