Following recent talk of “deglobalisation” and speculations that the World Trade Organisation might have had its time, the agreements brokered at its recent Ministerial Conference show that free and open global trade live on to see another day. In the meantime, however, what can’t be denied is that the pandemic, its shutdown of trade routes and the ongoing disruption of supply chains, has shaken the notion of global trade being the panacea, and ushered in a trend of regional blocs, deepening regional ties, and a move towards what could seem like regional and even national self-reliance.
While AfCFTA gives promise we have a long way to go – PPPs are part of the solution
While the African Continental Free Trade Area (AfCFTA) and its accompanying trillion-dollar investment framework will create the largest free trade area in the world, we’re not there yet. Indeed, the war in Ukraine and the ensuing food crisis across the continent are a pertinent reminder of our dependencies. Rates of progression vary, but many countries still need to create an environment where economic activity can thrive, and a large part of that means developing the appropriate infrastructure needed. In this context, public-private partnerships (PPPs) can offer a lifeline and lay the foundations for developing water, telecommunications, transport, and power, among other things.
Any PPP is not necessarily a good PPP
But any PPP isn’t a good PPP. For decent contracts and projects to happen, discerning governments with strong governance are required so that untenable projects that only go on to indebt countries and disadvantage their populations yet further are avoided. Indeed, despite the numerous successful PPP projects across the world, a lack of regulatory oversight and inadequate evaluation process from the get-go has resulted in at least as many failures.
The Grand Inga Dam project in the DRC might not be classed as such – 2 of the 6 dams originally envisaged have at least been built – but the project has and continues to be shrouded in controversy.
The initial international economic community’s vision to develop a power grid that can supply a third of the continent’s power supply and spur economic development is far from achieved. Instead, as the current government attempts to push the third dam forwards, the previous two are seen to be responsible for a huge part of the country’s debt burden, were fast producing a fraction of the electricity they were sold to do (40% of capacity by 2002) and haven’t come close to meeting even the nation’s needs – an estimated 11% of Congolese have access to electricity. The projects at inception failed feasibility studies, showing them to be uneconomical. A lack of transparency and accountability, a missing environmental impact assessment or mitigation plans, and displacement of local communities are just some of the other charges against it.
While big infrastructure projects may seem tempting to governments in the race towards economic development, when it comes to PPP investments, governments need to be more discerning of the projects they choose to embark upon. Many of the failures of PPP projects could have been avoided or mitigated with strong governance in place – of not just the projects, but of the governments themselves. ‘Investability’ is crucial to attract the necessary private investment, but beyond that, countries should also be politically stable, free from corruption, and adhere to rule of law. All these conditions count when it comes to the successful and sustainable PPP projects.
Rwanda shows that good investments with governance can spell growth
Take Rwanda for example, whose government is investing in PPPs with the potential to offer national and potentially pan-African benefits. Making that link with governance again, Rwanda was recently classed as the best performing low-income country in the world and ranked 2ndamongst countries in sub-Saharan Africa in the 2022 Chandler Good Government Index. Its rapid economic growth over the last two decades is in part due to its strong focus on improving not just its financial and economic governance, but also its leadership and long-term vision.
One of its PPP agreements, Africa Improved Foods (AIF), is creating jobs for locals, investing in farming, and sourcing their ingredients from the country to boost local economies and fulfil their vision for “Africa to feed Africa”. Meanwhile, AIF is also working to resolve the malnutrition and stunted growth of the country’s children by providing them with nutritious food during the first 1,000 days of their life, with the goal of reaching 1 million malnourished children and pregnant or breastfeeding women annually by 2031. Looking to solve malnutrition in the region, their next step is to expand operations to Ethiopia and other East African countries.
As the world pivots towards a seeming pulling in and localisation of trade and agreements, good PPPs and the AfCFTA provide countries with funds, resources, and mechanisms to build their physical and human infrastructure, and in so doing move us closer to a position of greater intercontinental trade and regional autonomy. In the meantime, foreign institutions and investors coupled with smart and discerning governments still have a large and valuable role to play in developing the capacity of countries and businesses in Africa.
Written By Paulo Gomes – Chairman and Founder of Orango Investment Corporation