A New Trilogy? BRICS, Infrastructure and Development on the African Continent. By Agathe Maupin

 

Agathe

Agathe Maupin is currently holding a researcher post at the South African Institute of International Affairs (SAIIA) in Johannesburg, and is also Research Associate at the Laboratory Les Afriques dans le Monde (LAM) in Bordeaux. She defended her doctoral thesis in 2010 on water management policies in the transboundary catchment areas of Southern Africa.

 

 

 

Abstract

The growing position of Brazil, Russia, India, China and South Africa on the African scene offers new development opportunities for the continent, concerning infrastructures in particular. By privileging investments in certain domains rather than public development aid, the BRICS are establishing new forms of relations. During the last BRICS Summit, the members expressed once more their support to the PIDA. Which infrastructures are privileged and, through these, what interests do the BRICS defend on the African continent?

Introduction

Why did a future development bank find itself at the centre of the debates during the last BRICS Summit which took place in March 2013 in Durban, South Africa? The BRICS have already invested a lot these last years, in improving and multiplying infrastructures on the African continent, by relying mainly on bilateral agreements and partnerships. But it is now time for trilateral co-operation as well as complex and multilateral projects.

Because many bilateral agreements and projects already exist, as do regional institutions, the need for general frameworks or even standards seems to show: trilateral (or even multilateral) co-operation, which usually focuses around a project – whether or not including infrastructures – could be facilitated by a bank shared by BRICS members.
Moreover, the African Union Commission, in partnership with NEPAD Planning and Co-ordinating Agency, the African Development Bank and the UN Economic Commission for Africa, certainly had the continent’s integration, development and socioeconomic co-operation and their potential investors in mind when they proposed a Programme for Infrastructure Development in Africa (PIDA).
The PIDA has been proposing to interested parties from Africa, a common framework of integration for infrastructures to be developed on the continent. As such, the proposal’s foreword specifies that “implementing PIDA will require solid co-ordination structures and mobilising all relevant funding sources, both public and private. […] We invite Africa’s various development partners and the private sector to consider supporting PIDA’s delivery.”[1]

Priority projects have already been identified and many of them are now ready to be financed and implemented, thereby illustrating an opportunity for the BRICS to invest in infrastructures on the African continent. The expression “development partner” used in the PIDA report is far from trivial: from development aid to partner, apprehending such an expression has been evolving over the years.

The recent advances concerning the creation of a South African Development Partnership Agency (SADPA), in 2013, begs the following question: confronted with development as a global issue, are the BRICS going to draw inspiration from USAID, DFID or EuropeAid among others, or are they going to outline a common strategy? Within the BRICS, development aid or partnership is more or less recent, targeted and planned according to several criteria. Moreover, the opportunity to invest in the infrastructures of the African continent as presented by the PIDA, does not constitute a question mark over previous strategies (bilateral and in other sectors for example) but, rather, the beginning of a more shared and integrated support between actors of development on the continent.

Return to the beginning of the BRICS and development: aid or partnership?

As one can easily note, their first forms of investments in the development of the African continent is not what the BRICS have in common! If China and Russia already had a go at development during the Cold War, Brazil and India, former developing countries and today emerging powers, are more recent investors. As to South Africa, it is only as from the end of apartheid, and therefore from the beginning of the 1990s, that the country was able to begin investing officially in the development of the continent.

Chinese assistance in African countries exists since the beginning of the 1960s: several sectors and countries have benefited from this early assistance with, for example, sending Chinese experts and funds to Egypt (Suez Canal), producing matches and cigarettes in Guinea, producing sugar cane and tea in Mali, and supplying medical support in Tanzania and Somalia.

It is from the 1990s onwards that China truly began to invest on the continent with, today, over 900 infrastructure development projects[2]. Chinese financial resources for foreign aid are essentially of three types: subsidies, interest-free loans and soft loans. The first two come from State finances, while soft loans are supplied by the Import-Export Bank of China. Several Chinese ministries are involved in this regard, those of Foreign Affairs, Science and Technology as well as Trade. The co-operation privileged by China up to now has been more bilateral, but the opening of a Forum on China-Africa Co-operation (FOCAC) in 2000 marked a turning point in the growing importance of the dialogue between China and the entire African continent.
Today, as the first trading partner in Africa, China announced in June 2013 the launch of two additional investment funds within the framework of the China-Africa Business Council (CABC) and the China-Africa Development Fund (CADFund). Both funds should gather close to 1 billion USD each, and aim to stimulate the investments of Chinese companies (from the trading and mining sectors) by supplying them with capitals. Finally, China is contemplating moving a step further by relocating companies on the African continent [3].

