Developments in Infrastructure and Natural Resources 7th Session of the Committee on Regional Integration and Trade 2 - 3 June 2011 Addis Ababa, Ethiopia

Structure of Report

• Report gives overview of developments in infrastructure and natural resources at • Global • Regional; and • National levels • Identify challenges impeding development • Provides an overview of what ECA is doing. Also identify what ECA could do

Infrastructure

• Infrastructure section excludes ICT and Water • Efficient infrastructure and services key to Africa’s social and economic development • Electricity powers health and education services as well as boosts business productivity • Road networks provide links to global and local markets for goods and services • Safe water supplies save time and stop the spread of diseases • ICTs provide access reduces transaction costs • Functioning infrastructure is key to human well being and poverty reduction

Infrastructure

• Much of Africa’s current infrastructure is in poor state, depressing productivity by 40% and contributes to higher cost of doing business • Road density is extremely low • Rail density is low, variations in gauge types, most pre existing rail lines damaged or destroyed • Poor transport infrastructure accounts for 40% increase in transport costs for coastal countries, up to 60% for landlocked countries • 80 Ports, small, inaccessible by large modern vessels, inadequately dredged, inappropriate berths; old merchant fleet • 15 States with no access to ports; Africa’s freight costs at about 250% of the global average

Mobile density

Africa’s Infrastructure deficit

Sub Saharan Africa 55

Low Income countries

Rest of the world 134 211 78 76 3 326 41 72 51

Developments in infrastructure

• • • • At the global level… G-20 meeting in Seoul, South Korea pledged support for Africa’s integration agenda through the promotion of trade facilitation and regional infrastructure Created a high level panel to report to report back to next meeting The Infrastructure Consortium for Africa (ICA) established by G8 to coordinate financing for Africa’s infrastructure This is likely to be expanded to G20 to accommodate some of Africa’s large funders

Developments in infrastructure

• • • • • At the regional level…five key programmes..

The NEPAD STAP (2002-2010) developed some 120 priority projects (studies, capacity building, facilitation programmes, and investment projects Commonly acknowledged that success was limited and projects slow to implement African Action Plan 2010-2015 (AAP) – infrastructure side aimed at speeding up implementation of STAP Key strategy is to highlight high impact, quick gains projects 23 projects (5 energy, 9 transport, 6 ICT and 3 water) identified with a net resources requirement of US$ 9.3 billion

• • • •

Developments in infrastructure

Programme for Infrastructure development (PIDA) seeks to establish long term (2010 development in Africa – 2040) harmonised strategic framework and programme for infrastructure Has five sequential stages (to Jan 2012) – – Inception phase; – Planning phase (methodologies, identify challenges); – Programming phase; – Consensus building phase; and – approval by Heads of State Presidential Infrastructure Champion Initiative – seeks to facilitate infrastructure projects 7 initial projects identified –

• • • • • • •

Developments in infrastructure

Missing links of Trans-Saharan Highway and Optic Fibre project –

Algeria

; Dakar-Ndjemena-Djibouti Road and Rail project – North-South Corridor Road and Rail project –

Senegal South Africa

; ; Kinshasa-Brazzaville Road, Rail and Bridge project –

Congo

;

Republic of

Water management, river and rail transport projects – Nigeria-Algeria gas pipeline –

Nigeria

; and

Egypt

; ICT Broadband and link to fibre optic project into neighbouring states –

Rwanda.

•

Institutional Architecture for Infrastructure Development in Africa (AIDA) Main objective is to create an integrated infrastructure development environment by streamlining efforts into a single platform

DECISIONS FOR IMPLEMENTATION DECISION MAKING STRUCTURE IMPLEMENTATION STRUCTURE African Union Assembly of Heads of State and Government Executive Council PRC Council for Infrastructure Development African Union Commission Infrastructu re Advisory Group NEPAD PLANNIG & COORDIN ATING AGENCY AfDB +ICA+ DEVELOPMENT PARTNERS Private Sector Regional Economi c Comm unities Countrie s Specialized Institutions & Agencies PROJECTS AND PROGRAM PROPOSALS & REPORTING

Developments in infrastructure

At sub regional level..

• RECs have developed infrastructure master plans – these are to be part of PIDA programming phase • Regional power pools (SAPP, WAPP & EAPP) working towards full interconnection • Regional regulatory bodies (RERA) and ERERA) now functional to facilitate harmonized regulations • In transport, good progress is being made to improve transport and trade facilitation measures groups – several one stop border posts have been implemented (eg Chirundu and Malaba) to minimize delays in border crossings • Progress has also been made in corridor management • and tfrapsort Renewablae enerbgies are being promoted (hydropower, solar, wind, geothermal

Developments in infrastructure

At national level..

