Sadly, the AU are not addressing the economic value of High Speed (180km/hr +). However AUDA-NEPAD have now come up with very interesting ideas for how railways should be seen in context with and as a catalyst for economic development and how to increase funding for infrastructure.
A New Paradigm Shift for Infrastructure Development ?
African Integrated High Speed Railway Network
Railways Africa Magazine in conversation with Ibrah Wahabu, AUDA- NEPAD Senior Programme Officer Infrastructure and Connectivity
excerpts from this very informative interview:
AUDA – African Union Development Agency
NEPAD – New Partnership for Africa`s Development
“Now when we talk about high speed, given the current status of rail infrastructure on the continent, in Zanzibar, this year in September our ministers agree we need to revise and recast our ambition. So instead of African Integrated High Speed Railway Network , we are now headed simply to Africa Integrated Railways Network. If that gets adopted by our Head of State, that is what the programme will become……………………………..”
“Without infrastructure the African Continental Free Trade Agreement will be just a talk show. Currently we have less than 5% inter-African trade volume within the continent. If we want to boost inter-African trade, we need to boost connectivity. Connectivity in terms of trade, rail is the most adequate one. Unfortunately what we notice at the AU Development Agency (AUDA) the current rail networks are not built for inter-African trade. They are built for the extraction of resources. So we need to have a deliberate approach where we shift the focus to make rail infrastructure that works for trade, make rail infrastructure that works for people movement, and make it work for business opportunities.”
How are we going to do it? First is to completely change how we see infrastructure on the continent. In 2021 we put forward a proposal that was adopted by our Head of State at the African Union General Assembly which is an integrated corridor approach for infrastructure development. It`s an approach that when we take a rail line we don`t see it as a rail line we see it as a link of a whole corridor for economic development. And a number of elements we look at: for example urban rural connectivity, we look at the issue around job creation, around environmental sustainability and climate resilience, ….”
“We believe the integrated corridor approach is giving a new paradigm shift for infrastructure development that will tackle those issues. One of the projects that illustrate perfectly the integrated corridor approach is LAPSET Corridor (Lamu Port-South Sudan-Ethiopia-Transport). So you have a corridor from Lamu Port in Kenya up Ethiopia through South Sudan. Along the corridor you have a highway, you have a fiber optic line, you have a resort city, an airport, and then you have a power plant and more importantly you have the LAPSET Railway Project which if really implemented will give tremendous boost to inter-regional trade in East Africa and Central Africa and to connect to the West African region, definitely.”
Where is the money coming from?
“We used to think money is not the problem. This continent has a lot of money. How do you translate that money into funding, into financing? We commissioned a report on institutional investment in Africa in 2018 up to 2020.And we realized at that time pension fund and the sovereign wealth fund only invest 1.4% of their asset under management into infrastructure. If they can invest up to 5% that will generate $25 billion investment into infrastructure annually on this continent.
From 2018 up to now, the capitalization, the asset under management of those funds has increased tremendously. So the first source of funding we think is domestic resources. Our institutional investors have a lot of capacity to invest in finance infrastructure. We just need to make sure to put in place the necessary framework that that will make their investment covered and sustainable because you don`t want to put pension in to a very volatile business scheme.
The second source of funding is private sector . They only invest 12%, they only participate up to 12% of infrastructure financing on this continent. There’s a lot of opportunity to tap into…..And of course we have traditional funding process through a multilateral development bank, international financing community. That is very important. And the last thing, not the least, is African government. So far, they finance up to 80% of infrastructure on the continent, be it via the contract loan or they use directly the budget allocation for infrastructure. So these are the key source of funding.
We developed a financing strategy for PIDA, the Program for Infrastructure Development in Africa , which articulate clearly from the project definition up to the operation of maintenance, how much it will cost us and where can we get those resources and how can we effectively mobilize those resources. We need to take that strategy and adjust it and translate it into the rail sector. And I am sure we can find the appropriate mechanism to finance the African Integrated Rail Network project.”