Processual Trajectories for a Visionary African Human Capital Development Strategy

Africa:

Processual Trajectories

for a Visionary Strategy for Infrastructure & Human Capital Development

Programme for Infrastructure Development in Africa

African Development Bank - Accelerating Infrastructure Implementation for Africa’s integration,

PIDA Week, Abidjan, Côte d’Ivoire, 13-17 November 2015

Public Lecture CXXXI, MMXV

Costantinos B. Costantinos, PhD

Moderator PIDA "Infrastructure for Jobs" Professor of Public Policy, School of Graduate Studies , College of Business & Economics, AAU

Africa has the fastest growing demographics in the world. Deep changes, which all have had an impact on the constitution of its human capital, are affecting the African continent. A fast growing young population could be an asset for change, progress and dynamism, but also a threat to peace and security

One of the major challenges for the African continent

in the upcoming years and decades will be to absorb the ever growing young population by sustainably creating new jobs. According to the World Bank, Africa’s working age population has recently been growing by 13 million or 2.7% every year. Since not only recently, renowned economists stress the importance of infrastructure for inclusive, long-lasting economic development. The OECD, for instance, highlights that infrastructure investment contributes as much as 2% to the GDP of African nations. In absolute terms this means that for every dollar spent on public infrastructure development the GDP of a country rises between USD 0.05 and USD 0.25.

At the XVIIIth Ordinary Session of the African Union (AU) held in Addis Ababa, Ethiopia, on 29-30 January 2012, the AU Heads of State and Government formally endorsed the Program for Infrastructure Development in Africa (PIDA) through adoption of the “Declaration on the Program for Infrastructure Development in Africa” (Doc. EX.CL/702 (XX)). PIDA approximately requires an investment of 68 billion USD for its 51 priority programs in the sectors of energy, transport, water and ICT to be implemented until 2020.

PIDA provides a common framework for African stakeholders to build the infrastructure necessary for more integrated transport, energy, ICT and trans-boundary water networks to boost trade, spark growth and create jobs. Implementing it will transform the way business is done and help deliver a well-connected and prosperous Africa. PIDA's overall strategic objective aims at accelerating the regional integration of the continent and facilitating the creation of African Regional Economic as planned by the Abuja Treaty.

The expected outcomes are reduce energy costs and increase access, slash transport costs and boost intra-African trade, ensure water and food security, and increase global connectivity.

A high level panel on PIDA week was held on Sunday, 15th November from 11.30 AM - 14:00 PM at the African Development Bank Headquarters, CCIA Building, Avenue Jean Paul II, Abidjan Plateau. The objective of the session was to have a dynamic illustration and discussion of importance of infrastructure, in particular large-scale, regional infrastructure (i.e. PIDA), for the sustainable creation of jobs for Africa’s constantly growing young population: Infrastructure as a central leverage for youth development on the continent.

Implementing infrastructure is always complex—more so for regional projects with many stakeholders. For PIDA implementation to succeed, coordinated action must be taken all along the project chain, starting with the States who must provide political leadership (the catalytic role of the Presidential Infrastructure Champion Initiative (PCI)), which facilitate implementation by removing bottlenecks. States and financial institutions, such as the AfDB, must provide financial leadership. Both are required to avoid the mistakes of past regional infrastructure efforts. At the regional level, RECs and the selected implementing agencies must ensure that countries involved are united and that project developers are skilled.

Paradigm shifts

As Dr Ibrahim Assane Mayaki, CEO, NEPAD Agency stated, “Through the coordination of the AUC, NEPAD Planning and Coordinating Agency, the AfDB, UNECA and the REC, PIDA’s complex and long-term strategic planning for

Africa’s regional infrastructure (2012–40) has

been conducted in cooperation with all African

stakeholders. The resulting framework of PIDA

is a direct response to the gaps, challenges and

needs identified across four key target sectors:

energy, transport, water and ICT, organized so

that options are presented for the short and

medium term (through 2020 and 2030) but

with a long-term view for additional projects

to meet demand through 2040".

He cautioned that failure to effectively deal with deepening unemployment among Africa’s growing youth population could seriously erode the economic gains achieved across the continent in recent years.

Dr Mayaki warned that Africa faces a large and growing unemployment challenge, with 300 million youth entering the labour market in 2030. Half of the continent’s population of 1.1 billion people is currently under the age of 25 years, with this population expected to double to 2.4 billion people by 2050. Moreover, the rate of entrants into Africa’s labour market is expected to increase by three per cent every year until 2020.