Russia experienced several phases in which Sino-Soviet and international relations during the Cold War played a certain role, i.e. the pre- and post-1989 periods and two financial crises (1998 and 2008), interspersed with recent periods of rapid expansion.
Up until the beginning of the 1990s, the USSR supported several opposing political parties, then their regimes (in Ethiopia, Sudan, Democratic Republic of Congo, Zimbabwe, Mozambique, Angola, Namibia, and the ANC in South Africa), without for all that committing herself at the economic level, except for a few imports (cocoa, coffee and bauxite from Ghana, Côte d’Ivoire and Nigeria respectively).
More recently, after the 1990-2000 decade during which little exchange took place (except for the purchase of diamond and hydroelectricity in Angola, Namibia and DRC at the beginning of the 1990s), Russia reinvested on the continent: imports from Russia always involved specific countries (mainly Algeria, Egypt, Morocco, Guinea, Côte d’Ivoire and South Africa) and African exports towards Russia concern essentially metal (uranium and iron), fruits, oil-producing plants and tobacco.
The current global energy context has also been pushing Russia to turn to Africa for gas and oil. Several Russian companies in this regard have already been betting on the African continent [4] since the beginning of the 2000s:

– Lukoil in Ghana and Côte d’Ivoire in 2010 (900 million USD in submarine oil prospection);
– Gazprom in Algeria in 2006 (within the framework of a development and debt cancellation contract) followed by the construction of the Nigeria-Algeria pipeline (in partnership with the Nigerian national oil company);
– Norilsk Nickel, a metallurgic company, owns reserves in South Africa, Gabon, Guinea and Nigeria [5];

Rosatom is also on the way to building the first nuclear plants in Egypt and Nigeria . Following the G8 Summit held in Saint-Petersburg in 2006, Russia, through a concept note [6], proposed several elements to improve its international development aid with, for example, cancelling the debts of African countries which came to 20 billion Dollars [7]. An agency of the Russian government specialised in co-operation, the Rossitrudnichestvo [8], was set up in 2008 and was attributed missions overseas, as in Ethiopia. Fighting against infectious diseases or « energy poverty » and reinforcing education, are part of the sectors targeted by Russian aid which operates under a number of ministries, particularly the Ministry of Finances, the Ministry of Foreign Affairs, the Ministry of Economic Development, the Ministry of Education and Sciences, the Ministry of Health and, finally, EMERCOM. The creation of a development agency (of the RusAID type) has been officially proposed since 2007 but does not yet exist.
Indian Technical and Economic Co-operation (ITEC) was launched in 1964 as an aid programme which was part of the Indian Ministry of External Relations. Being essentially bilateral, ITEC emphasised capacity building, the transfer of technology and experience sharing. From the 1950s to the beginning of the 1990s, India benefited from international aid especially. Becoming a donor is a relatively recent state of affairs which was marked at the end of 2012 by the announcement that Great-Britain was stopping development aid to India.
More recently, India created a Development Partnership Administration (DPA) with the energy sector taking the lead in DPA-led projects. In the last decades, the countries which benefited the most from it were Bhutan, Sudan and Afghanistan. Ethiopia, Mali and Ghana are also among the ten countries benefiting the most from Indian aid which emphasizes South-South co-operation, and also favours bilateral agreements.
In 2008, the first Summit of an India-Africa Forum was organised in New-Delhi (IAFS I), followed in 2011 by a second Summit which took place in Ethiopia, under the patronage of the African Union (IAFS II). The PIDA was mentioned in the co-operation framework paragraph dedicated to infrastructure, energy and the environment [9]. Nineteen institutions should also be set up, such as various India-Africa Institutes of Foreign Trade (IAIFT) in Uganda, Information and Technologie (IAIIT) in Ghana, specialised in diamonds in Botswana and on Education, Planning and Administration issues (IAIEPA) in Burundi.
Today, India is taking on a wider perspective concerning South-South partnerships on environmental, technological and other issues within the framework of her commercial interests.

Because of her history, South Africa is a recent actor on the international scene of development aid, privileging perhaps more trilateral or even multilateral co-operation since the beginning of the 1990s.
Like India, South Africa is also a beneficiary and a donor at the same time, and the British Government also announced that it will be stopping development aid to South Africa in 2015. The European Union is also currently reconsidering its co-operation framework with South Africa, as a strategic partner since 2007.
Does the intermediary status of India and South Africa favour a co-operative framework focused more on partnership than development aid? The various declarations and projects in this regard bring one to think so, insofar as the focus is on mutual benefits. As such, South African investments in the (regional) energy sector include South African benefits such as the guarantee of an additional source of energy provision at negotiated tariffs, for example.