• Reforms in both energy and transport areas is progressing • Energy mix is generally widening to improve acces eg – use of gas (West African gas pipeline to deliver gas to Benin, Togo & Ghana), Tanzania, Mozambique and SA – Biomass for electricity generation – Wind energy being exploited (Egypt, Morocco, SA, Kenya, Ethiopia, etc) • In transport investment in ports being scaled up (eg Tema and Walvis Bay) • Dry ports becoming common to ease port congestion and improve tax collection

Challenges of infrastructure development

• Lack of coherent policy framework – policies are not harmonized – Strengthen policy coordination at all levels • Institutional structures for regional projects not well defined – Ownership and responsibility issues persist – Underwriting major power projects difficult • Inadequate financing sources – Projects poorly prepared – Risk perception and underwriting complicated – Increase PPP participation through long term financial markets • National commitment to regional projects is weak – Deepen regional cooperation and integration – Integrate regional projects in national priorities

Developments in mineral resources

At the global level..

• Most significant is dramatic increase in demand for mineral commodities since about 2002 • Demand increased by 1-2% between 80s and 90s but by about 7% between 1990 and 2000 • High demand caused mainly by growth in China • Between 1995 and 2005, China’s contribution to global output grew from 6% to 12% • With growth in India and Brazil, mineral commodities are assumed to be on a super cycle • High demand has created strong geopolitical competition for Africa’s minerals

Developments in mineral resources

Chinese influence on world demand for metals

Aluminium (kt) Copper (kt) Zinc (kt) Lead (kt) Nickel (kt) Tin (kt) Crude steel (Mt) Iron ore imports (Mt)

Refined use (2007)

12267 4800 3750 2548 345 150 437 379

% Share of China (2007)

32.5

26.2

32.1

30.6

24.9

39.9

32.3

48.2

% Share of China (2000)

13.0

11.8

14.9

10.1

6.0

18.6

16.3

15.6

Developments in mineral resources

• At the regional level..

• The African Heads of State and Government adopted the African Mining Vision in February 2009 • Over-arching objective is to create a -

“Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio economic development”

It is seeks to integrate Africa's natural resources sector into continent's social and economic development thru – Value addition to mineral products – Social and economic Infrastructure development – Transparency and equity – Building human and institutional capacities

Developments in mineral resources

At the regional level..

• ECA and AUC created an international study group to explore how Africa’s mineral regimes can transform mining into a broad economic development tool • Work of the ISG group is complete and an analytical framework report compiled • Report being edited prior to printing • An action plan is also being developed for implementing the vision • The action plan and ISG report will be considered by the African Ministers of Mining in September 2011

Developments in mineral resources

Main findings of ISG Report: • Exploit current global competition and resource glut by encouraging contracts that promote development • Strengthen environmental and social practice through greater local and community participation eg EITI, EITI++ of royalties and resource rents – explore legislated CSR to provide certainty and uniformity • Improve revenue transparency, sharing and use on developmental projects through improved governance • Improve use of tax instruments, especially strategic use

Developments in mineral resources

• Explore use of price discovery instruments eg auctions to include development objectives – for ex infrastructure and economic linkage development • In optimizing mineral linkages, pay attention to collateral economic and social use to promote integrated spatial resource use • Strengthen institutional capacities to manage mineral sector especially in tax structuring, contract negotiations, value chain auditing, monitoring transfer pricing, etc • Encourage regional cooperation to share developmental capacities eg developing regional economic and social infrastructure

Developments in mineral resources

At the sub regional level..

• RECs are harmonizing their mining policies and codes • SADC has developed and is implementing a framework for Harmonizing Mining Policies • ECOWAS has also adopted a draft ECOWAS Directive on Harmonization of Guiding Principles and Policies in the Mining sector • These efforts aimed at sharing capacities for mineral development • RECs are also the implementation vehicles for the AMV

Developments in mineral resources

At the national level..

• A number of African countries are rewriting their mining codes (DRC, Ghana, Namibia, Tanzania, Zambia, etc) • New codes seek to improve competitiveness of mining sector to private sector investment • More important, new codes also seek to re-negotiate fiscal aspects of mineral contracts which are seen as unfair (eg Tanzania, Zambia) • CSR issues are also being strengthened - issue is whether CSR should be mandatory of discretional • New codes also seek to strengthen public participation especially by communities affected by mining

Challenges in mining

• Mineral regulatory regimes continue to be ineffective in promoting broader social and economic inclusion • The mineral sector is not integrated in domestic economies, still commodity export oriented. Need to emphasize local content and value addition • Human and Institutional capacities are very weak – promote more capacity building programmes eg in contract negotiations, tax structuring, value chain auditing to check transfer pricing • Implementing of environmental and social responsibilities is weak. This needs strengthening • Small scale and artisanal mining is not making its full contribution – this needs institutional support in a number of areas.

• Mainstreaming AMV into national mineral development regimes

Thank You

7 th Session of the Committee on Trade, Regional Cooperation and Integration 2 - 3 June 2011 Addis Ababa, Ethiopia