Dr Mayaki emphasized that inclusive policies are a pre-requisite for political stability. “A population that has an average age of 49 years cannot be governed in the same way as a population where the average age is 19 years old,” he said. “If we do not succeed in the next 10 years in changing the way we govern and conduct business, we might face huge stability issues on the continent.”

According to him, accelerating the development of Africa’s regional infrastructure could be the game changer that will trigger industrialisation and create jobs. It is for this reason that African leaders developed the Programme for Infrastructure Development in Africa (PIDA) in 2012, as the means for socio-economic growth and intra-African trade.

It was now time to build critical skills necessary to absorb Africa’s youthful labour force and implement infrastructure projects, he said. The CEO mentioned that the NEPAD Agency was working through the leadership of the African Union on a continental framework that will address skills development and job creation for the youth.

“The Priority Action Plan (PAP) thus, is the Project and Programme list for short- and medium-term implementation, the heart of PIDA. The PIDA Priority Action Plan based on African ownership details the immediate way forward by presenting actionable projects and programmes that promote sound regional integration between 2012 and 2020. Nevertheless, as reported during 2014, challenges that impede the accelerated implementation progress have been identified and documented for action.

“Yet Africa’s challenge is not just a lack of resources, but a lack of bankable projects. We need to invest in the capacity to invest. In the reporting period, complementary instruments have been developed to build the necessary capacity for early-stage project preparation, while the Africa50 Fund has been developed to finance the implementation of PIDA and other regional infrastructure projects. There have been some gains through the Regional Economic Communities in providing the

enabling environment for project implementation, through

harmonised policies and regulatory frameworks”.

Objective of

the PIDA Panel

The objective of the panel is to raise awareness on mutually beneficial correlation of PIDA/Infrastructure & job creation/skills development for youth

• What data/ information do we have?
• What is our objective? What worked, what it didn’t?
• Additionally, it is to come up with innovative ideas/concepts on how infrastructure projects shall be planned, managed to have greatest effect on job creation/youth development, how Job creation/skills development can be factored into infrastructure investment.
• Moreover, it is to mainstreaming the role of academia into PIDA - research to help raising awareness and to help make informed decisions.

The representative of academia on the panel nourished the discussion with research results on the mutual correlations between infrastructure (electricity, roads, rail, internet, telecommunications and trans-boundary water) and youth development (more specifically jobs and training for African youth). The introductory presentation focused on the effects of infrastructure on employment and youth development that addressed the following arenas of the infrastructure-jobs nexus

Questions to

Professor Ahmadou Aly Mbaye

(Academia)

• How can infrastructure, especially large-scale regional infrastructure contribute to job creation?
• How can infrastructure contribute to youth development more broadly?
• From an academic perspective: What needs to be done to maximize the benefits of infrastructure for Africa’s youth?
• Why is it so crucial to sustainably create new jobs in Africa?

Professor Mbaye underpinned the structural reforms that are necessary to create employment and aligned his presentations along the following topics

• Labor supply and major characteristics in Africa
• Business environment and the demand for labor
• What infrastructure services can achieve
• Structural reforms that are needed

Labor Supply Major Characteristics in Africa

Business Environment and the Demand for Labor

What Infrastructure Services Can Achieve

Structural Reforms that Are Needed

Questions to the Infrastructure/PIDA financier

• What was your motivation to participate precisely in this discussion? Why do you think it is so important?
• Do you have any on-the-ground figures or estimates of how PIDA projects contribute to job creation – directly and indirectly e.g. on the basis of a case study (for instance North-South-Corridor)?
• How are these numbers measured / estimated? Which projects have the highest employment effects and why?
• How sustainable are the employment effects? How can these be made more sustainable?
• What are critical success factors to increase positive impacts of large-scale infrastructure projects on employment and youth development in Africa? Critically reflect on employment and youth development effects of PIDA implementation, i.e. what works, what doesn’t? What needs to be done by whom?
• Does the bank’s investment policy make reference to job creation/youth development? If so, how? How is job creation or youth development in a broader sense factored into infrastructure investment?
• Do you know of infrastructure investment (or more specifically PIDA investments) where there were potential negative impacts on Africa’s youth? What needs to be done to prevent that?
• As a banker what do you think needs to be done in terms of policy to increase the positive effects of infrastructure investment for job perspectives of young Africans? What’s the role of the private sector here? What’s the role of infrastructure investors to increase the education and employment effects for youth?

Moe Shaik

Group Executive, International Finance

Development Bank of South Africa

Mr. Moe Shai addressed the questions above by starting out with the fact that the DBSA addresses infrastructure financing as long as they have effects on advancing public goods, besides their return on investment.

