Shared infrastructure and the role in job creation and integration in Africa

The Ruzizi III Hydropower Plant Project, which serves Burundi, the Democratic Republic of Congo, and Rwanda, could create about 135,200 total jobs over the project’s lifespan. It will increase the region’s access to electricity by 300% too. This project is important in the face of limited access to electricity in these countries: 10% in Burundi, 15% in the Democratic Republic of Congo and 30% in Rwanda as at 2016.

The Ruzizi III, which will involve the construction of a run-of-river dam straddling the Ruzizi River between the DRC and Rwanda as well as a 147 MW power plant and distribution station, will cost about US$ 610 million. It is part of the Programme for Infrastructure Development i--n Africa (PIDA).

The Ruzizi III project reflects the massive opportunities in expanding not just infrastructure, but cross-border – shared – infrastructure. But many of these opportunities are often missed. This is due to huge infrastructure deficit and nature of these infrastructure in the Africa region. In some estimates, a spending requirement of about $120 billion to $140 billion in the short-term is needed to fulfill Africa’s infrastructure needs.

Africa’s infrastructure gap currently removes an estimated 2.6% of its GDP growth every year. There is the urgent need to act on Africa’s infrastructure.

Not just infrastructure, but shared infrastructure

Africa currently assigns just 3.5% of GDP to infrastructure, but 5-6% of GDP is needed for sufficient infrastructure investment. African governments must increase their percentage of GDP to infrastructure. The private sector has a role to play too.

But there is the need to rethink infrastructure financing architecture towards driving regional and shared infrastructure. This will help overcome the twin challenges of infrastructure deficit and unemployment among the rising young population in Africa.

Like the Ruzizi III Hydropower Plant Project, cross-boundary and shared infrastructure projects have the potential to generate significant gains in the form of direct and indirect employment, and social and economic spin offs in the form of saved finance and movement of goods and services across countries.

Photo: Location of Ruzizi III Hydropower Plant Project.

Building on progress

Positively, key initiatives and partnerships are picking up in various regional blocs in Africa.

A case in point is PIDA, endorsed by African Heads of State and Government in January 2012. PIDA lies at the heart of African Union Commission’s Agenda 2063 too. It was initiated to provide large-scale and innovative finance for Africa’s infrastructure. It is estimated that US$70 billion of PIDA infrastructure investment will generate US$172 billion in additional growth. A distinct feature of PIDA is the promotion of shared and cross-boundary infrastructure investments.

Also, the West Africa Power Pool (WAPP), founded in 2000, aims at providing by 2025 new generation capacity to the region and transmission lines infrastructures. The Southern African Development Community (SADC) Regional Infrastructure Development Master Plan (2012-2027) as part of the PIDA has defined a plan for infrastructure, divided in power generation (identifying nearly 40 GW in future hydropower projects), regional interconnections and storage facilities.

Power pools – a key feature of shared infrastructure – could bolster regional integration, a pre-requisite for unleashing Africa’s growth potential. In a full energy integration scenario, power pools would save US$43 billion per year by 2040.

Africa has many small-sized economies. Regional infrastructure investment is therefore important for attracting investments, creating economies of scale and cutting down costs to consumers.

The good news is that there is increased regional commitment towards driving a strong African integration. We ought to ride on the crest of this commitment to develop a common regional framework for policies, laws and regulations on private-sector investment in cross-border, shared infrastructure projects.

Africa needs infrastructure investments. But these investments must feed into the growing commitment for shared, cross-border infrastructure projects that connect countries and create better economic and social opportunities.

BY: Stephen Yeboah, Founder, Commodity Monitor, a Ghanaian-based business company building a competitive commodity value chain in Africa. He can be reached via: [email protected]