Category Archives: Infrastructure

10 Points from AfDB 2019 in Malabo

The African Development Bank (AfDB) Group held their 2019 series of annual meetings from 11 to 14 June in Malabo, Equatorial Guinea with the theme of “Regional Integration”

Highlights of the meetings:

1. Fast growth is not Enough: A key theme of the week was that the stellar growth levels in Africa (over 4%) were still not enough to create enough jobs and produce sufficient food on the continent.

2. High 5’s:  Regional Integration is one of the development priority themes (‘ High 5s’) that the Bank had adopted at its 2016 meetings in Lusaka, Zambia alongside (to) “Light up and power Africa”, “Feed Africa”, “Industrialise Africa”, and “Improve the quality of life of the people of Africa.”

3. It is Capital Raising time for the Bank and is organs. There are advanced talks towards a 7th general capital increase, the first since 2010, for the African Development Bank, which will be concluded in September.

A few months ago, Canada provided temporary callable capital of up to $1.1 billion to stabilize the AAA rating of the Bank.

There are also ongoing negotiations for a 15th replenishment of the African Development Fund.

4. Visa Index: The Bank’s Africa Visa Openness Index ranks how accessible African countries are to visitors from within the continent in terms of requiring travel visas and tracks developments by different countries to improve the ease of travel for fellow African citizens.

5. Low intra-Africa trade:  Ahead of the African Continental Free Trade Area (AfCFTA) which comes into force in July 2019, the potential economic benefits of full implementation were highlighted, with the greatest beneficiaries of the increased trade likely to be countries in the Central Africa region.

Africa has 54 countries; Alone they are not very competitive, but together, under the Continental Free Trade Agreement, they are a market of $3.4 trillion

 

Also see the regional economic outlook reports by the Bank.

6. Debt levels in Africa: There was some discussion about the levels and types of debt across Africa and their potential burden versus the growth and infrastructure needs of individual countries. Also the Bank affirmed its support to help countries negotiate better financing terms, get better deals for extractive resources, minimize currency risks, and to enable them to mobilize their own resources domestically.

7. Asia-models for Africa: At the AfDBAM2019, Korea and India showcased their partnerships with the Bank including on agricultural transformation, enhancing food security and scaling financing across Africa.

8. Different forms of development finance by the Bank: 

  • Toward Financial Inclusion

  • Integration of Africa

  • The Environment

  • Food Security

  • Disaster Relief

  • Clean Energy

  • They also have plans for an affirmative action finance facility for women in Africa (AFAWA).

9. Transformational Infrastructure Projects funded by the bank include ports, highways, bridges and border-crossing stations across different countries.

10. Malabo Image: Host nation, Equatorial Guinea, used the forum to shed an image about the country that is full of old stereotypes to one of economic diversification, transformation and infrastructure. President Obiang attended the opening of the AfDBAM2019 which were chaired by the country’s Minister of Finance, Cesar Abogo, who is just 39 years old.

(a) Parallel events during AfDBAM2019: 

  • Africa Investment Forum last year which at its inaugural AIF forum in 2018 in Johannesburg secured  $38 billion of investments for 40 projects across Africa.

  • African Banker Awards

(b) Next meeting: Following these first-ever meetings to take place in Central Africa, the next annual meetings of the bank will be in a year’s time in Abidjan, Côte d’Ivoire – the bank’s headquarter city, where they the election of the Bank President will be the main agenda item.

China and Africa’s Infrastructure Developments

Excerpts from a piece by Andrew Alli, the former Africa Finance Corp (AFC) CEO, in his debut column for Quartz Africa on separating myths and realities of the role of China in Africa’s infrastructure developments.

China firms funded, built and operate Kenya’s new railway.

  • China’s was the fourth largest foreign investor in Africa spending about $40 billion in 2016, according to UNCTAD’s World Investment 2018 report, behind the US ($57 billion), the UK ($55 billion), and France ($49 billion).
  • Construction contracts are backed by Chinese financial institutions—like China Export -Import Bank and Sinosure – looking to support the exports or sales of Chinese products and services. The mission of these financing entities is to support jobs and income generation in China, as well as to support more strategic objectives of the Chinese government.
  • Chinese companies are surprisingly risk-averse when it comes to Africa – most Chinese financiers will not consider a project without insurance from Sinosure, the Chinese government-owned political risk insurer, or other similar institutions. In turn, Sinosure often requires a guarantee from the government of the country in which the project is located. (e.g. – with Kenya’s Standard Gauge Railway construction, the contracts specify that there will be insurance cover of 6.93% of the commercial loan – done by a Chinese firm, SinoSure, to take care of nonpayment). Sinosure insurance and other financing costs do not come cheap, which leads to the point that Chinese firms are not necessarily cheaper than firms from other countries – and while the bare construction costs of certain projects may seem cheaper, even after equalizing for quality, there are other costs that may apply including the insurance and other financing costs mentioned before, and costs associated with local content. 
  • It is true Chinese firms prefer to use all-Chinese inputs. If you want local workers and contractors, you will have to make that a negotiating point.
  • While some work done by Chinese firms can indeed be shoddy,  this doesn’t have to be the case.  For example, while a Western firm may tell you a bridge will cost you, say, $300 million. A Chinese firm may tell you that you can have a $300 million bridge, or a $250 million one.- and things that may be taken for granted in other parts of the world can be negotiable when dealing with a Chinese firm. You have to be careful to specify the quality that you want and the standards that you would like the project to be built to. You also need to be very specific about the environmental and social standards you want the project to adhere to.
  • For too long the number of firms willing to engage in, and finance, projects in Africa has been very limited, meaning that competition has also been limited leading to high prices and a lack of innovation. The increase in interest by Chinese firms has increased the amount of competition, forcing prices down overall and improving quality. The bleating of companies being forced out of cozy monopolies is probably one cause of the constant refrain we hear about the “dangers” of Chinese interest in Africa. We shaved the costs of that project in Ghana by over 20% from initial quotes by running a competitive process involving a Chinese firm.
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Missing Links

There are about 20 roads envisioned for Nairobi, known as Nairobi missing links that had been planned as far back as independence and in subsequent development plans for the City. These were designed to open up neighborhoods to development and ease transportations problems – but were never built.