Projects submitted to the

DBSA must have development impact. They should advance human development and human security. Such projects can address provision of basic services (water supply, electricity...)

DBSA finances RESILIENT INFRASTRUCTURE. Projects must withstand climate change impacts and other forces of nature that may result

in building, bridges and roads that

collapse under natural impact

DBSA supports and finances capacity development to do planning for projects that have development impact, socially relevant projects and projects that address resilience to climate change such as rising levels of seas that threaten cities on shores.

Questions for the Private Sector representative

• From a private sector perspective, why is PIDA interesting for you? Why did you choose to become a member of the so-called PIDA Continental Business Network (CBN) which acts as platform for direct exchange between public and private sector in order to advance infrastructure development on the continent?
• What motivated you to participate in precisely this panel?
• You have extensive and perennial experience with capital markets in Africa. When the private sector invests in infrastructure projects like PIDA projects, how are socio-economic factors taken into consideration, e.g. employment creation, education? give an example?
• What role can private investors play to advance infrastructure development on the continent in a more inclusive manner to increase beneficial effects for the society?
• What do private investors need in terms of policy and regulation to do so? Do you have any best-practices here?

Mr. Yofi Grant

Non-Executive Director, Databank Brokerage Ltd. Databank Private Equity Ltd & Databank Financial Services Ltd.

Mr. Grant started by saying that his interest in PIDA stems from the promises PIDA has for Africa's rapid development by providing infrastructure and jobs simultaneously. He is specifically interested in contributing to the development of capital markets to finance infrastructure and hence job creation

Indeed, securities markets, corporate governance, and non-bank financial institution reforms help mobilize domestic & international savings and allocate these savings efficiently to the most productive uses in the economy.

• They provide the long-term local currency financing needed to finance infrastructure investments by governments, sub-sovereign and private entities; finance long-term housing mortgages increasing affordability and access to housing for the poor; facilitate equity and debt finance for small enterprises;
• They enable individuals to save for their old age and purchase retirement products; allow states, corporations, and households to manage risks and pool and transfer risks to domestic and international agents that are best able to shoulder them; diversify the financial system through local currency capital markets;
• They improve risk governance and company performance, resulting in responsible and productive institutions that contribute to sustainable economic growth and financial stability, deepen and broaden capital markets improving quality and transparency and reduce financial sector risk and finance development with stability.

Claude Yao Kouame

Senior Specialist on Labour-based Infrastructure Programme, ILO, Dakar, West Africa.

The moderator asked Mr. Kouame still too many young people are not benefiting fully from the education system, although there has been progress in educational attainment across the generations. Approximately 40% of young aged 15-29 in the region is currently enrolled in school. Yet still far too many young people are not accessing education at all or are leaving before completion. The lack of education/training is not an obstacle to finding work – unemployment rates increase with the level of education – but the lesser educated youth remain disadvantaged in terms of wages and access to stable employment.

Mr. Kouame raised the following issues in his response to the questions and a general presentation of the programme he is working in. He underlined the fact that ILO has been in the forefront to address the issue of employment for a long time even before the need for infrastructure development by African leaders was on the agenda. The ILO Labour-based Infrastructure Programme is actively undertaking training and skills acquisition in infrastructure development. Labour-based infrastructure development directly addresses the 'jobs' effect it has in creating massive employment in a short period. Skills training in building roads, rail systems, power generation and power transmission systems enable young Africans to prepare themselves for programmes like PIDA. The availability of trained young Africans to enter the labour market encourages the state and investors to undertake infrastructure projects without having to import labour (for instance, Chinese investments are bringing labour from China)

Discussion

Industrialisation and Citizen Entrepreneurship

• Development of agro-industry
• Development of capital funds
• Social enterprises - cooperatives mediating between the state & private sector
• Policy design - power politics

Skills and Good Economy

Skills development without a good macro-economy is not the way to go (see Portugal, Italy, Ireland, Greece and Spain (ironically acronymed PIIGS) they have populace with skills but the economies are in shatters;

Inclusive Growth

Rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from the post-2015 development agenda. Rapid pace of growth is unquestionably necessary for sustainable development, but for this growth to be sustainable in the long run, it should be broad-based across sectors, and inclusive of the large part of the country’s labor force. Inclusive growth assumes that economic growth is the most powerful tool for elimination of poverty. However, this overarching claim ignores the fact that growth can also create poverty because it brings technological changes, shifts in property and user rights and transformations in the labor markets, which can dispossess and impoverish large numbers of people.