Since 1987, the Brazilian Co-operation Agency (ABC) has been proposing technical aid although not only: Brazilian assistance functions on a model split between various technical intervention sectors, which also include emergency aid as in Haiti.
As such, Brazil has led several projects in Afghanistan (population census aid and agricultural aid in 2009), as well as in African Lusophone countries such as Angola, Guinea Bissau and Mozambique, and in the health sector in South Africa. The volume of Brazilian aid, nearing one billion USD, today has placed the country at the same level as China (over 3 billion USD) and India (around 2 billion USD) in 2011.
Brazilian expertise and assistance, like those from India and South Africa, are appreciated because they are perceived as being adapted to the political, economic and socio-environmental context of the countries of the African continent.
While Brazil is also a beneficiary and at the same time a donor, the fact that many institutions have a hand in Brazilian co-operation puts a break on its expansion and readability. As such, the ABC is not an aid agency per se but depends on the Ministry of Foreign Affairs (known as Itamaraty) [10]. Moreover, many Brazilian companies are investing on the continent, without such investments being for all that listed as development aid, assistance or partnership.
Finally, Brazil today, like South Africa, favours trilateral co-operation, by using its intermediary position: for example, development aid projects are conducted with Japan in Mozambique [11].

As such, the BRICS have progressively implemented forms of bilateral as well as multilateral co-operation, which differ from post-WWII development aid models. IBSA and BRICS constitute innovative forms of intergovernmental collaboration, insofar as they open discussion areas for governance, development models and other issues between countries facing common challenges. These forms of collaboration have paved the way for South-South co-operation, centred on trade projects, investments, humanitarian relief, etc. However, competition is rife, as highlighted in the debates on competition between China and India, the allocation of disputed markets, as well as the analysis of partnerships between India and South Africa for example, both countries feeling very strongly about their competitive commercial interests on the African continent [12].

PIDA: an Opportunity to Match the BRICS?

What dynamics are inspired by the BRICS as far as infrastructure development on the African continent is concerned? Beyond BRICS projects, is there a made-in-BRICS thought on development? BRICS investments on the African continent have increased in the last years mainly, to reach almost 350 billion USD per year. For example, trade between China and the continent is at least 20 times more important than at the beginning of the 2000s. Nevertheless, this type of trade remains targeted: infrastructures absorb an important portion of the funds. Whether roads, railroads, ports, communication lines, dams or power plants among others, each infrastructure contributes to the development of the continent and the BRICS know this. BRICS financing, loans etc. usually include the expertise and experience of the group’s members in each domain. Such investments also concern large hydraulic infrastructures and Brazil, Russia, India, China and South Africa have not missed out on such opportunities: from Merowe in Soudan to Massingir in Mozambique, there is no shortage of examples!

Indeed, infrastructure consumes 60 % of the yearly loans and donations of 5 billion USD from the African Development Bank (ADB) for example. However, the infrastructure funding gap in Africa remains massive. In this light, the ADB is planning to launch a funding programme meant only for infrastructure: an African Infrastructure Fund (AIF) which would combine sovereign and non-sovereign, national as well as international resources to gather investments suitable for the development of infrastructures on the continent.

Financing large high-return infrastructure projects in Africa from the considerable surpluses of the BRICS, is currently very topical. Many documents have already put forward the importance of infrastructure in development, such as the Infrastructure Action Plan of the G20, the Infrastructure Consortium for Africa (ICA) and the Fonds fiduciaire UE-Afrique pour les infrastructures (FFI). The PIDA has been synthesising into one programme all current or former continental infrastructure initiatives, such as the plans and frameworks of the NEPAD and the Infrastructure Master Plans of the AU. The PIDA’s Priority Action Programme (PAP) has been putting forward around fifty urgent projects in the sectors of energy, transports, water as well as Information and Communication Technologies (ICTs). Projects have been selected according to three main criteria:

– their eligibility and regional integration;
– their feasibility and state of preparation;
– their impacts on development.

Infrastructure obligations, loan guarantees, regional community taxes are part of the financing means envisaged by the PIDA. Among PIDA projects in the energy sector, “large hydroelectric projects and the interconnection of energy exchange systems” (CUA, 2012) are clearly privileged. The large Millennium Dam in Ethiopia [13], Grand Inga in DRC, as well as more modest constructions such as the Lom Pangar Dam in Cameroon, are part of the middle- (2025) to long-term (2040) objectives of the PIDA.

