Trade integration in Africa depends on fixing the infrastructure deficit
If construction and building material industries get ahead of the wave, they can benefit from investment surge
The world recently witnessed the signing of the biggest free trade area in the world by heads of African governments in Kigali, Rwanda. The African Continental Free Trade Area (AfCFTA) is the largest such free trade area in terms of the number of countries involved.
The African continent consists of 55 countries, with 55-odd currencies (some have chosen to adopt the dollar), 55 regulatory frameworks — and 55 different sets of red tape. This scenario means doing business on the African continent can be challenging, for both foreign and domestic investors. However, there is a general consensus among economists and scholars alike that, when it comes into force, the AfCFTA will yield major economic benefits for the continent, its citizens and businesses.
But what does it mean for African businesses and international investors? What opportunities does it offer for our industry?
The new trade area gives the infrastructure-build programme added impetus. A researcher at the Cape-based Trade Law Centre, Talkmore Chidede, contends that "the AfCFTA’s objective to boost intra-African trade cannot be achieved without adequate trade-related infrastructure".
This is important considering that the African continent has a serious infrastructure deficit. A 2009 World Bank report entitled Africa’s Infrastructure: A Time for Transformation estimated that $93bn was needed annually for the continent to address this deficit. More recently, Kalilou Traoré, the Economic Community of West African States’s commissioner for industry and private sector promotion, put this at $100bn.
African governments, the private sector, the AU and its partners will have to embark on a serious and deliberate programme to build the necessary economic infrastructure to facilitate economic integration.
The construction industry should play a leading role in harnessing the development of this much-needed infrastructure. The rapid development of infrastructure, especially regional mega-projects on the continent, is urgent and critical. Infrastructure is a catalyst for economic growth, competitiveness and integration. An example is efficient port and transport infrastructure, which facilitates ease of movement of goods and people between different economies. Modern and world-class infrastructure will expedite the economic integration as envisaged by the free trade area, ensuring that the barriers of trade are removed both on paper and physically.
With this understanding the AU, in partnership with the UN Economic Commission for Africa, African Development Bank and the Nepad Planning and Co-ordinating Agency, among other significant role players, has developed a focused programme to attend to the infrastructure challenge — the Programme for Infrastructure Development in Africa (PIDA). The programme is "a continental initiative to help address the infrastructure deficit that severely hampers Africa’s competitiveness in the world market".
One of PIDA’s overall strategic objectives is to "enable Africa to finally build ‘the’ common market". It asserts that by improving access to integrated regional and continental infrastructure networks, countries will meet the forecast demand for infrastructure services and boost competitiveness by increasing efficiencies, accelerating growth, facilitating integration into the world economy, improving living standards, and unleashing intra-African trade.
In my view the construction and associated industries should continuously and as a matter of urgency engage the various governments and multilateral institutions that have the responsibility of providing the necessary infrastructure. This should be done with a view to understanding the priorities and development needs, especially the scale, impact and bankability. This will guide both our production capacity allocation and investment decisions.
In this context, PIDA identified four key infrastructure priority areas that require urgent attention: transport, energy, information and communications technology and trans-boundary water sectors. These sectors are the backbone of industrial development and offer significant potential for economic growth and development.
Three of the priorities offer abundant opportunities for cement industry players such as PPC. However, these will not materialise if the industry is not proactive and strategically geared to leverage off these opportunities.
With the implementation of the various infrastructure projects it is likely that demand for PPC’s products and services will increase. The industry cannot afford to be found wanting when this happens. It is thus my contention that, informed by solid and credible market intelligence, the industry should make the necessary investments before demand spikes. It is imperative that we start forming the necessary critical partnerships now, to ensure that when the time comes we are well positioned to deliver world-class quality infrastructure.
The investments such as those PPC has made in various African countries — specifically SA, Rwanda, Democratic Republic of Congo, Ethiopia, Zimbabwe and Botswana — will go a long way towards bolstering the production of cement, a product that is critical and necessary in any large infrastructure project. PPC’s choice of countries to invest in was deliberate. Not only do these have a high potential domestic demand for cement and related products, but they are strategically positioned to serve neighbouring countries in regions where they are situated.
Importantly, we at PPC don’t see ourselves as just cement producers; we see ourselves as playing a bigger role in contributing to the growth and development of all our chosen markets and the continent at large; igniting meaningful collaboration both within and outside our organisation.
Many of Africa’s 55 countries are small, with populations of fewer than 20-million and economies of less than $10bn.
Their infrastructure systems, like their borders, are reflections of the continent’s colonial past, with roads, ports and railroads built for resource extraction and political control, rather than to bind territories economically or socially. Most would battle to build the critical infrastructure on their own and require partners that are driven by the same objectives.
A proactive approach involving delivery-focused partnerships will be a game changer as it will bring together small and big economies to deliver mega regional infrastructure projects. The essential benefit of regional infrastructure is the formation of large, competitive markets instead of the current collection of small, isolated and inefficient ones. Undoubtedly, the industry will benefit during the construction phase as large competitive markets form as a result of integrated economic development.
Perhaps the most obvious example is logistics ports that will facilitate easy movement of goods across the continent with a consequence of reduction in logistics costs. Initiatives such as the North-South Corridor and the Southern Africa Development Community (Sadc) Infrastructure Master Plan present massive opportunities for public-private partnerships.
There is recognition that public-private partnerships help governments close material, financial, managerial and technical gaps, while supporting regional integration. For example, there is a $100bn funding gap for the Sadc Infrastructure Plan. The North-South Corridor project, conceived as the area between Durban and Dar es Salaam, is equally ambitious and costly. It comprises 157 projects and includes 59 road projects, 38 rail projects and six bridge projects (part of PIDA).
The AfCFTA provides a single rules-based framework for doing business and investing in Africa. It is precisely what the continent needs at this moment. Harmonisation of trade and investment rules, overcoming the constraints associated with small economies, achieving economies of scale and integrating African economies are the ultimate objectives of the free trade area.
However, this will and can only be realised if all critical sectors of the economy are mobilised, engaged and focused in a single-minded manner.
• Ramafoko is PPC MD of international operations.