Corruption

What is required of the different development players to improve efficiency & effectiveness in the use of available resources for sustainable development is to

• Curb corruption caused by political, economical & socio-cultural factors characterized by top-down style of governance & authority radiating from the centre. Institutionalization of government structure & civil service, control mechanisms of legislation can curb the practice, the state of transparency & accountability & check & balance can be taken as the major factors that increase the rate of prevalence in various countries.
• Public management challenges & reform must be augured on the hypothesis that the relative potency of leadership requires a plural set of rules & governing institutions, which promote & protect rules of peaceful participation & competition.

Notwithstanding the fact that the effectiveness of leadership is intertwined

with the notion of objectivity, a noxious illusion persists that a political civil service would deliver superior public goods, prevails. Hence, evolving a meritocratic state can deliver visionary public spending, fiscal policy discipline & inward foreign direct investment; coupled with prudent oversight of financial institutions & legal security for access to justice, labor & property rights -- a brand of governance that unleashes free enterprises in a pluralistic milieu.

• States should “steer rather than row”; empowering citizens to solve their own problems;
• Competitive rather than monopolistic by deregulating activities that could be carried out by the private sector more efficiently;
• Mission-driven rather than rule-bound, setting goals for meeting objectives;
• Results-oriented by funding effective outcomes rather than inputs;
• Customer-driven in meeting the needs of citizens rather than those of the bureaucracy;
• Enterprising in earning revenues rather than just spending tax resources;
• Anticipatory by investing in the prevention of problems rather than solve after they occur;
• Decentralized: working through participation & teamwork in government agencies

Tackling Illicit Capital Flows for Economic Transformation

• Total illicit financial outflows from Africa, conservatively estimated, were approximately $854 billion during the period 1970 to 2008;
• Total illicit outflows from Africa may be as high as $1.8 trillion;
• Sub-Saharan African countries experienced the bulk of illicit financial outflows with the West and Central African region posting the largest outflow numbers;
• The top five countries with the highest outflow measured were: Nigeria ($89.5 billion) Egypt ($70.5 billion), Algeria ($25.7 billion), Morocco ($25 billion), and South Africa ($24.9 billion);
• Illicit financial outflows from the entire region outpaced official development assistance going into the region at a ratio of at least 2 to 1;
• Illicit financial outflows from Africa grew at an average rate of 11.9 percent per year. (GFI)

There is a considerable literature which analyzes the relationship between macroeconomic environment and capital flight, a recent UNECA report, for instance, summarized these relationships in an effort to identify the root causes of capital flight

• Weak financial management and enforcement systems, which make it possible to repatriate resources through theft and tax evasion.
• Political instability, which makes the holding of domestic assets risky and therefore leads to a search for a safer home for theses assets.
• Search for better returns on investment outside the country.
• Financial liberalization which has made it easier to externalize resources.
• Limited financial instruments in the domestic market which limit the available investment opportunities in the local market.
• Macroeconomic instability manifested in the form of high inflation, exchange rate volatility and the high cost of borrowing.
• Heavy and capricious taxing of investments and deposits, which make the option of investing in markets where such taxes do not exist attractive.

Thank You

Moderators Notes

Conclusion

Dr. Ibrahim Mayaki, CEO, NEPAD

Accelerating the development of

Africa’s regional infrastructure could be a game changer triggering industrialisation and create jobs. It is for this reason that African leaders developed the Programme for Infrastructure Development in Africa (PIDA) in 2012, as the means for socio-economic growth and intra-African trade. “Structural transformation will happen through industrialisation and industrialisation will be the main

factor for creating jobs

costy@costantinos.net

Background music - "Meskerem" by Elias Negash

Meeting social expectations: Social expectations refer to the belief citizens hold as to what the state should provide to its citizens (OECD, 2008c). There are

• “realistic expectations” and “normative expectations” with regard to how society perceives the state (OECD, 2010a: 37).
• Normative expectations “are based on beliefs and perceptions about what a state should look like, what it should deliver, and how it should relate to society “ based on “political contestation, ideology and beliefs” (ibid).
• Realistic expectations refer to what the population expects the state to deliver in reality, based on previous experience (ibid).
• Political will: Political will refers to the willingness of the government to direct state resources and capacity to fulfill social expectations.
• State responsiveness: States are responsive when they have the capability and will to deliver security, social services and justice according to the prevailing societal expectations.

AHA Current Operation

AHA footprints

Algeria, Angola,

Burundi, Cameroon,

Chad, DR Congo,

Ethiopia, Kenya, Liberia, Namibia, Republic of Guinea, Rwanda, Sierra Leone, Somalia, South Sudan, Sudan, Uganda and Zambia