China and Brazil are unavoidable investors on the continent when it comes to hydraulic infrastructure, with the presence of Brazilian company Camargo Correia in the Mphanda Nkuwa Dam consortium in Mozambique (40% of Hidroelectrica de Mphanda Nkuwa), and in the Inga III Dam project in the Democratic Republic of Congo, in which Chinese company Sinohydro might play a major role. Road infrastructures are also of great interest: Brazilian company Vale, for example, invested in the roads and railways of Mozambique. India and South Africa as to them are more present in new communication technologies and in agrobusiness, as testified by the activities of the Indian group Bharti Airtel in Chad and the South African group Vodacom in Southern Africa.

Infrastructure and development continue to be introduced as a necessary although insufficient tandem: what roles did the BRICS play and are called upon to play in this regard? Several approaches coexist to link infrastructure and development. Since 2011, infrastructures have been the subject of new strategies. Very much associated with development, banks specialising in development aid have very pertinently shared an integrated approach relying on public-private partnership, so as to favour the solvability of regional projects. Decentralised solutions have also been multiplying, notably micro-projects based on small infrastructures, particularly in rural areas or in countries where it has taken a long time to develop a central electrification network.

Complex and Multilateral Projects

Other elements have been testifying to the growing importance of investments in infrastructure on the African continent. For example, the Multilateral Investment Guarantee Agency (MIGA), a World Bank group, has been concentrating half of its insurance activity between various projects on the African continent. As such, MIGA’s “insured” implement infrastructure development projects matching World Bank specifications, i.e. complex and multilateral projects: these must have various objectives, e.g. production of hydroelectricity and irrigation for a dam, as well as post-conflict reconstruction etc.; and be multilateral as in including actors from different countries, and also favour South-South co-operation, strongly associating the BRICS, and South Africa in particular.

Concerning energy production infrastructures, MIGA recently provided a non-honouring of sovereign financial obligations cover to British bank HSBC for its investments in Angola, as part of a project for the rehabilitation and development of the hydroelectric plant of Cambambe, on the Kwanza River (of a capacity of 700 MW). In the long run, the Angolan government planned an increase of its national production from 1500 to 5000 MW. This project illustrates the growing presence of the BRICS in the development of infrastructures in Africa, all the more since it includes Brazilian building firm Odebrecht as the main builder, as well as German companies Hydro GmBH and KG (from the Voith Group) and Spanish company Elecnor for the supply of mechanical and electrical equipment. This type of complex project, i.e. containing various objectives – in this case the development of hydroelectric production in Angola and the acceleration of post-conflict reconstruction – as well as multilateral objectives, i.e. including several international companies and actors, is increasingly being put forward by international institutions such as the World Bank.

In addition to building firms, BRICS investments also concern finances. A Chinese and a South African bank, the Industrial and Commercial Bank of China and CfC Stanbic respectively, invested in a project for the production of energy in Kenya in 2012. The insurance cover taken out with MIGA guarantees a breach of contract. The project was named Triumph and consists in building an oil-fired power station (83MW) to be situated in Kitengela near the Athi River, around 25 km away from Nairobi. Triumph also undertakes to conclude a 20-year electricity purchase contract with the Kenya Power and Lighting Company (KPLC). The objectives of this project are to increase and, according to MIGA, diversify Kenya’s energy production since it relies on hydroelectricity which is threatened by droughts, as well as to facilitate South-South co-operation. Finally, KPLC has undertaken to facilitate the emergence of three Independent Power Producers (IPP), i.e. Gulf Power, Thika Power and Triumph Power, within the framework of a wider programme for the introduction of these IPPs led by the World Bank in Kenya.

South Africa has already begun the process of investing in infrastructure locally, in its own energy sector, and on a regional scale. Other projects which today are completed, can thus be mentioned, such as MIGA’s first project in Swaziland: MIGA issued guarantees against financial risks as well as war and unrest-related risks, for 69,4 million USD, to South African electricity company Eskom to cover its own loan guarantees to the Banque européenne d’investissement (BEI) and to the Japanese Bank for International Co-operation, for their investments in Motraco-Mozambique Transmission Company SARL (Motraco), which included the construction and includes today the operation of power lines linking South Africa, Swaziland and Mozambique, thereby associating the public suppliers of electricity of these three countries, i.e. Eskom for South Africa, Electricidade de Moçambique (EdM) and the Swaziland Electricity Board (SEB).

