SADC PPP Network Infrastructure and Development Goals Facts About Infrastructure Kogan Pillay Head SADC PPP Network 7 March 2014

Facts About Infrastructure “Hard" infrastructure refers to the large physical networks necessary for the functioning of a modern industrial nation, whereas "soft" infrastructure refers to all the institutions which are required to maintain the economy, health, and cultural and social standards of a country, such as the financial system, the education system, the health care system, the system of government, and law enforcement, as well as emergency services Infrastructure is THE most important contributing factor for sustainable economic growth in the developing world. GDP is not a measurement for economic development of the poor Africa has six of the fastest growing economies in the world but there is not concomitant reduction in poverty. WHY?

Facts About Infrastructure Studies have shown that where significant infrastructure is developed (both hard and soft) there is a positive correlation with poverty reduction According to researchers at the Overseas Development Institute, the lack of infrastructure in many developing countries represents one of the most significant limitations to economic growth and achievement of the Sustainable Development Goals (SDGs).

Facts About Infrastructure Infrastructure investments and maintenance can be very expensive, especially in such as areas as landlocked, rural and sparsely populated countries in Africa. It has been argued that infrastructure investments contributed to more than half of Africa's improved growth performance between 1990 and 2005, and increased investment is necessary to maintain growth and tackle poverty. The returns to investment in infrastructure are very significant, with on average thirty to forty percent returns for telecommunications (ICT) investments, over forty percent for electricity generation, and eighty percent for roads.[16]

Facts About Infrastructure The demand for infrastructure, both by consumers and by companies is much higher than the amount invested. There are severe constraints on the supply side of the provision of infrastructure in Asia. The infrastructure financing gap between what is invested in Asia-Pacific (around US$48 billion) and what is needed (US$228 billion) is around US$180 billion every year. In Latin America, three percent of GDP (around US$71 billion) would need to be invested in infrastructure in order to satisfy demand, yet in 2011, for example, only around two percent was invested leaving a financing gap of approximately US$24 billion.

Facts About Infrastructure In Africa, in order to reach the seven percent annual growth calculated to be required to meet the MDGs by 2015 would require infrastructure investments of about fifteen percent of GDP, or around US$93 billion a year. In fragile states, over thirty-seven percent of GDP would be required. In SADC Alone under the Regional Infrastructure Development Master Plan between 2015 and 2027 $500 billion to finance infrastructure. $100 billion must come from private finance and Development Finance Institutions (DFI’s)

Facts About Infrastructure It was determined out of the RIDMP that SADC should have a harmonized PPP investment Policy, Legal Framework and Institutional Arrangements This would send a positive message to potential investors and funders The PPP Network has developed a regional framework for PPPs in the SADC Region in January 2013 It was approved by the Ministers of Finance in Maputo in May 2013

Facts About Infrastructure Currently most countries in the region have PPP Legislation or are developing this legislation Tanzania, South Africa, Zambia, Malawi and Mauritius all have legislation Zimbabwe, Botswana, Namibia, Lesotho and Swaziland have draft legislation Governments are being supported to harmonize with the regional framework for PPPs approved by the Ministers of Finance

Facts About Infrastructure Currently, the source of financing varies significantly across sectors. Some sectors are dominated by government spending, others by overseas development aid (ODA), and yet others by private investors. Governments need to use more private sector capital and expertise More emphasis on risk sharing More emphasis on project identification and preparation Better access to project preparation funds

Facts About Infrastructure DFI’s to assist in the de-risking of projects More Public Private Dialogues Joint Public and Private Sector Planning for roll out of projects More risk to be shared by private finance with proper planning More harmonization of investment policy and regulations for private sector

Facts About Infrastructure More cross border projects! (rail, IPP’s, water & ICT) Build Africa’s capacity through doing not showing! Political Commitment from States (not election horizons) Proper mix of economic and social infrastructure (no social infrastructure in RIDMP) Public and Private sectors –DO THE RIGHT THING!

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