Africa will go far through sound governance and good investments

Paulo Gomes
By Paulo Gomes

Former Executive Director at the World Bank, and currently Chairman and Founder of Orango Investment Corporation. 

Posted on Tuesday, 27 September 2022 11:45

World Trade Organization Director-General Ngozi Okonjo-Iweala claps next to conference chair Timur Suleimenov after a closing session of a World Trade Organization Ministerial Conference at the WTO headquarters in Geneva, Switzerland June 17, 2022. Fabrice Coffrini/Pool via REUTERS

Following recent talk of “deglobalisation” and speculations that the World Trade Organisation (WTO) might have had its time, the agreements brokered at its recent Ministerial Conference show that free and open global trade lives on to see another day.

In the meantime, however, what can’t be denied is that the pandemic, its shutdown of trade routes and the ongoing disruption of supply chains, has shaken the notion of global trade being the panacea, and ushered in a trend of regional blocs, deepening regional ties, and a move towards what could seem like regional and even national self-reliance.

While AfCFTA gives promises we have a long way to go – PPPs are part of the solution.

While the African Continental Free Trade Area (AfCFTA) and its accompanying trillion-dollar investment framework will create the largest free trade area in the world, we’re not there yet. Indeed, the war in Ukraine and the ensuing food crisis across the continent are pertinent reminders of our dependencies. Rates of progression vary, but many countries still need to create an environment where economic activity can thrive, and a large part of that means developing the appropriate infrastructure needed. In this context, public-private partnerships (PPPs) can offer a lifeline and lay the foundations for developing water, telecommunications, transport, and power, among other things.

Any PPP is not necessarily a good PPP

But any PPP isn’t a good PPP. For decent contracts and projects to occur, discerning governments with strong governance are required to avoid unsustainable projects that only further indebt countries and disadvantage their populations. Indeed, despite the numerous successful PPP projects worldwide, a lack of regulatory oversight and inadequate evaluation process from the get-go has resulted in at least as many failures.

The Grand Inga Dam project in the DRC might not be classed as such – 2 of the 6 dams originally envisaged have at least been built – but the project has and continues to be shrouded in controversy.

The initial international economic community’s vision to develop a power grid that can supply a third of the continent’s power supply and spur economic development is far from achieved. Instead, as the current government attempts to push the third dam forwards, the previous two are seen to be responsible for a huge part of the country’s debt burden, and were fast producing a fraction of the electricity they were sold to do (40% of capacity by 2002) and haven’t come close to meeting even the nation’s needs – an estimated 11% of Congolese have access to electricity.

The projects at inception failed feasibility studies, showing them to be uneconomical.  A lack of transparency and accountability, a missing environmental impact assessment or mitigation plans, and displacement of local communities are just some of the other charges against it.

Governance matters

While big infrastructure projects may seem tempting to governments in the race toward economic development, when it comes to PPP investments, governments need to be more discerning of the projects they choose to embark upon.

Many of the failures of PPP projects could have been avoided or mitigated with strong governance in place – not just the projects, but of the governments themselves. ‘Investability’ is crucial to attracting the necessary private investment, but beyond that, countries should also be politically stable, free from corruption, and adhere to rule of law. All these conditions count when it comes to successful and sustainable PPP projects.

Rwanda: When suitable investments with governance can spell growth

Take Rwanda for example, whose government is investing in PPPs with the potential to offer national and potentially pan-African benefits. Making that link with governance again, Rwanda was recently classed as the best performing low-income country in the world and best performing sub-Saharan country in the 2022 Chandler Good Government Index. Its rapid economic growth over the last two decades is in part due to its strong focus on improving not just its financial and economic governance, but also its leadership and long-term vision.

One of its PPP agreements, Africa Improved Foods (AIF), is creating jobs for locals, investing in farming, and sourcing their ingredients from the country to boost local economies and fulfil their vision for “Africa to feed Africa”.

Meanwhile, AIF is also working to resolve the malnutrition and stunted growth of the country’s children by providing them with nutritious food during the first 1,000 days of their life, with the goal of reaching 1 million malnourished children and pregnant or breastfeeding women annually by 2031. Looking to solve malnutrition in the region, their next step is to expand operations to Ethiopia and other East African countries.

As the world pivots towards a seeming pulling in and localisation of trade and agreements, good PPPs and the AfCFTA provide countries with funds, resources, and mechanisms to build their physical and human infrastructure, and in so doing move us closer to a position of greater intercontinental trade and regional autonomy. In the meantime, foreign institutions and investors coupled with smart and discerning governments still have a large and valuable role to play in developing the capacity of countries and businesses in Africa.

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