A last example already mentioned and referred to as a classic example of trilateral or even multilateral partnership involving large hydraulic infrastructures, is that of Grand Inga in the Democratic Republic of Congo. The construction of this dam which will start with Inga III, should begin in 2015. In addition to several companies’ potential investments, the agreement signed between the South African and Congolese energy departments on energy trade between the two States, as well as the reinforcement of the role of France (Grand Inga project submitted and discussed in Paris) do make of them a model of complexity and multilateralism.

Conclusion: In the Poker Game of Development, the BRICS Have Many Cards to Play

A dominating place is now given to the BRICS in many domains on the world agenda. The 5th BRICS Summit contributed not only to ratifying South Africa’s December 2010 membership and highlighting her enthusiasm linked partly to the possibilities of reinforcing her interests, but also to ratifying the growing place given to the African continent in the agenda of emerging powers.

Yet, other configurations also exist, such as the IBSA, a diplomatic association made up of India, Brazil and South Africa since 2003, and already endowed with a development and democracy aid bank. This coalition of major emerging democracies of the South relies on shared values and, through task forces, examines international issues, from the reform of the IMF and the World Bank to climate change. Today, IBSA’s development fund, accrued by these countries, is supporting over a dozen projects on the three continents. The future BRICS development bank, supposed to differ from that of the IBSA in terms of administrative scope and scale, is motivated by a similar will to mobilise the resources of emerging countries, which has already given rise to the IBSA development fund. The incubating role of the IBSA concerning the co-operation of emerging countries on the one hand, and the use of this role to the benefit of their citizens on the other, has not been negligible [14].

The relationship between democracy and development should clearly be situated at the centre of reflections ahead of infrastructure projects. In a world oscillating between (multi)polarities and where governance issues often win over sustainability, is it still possible to think before investing, in order to establish instead of merely building?

[1] CUA (2012), Programme for Infrastructure Development in Africa (PIDA), Interconnecting, Integrating and Transforming a Continent, CUA, NEPAD, ADB, CEA, extract from the Foreword.

[2] China’s Foreign Aid and Aid to Africa: overview, Li Xiaoyun, College of Humanities and Development, China Agricultural University, Beijing, 2008 http://www.oecd.org/dataoecd/27/7/40378067.pdf

[3] According to the China Daily: http://www.chinadaily.com.cn/cndy/2013-06/13/content_16612923.htm

[4] AfDB (2011), Russia’s economic engagement with Africa, Africa Economic Brief, vol.2, n°7

[5] According to the Rosatom website: http://www.rosatom.ru/en/presscentre/nuclear_industry/18a661004f5e053689e2fd7ea2a04c6d http://www.rosatom.ru/en/presscentre/Announcements/b08c7c004b7dd59cb851ff487a5dcd55

[6] Concept on Russia’s Participation in International Development Assistance (2007), available online: http://www.minfin.ru/common/img/uploaded/library/2007/06/concept_eng.pdf

[7] Cancellation concerns debts incurred with the former Soviet Union in particular, within the framework of the Heavily Indebted Poor Countries, as well as those under negotiations with Benin, Guinea, Zambia, Madagascar, Mozambique, Tanzania and Ethiopia.

[8] Federal Agency for the Commonwealth of Independent States, Compatriots Living Abroad and International Humanitarian Cooperation.

[9] According to the documents of the second forum: http://www.indiaafricasummit.nic.in/staticfile/framework-fr.pdf

[10] Cabral, L. and J. Weinstock (2010), “Brazil, an Emerging Aid Player?”, Briefing Paper, n°64, Overseas Development Institute, London

[11] During a conference in South Africa, a few days before the 5th Tokyo International Conference on African Development in June 2013, a trilateral co-operation involving Japan, Brazil and Mozambique in the agricultural and health sectors was mentioned as being successful.

[12] Sidiropoulos, E. (2011), “India and South Africa as Partners for Development in Africa?”, Briefing Paper, Asia Programme and Africa Programme, Chatham House, The Royal institute of International Affairs, ASP/AFP BP 2011/01

[13] This dam with a future total capacity of 5250 MW is a very hot issue between Egypt and Ethiopia within the framework of the recent Entebbe Agreement on sharing the Nile Basin.

[14] According to Chris Alden (2013) for Jeune Afrique Economie: http://economie.jeuneafrique.com/tribune/408-tribune-international/16230-les-ibsa-dans-un-monde-de-brics.html