These plans have remained on city maps and while land developers have generally avoided constructing on these set-aside areas, there has probably been encroachment on in the more densely populated areas, as indicated by the recent failure of fire-fighting efforts. In some cases the city council has licensed businesses to operate there but only as temporary occupants.

The Japanese International Cooperation Agency (JICA) is undertaking a study on the development of missing links “3 6 & 7” which are located on the western side of Nairobi to be an experiment for the rest of the City’s roads – and they will the projects for financing by the Government of Japan.

If approved, construction of the following roads (with bridges, pedestrian & cycle lanes) should begin in 2007:

  • a short road from the Westlands roundabout to Riverside drive
  • a road from Kileleshwa police station/Kasuku center to Methodist university
  • a road from Yaya center to Lavington area.

The road to Mombasa

That’s what friends are for
I called in a huge favour last week and was able to snap up some tickets on a Coast bus to Mombasa, two days before Christmas. Most bus companies are fully booked this time of year, and the seats I got were on one of the extra buses added to meet the holiday demand. On this trip, I took a bus ride down and drove back in a small car. Another option I considered was to make both legs of the journey by overnight train.

Shopping jam
Because of the last-minute shoppers, and increased number of buses & matatus waiting to travel, there was huge traffic jam in the city on Friday. As a result, it took over an hour to clear the city limits and we were passing JKIA (Nairobi airport) more than 1 ½ hours later, despite having left on time at exactly 10:30.
Good road

The 500 kilometre (300 mile) road to Mombasa is one of the smoothest and most pleasant roads to drive on – for at least 200 miles or (2/3) of the journey. There are long stretches of road that never seem to end, meandering through flat, mostly dry, low hills and plains. It’s been dry in most of Kenya for several months now, but one goes though parts of Ukambani where it has not rained for years and the drive is made beautiful in that you don’t have to stop here, and are only passing through at high-speed. The road is mostly new from Sultan Hamud onwards, and even though there are some diversions where the road is still being constructed, they are well paved and you don’t lose any time.

All those people who nurse their Subaru’s, BMW’s, and other high performance cars thought Nairobi’s daily traffic jams should consider giving their cars a treat and drive down to Voi, or even on to Mombasa. The roads are so good that one can easily get carried away, until they look at the speedometer and realise how fast they are driving on the many long stretches of road that never seem to end. But, if you have an older, troublesome or weak car, the drive can be frustrating because it appears you’ll never reach your destination, and keep getting demoralized as you’ve overtaken by faster cars, buses and even trucks.

Speaking of trucks they really hit top speed on the highway with trailer trucks cruising at 80 – 90 km/h. When one drive you (going in the opposite direction) the turbulence it produces can blow other light vehicles (with inexperienced drivers) off the road.

There are supposed to be some speed traps on the highway, but I did not encounter any. Police on this road are more concerned with ending a series of attacks by highway robbers who have been operating on the road for the last two years.

Bad road

Near Mombasa is short stretch of road that is reason enough not to drive to Mombasa. The road one of the worst you will find in Kenya, and is so unbelievably bad, it’s a national shame. It takes about 1 – 2 hours to cover the 20-kilometre section between Mariakani and Miritini on the outskirts of Mombasa. It doesn’t matter if you’re driving a land cruiser or humvee – high speed will cause a puncture or you to leave some vehicle parts behind. Power steering is a must, as you must literally dance your car around a huge endless sea of potholes, which are either huge craters or sharp-edged ditches.

Several prominent companies located in the area such as Mabati have complained and threatened to move their businesses elsewhere if the road is not improved – but to no avail. Mombasa residents say the road is actually better than in years past, and have faith that repairs will be done in 2006. You won’t believe how bad it is until you try it, but you should only attempt to drive through in the daytime. A nighttime drive though will expose you to severe vehicle damage and a possible robbery attempt.

For security purposes I was told that if you get a puncture in this area, or other parts of the highway (and especially at Night), it is advisable to block the whole road with your vehicle. This forces other vehicles to stop and support you while you carry out you repair your puncture. People who pull to the roadside are often attacked.

Nearer Nairobi (between the Athi River and Machakos turnoffs) the road is also slowly deteriorating as no maintenance is being done.

Banking
Pesa Point have installed an ATM at Mtito Andei (halfway point of journey) in what is arguably the town’s busiest location – the Caltex petrol station where Coast bus make their rest stops. KCB also has some branches along the way, but most Banks only have branches in Mombasa

Wildlife
I saw a giraffe near Sultan Hamud, baboons, and three herds of Zebra who appear to have permanently settled on the roadside just after Mtito Andei. Also saw two elephants approaching the road near Manyani, and I almost ran over a four-foot monitor lizard that wanted to cross the road near Mariakani. Oh, and some cows grazing at Nyayo Stadium in Nairobi under the close watch of Masai herdsmen.

Summary
Overall it’s a good drive, whether going to or from Mombasa but only if you leave early enough to tackle the bad roads (at either end) with plenty of time and daylight left – it’s also advisable to go in a convoy of vehicles. Next time I go to Coast, I will try to take the train, as it is the only mode I have not recently used. The Kenya Airways flights take one hour and are unremarkable except for a clear view of the disappearing snow atop Mt. Kilimanjaro.