CG/LA Infrastructure's InfraBlog
Posted on July 26, 2013 11:30 am
VENTURES AFRICA – The New Partnership For Africa’s Development (NEPAD) and partner development institutions recently endorsed the Africa Development Bank (AfDB’s) Africa50 Fund. Reading about it, immediately it struck me that this could just be what Africa needs. At the very same time, the pessimistic side of my mind asked, “Is this the Offering Plate” we need or will it really be the vehicle for large-scale infrastructure projects across the continent?
The endorsement of the Africa50 Fund was reached at a meeting hosted by the AfDB in Tunis on July 19.
Back in 2002 was the year when my career began in the economic development sector. Most days I take a little time to scour twitter to keep up to date and see what is happening. Hardly do I come across real development work. We have moved away from the inter-connectedness of development within the context of communities. The first three years of my career in development and continually thereafter, as recent as February this was spent training people within a poor community.
There is a discord
Much is centred on Africa’s infrastructure development. Yet there are other immediate realities that are really concerning. These include; lack of energy, access to decent (not the best, just decent) education, food security and basic sanitary services with fresh running water.
“NEPAD was represented by Professor Tandeka Nkiwane, adviser to the CEO on Inter-Institutional Affairs, and Mr Symerre Grey-Johnson, Technical advisor to the NEPAD Agency on infrastructure”.
“The high level meeting was attended by AUC Chairperson Dr Nkosazanan Dlamini Zuma, Dr. Carlos Lopes, Executive Secretary of the Economic Commission for Africa (ECA), President of the AfDB, Dr Donald Kaberuka, representatives from Regional Economic Communities (RECs), regional Development Financial Institutions (DFIs) and the NEPAD Agency”.
Missing from this equation are the people that know how to develop the entrepreneurial sector that make up the middle-class around the world.
In South Africa, the unemployment rate has remained between 24 percent and 30 percent since 2000. Despite South Africa’s economic expansion, growth and redistribution of wealth have not been realised. A severe shortage of new job opportunities has led many South Africans, who have been unable to enter the formal job market, to look at street trading to generate an income.
This is Africa’s largest economy and yet this is our experience. Education in South Africa, well there is little to say about this area that is regarded as a basic human right.
Should we as Africa be focused on developing or maintaining growth rates of 7 percent or above? Is this a relevant argument for the development of Africa? Can we develop slower, regionally and do a great job at it?
There is so much outflow of capital from this continent’s shores and yet through these resources we have some of the highest growth rates globally. So exactly what is it we are doing right that we seek to maintain? Africa needs deeper discussions around the practicality of the Africa50 Fund. Our leaders also need to look at regional development within the context of what is needed within its realistic and perpetual growth, not maintaining something that we actually had no control over or is not a result of pragmatic development that is benefiting our own people. African leaders speak of 7 percent growth as if this is the result of their leading and achievement.
According to NEPAD: “The Africa50 Fund will be innovative in its design and structure, leveraging infrastructure financing resources from African central bank reserves, pension funds, sovereign wealth funds, the African Diaspora, and high net worth individuals on the continent.”
Just who benefits directly from these infrastructure programmes?
Who will own the downstream sector that we hope will be developed along with the major infrastructure projects being planned.
A Lesson in History
The Gilded Age was a period of economic growth as the United States jumped to the lead in industrialization ahead of Britain. The nation was rapidly expanding its economy into new areas, especially heavy industry like factories, railroads, and coal mining. In 1869, the First Transcontinental Railroad opened up the far-west mining and ranching regions. Travel from New York to San Francisco now took six days instead of six months. Railroad track mileage tripled between 1860 and 1880, and then doubled again by 1920. The new track linked formerly isolated areas with larger markets and allowed for the rise of commercial farming, ranching and mining, creating a truly national marketplace. American steel production rose to surpass the combined total of Britain, Germany, and France.] London and Paris poured investment money into the railroads through the American financial market centred in Wall Street. By 1900, the process of economic concentration had extended into most branches of industry—a few large corporations, called “trusts”, dominated in steel, oil, sugar, meat and farm machinery. Through vertical integration these trusts were able to control each aspect of the production of a specific good, ensuring that the profits made on the finished product were maximized, and by controlling access to the raw materials, prevented opponents from entering the marketplace. This practice would lead to a sole producer of a certain manufactured good and meant no competition in the marketplace to lower prices.
According AfDB, “the competitiveness of African firms is due lack of infrastructure, which has been in dire need of funding. The AfDB’s Africa50 Fund is being hailed as an innovative vehicle to advance a number of key related areas, including Africa’s natural resources, internal savings, external support and capital markets to finance bankable, high-return, transformational regional infrastructure projects. In this respect, the three prime Pan African institutions will therefore, meet in Tunis to rationalize approaches and foster synergies.”
All of a sudden I am starting to worry!
During the 1870s and 1880s, the U.S. economy rose at the fastest rate in its history, with real wages, wealth, GDP, and capital formation all increasing rapidly. For example, between 1865 and 1898, the output of wheat increased by 256 percent, corn by 222 percent, coal by 800 percent and miles of railway track by 567 percent. Thick national networks for transportation and communication were created. The corporation became the dominant form of business organization, and a scientific management revolution transformed business operations. By the beginning of the 20th century, per capita income and industrial production in the United States led the world, with per capita incomes double that of Germany or France, and 50 percent higher than Britain. The businessmen of the Second Industrial Revolution created industrial towns and cities in the Northeast with new factories, and hired an ethnically diverse industrial working class, many of them new immigrants from Europe.
This emerging industrial economy quickly expanded to meet the new market demands. From 1869 to 1879, the US economy grew at a rate of 6.8 percent for NNP (GDP minus capital depreciation) and 4.5 percent for NNP per capita. The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8 percent, while the GDP was also doubled. Real wages also increased greatly during the 1880s. Economist Milton Friedman states that for the 1880s, “The highest decadal rate [of growth of real reproducible, tangible wealth per head from 1805 to 1950] for periods of about ten years was apparently reached in the eighties with approximately 3.8 percent.”
There seem to be some fundamental similarities to our way of thinking, yet at the same time some things we may be overlooking. There are 56 states in the US and 54 countries in Africa!
The difference – there was much less than 1 billion people in the US during their development.