Speakers and panellists at the 5th Edition of Africa Business Day (ABD) held recently in Zug, Switzerland discussed the issues of infrastructure deficit in Africa and agreed that Africa should prioritise its power sector to boost the continent’s economy.
Verena Utzinger the President of Swiss-Africa Business Circle the organiser of ABD, welcoming participants says “building businesses in Africa requires a long-term commitment, with patience and resilience.” She continued by explaining that the infrastructure is still large, but experience and knowledge transfer needs to take place to continue developing innovative solutions and approaches to overcome the challenges of the infrastructure deficit. She implored businesses and investors to “realise [their] long term vision and jump on the train of this journey.”
Matthias Rebellius, COO, Siemens Smart Infrastructure and CEO, Siemens Schweiz, in his address made a particular reference to the important role infrastructure plays in the sustainability of business anywhere across the globe, Africa included.
Jürg Sprecher, Head of Section Bilateral Economic Relations Middle East and Africa, Switzerland’s State Secretariat for Economic Affairs (SECO) in his address said overcoming the infrastructure gap has become the priority of many African countries, and it plays vital in African development. “It is a multi-dimensional issue that demands good framework conditions”, commented Sprecher. While he acknowledged the importance African governments attached to infrastructural developments, he also believes the private sector is vital to the development. He told the private sector: “Sharing knowledge and skills can help us move along the road to success”.
The first keynote speaker of the day was Philippe Valahu, CEO, Private Infrastructure Development Group, PIDG with over 25 years of experience in developing infrastructure projects.
What is important to PIDG, he says: Is to mobilise domestic financial solutions in order to create African solutions for African problems. According to him, there is a financing gap of between 67.6 and 107.5 billion dollars for infrastructure development in Africa. He explained that one way of utilising investments is off grid mini grid solutions.
The impact of the infrastructure gap is known widely, Valahu tells the participants. “Lack of available potable water and electricity has enormous impact on businesses. The impact on women and girls is also very noticeable. This is why PIDG will begin to look at projects through a gender lens from 2020, to make sure women and girls benefit from changes to infrastructure.”
Next up Deji Alli, Chairman and CEO of Mixta Africa, gave the African perspective, as an African and a sponsor of infrastructure projects, and an advisor to governments explained “the politics of doing business in Africa is more important than bankability.” In his case he faced the politics of African owners of institutional versus non-regional co-owners of businesses, French speaking countries versus English speaking countries, Africa as a whole versus Nigeria, or even tribalism. “It all gets in the way whether you like it or not, despite of any grand vision”, warned Alli.
When going back to set up his asset management business in Nigeria in 1994, he was struck by the fact that it wasn’t really a viable business then. He eventually moved on to Mixta Africa, which focuses on affordable housing to close the housing deficit in Africa.
He explained that infrastructure in Africa didn’t always have a deficit. He grew up in a country where maintenance work of a structure was announced three weeks in advance, something that is hardly possible now. “By understanding what it was like in the past, proves it is possible to solve the problems again”, he told the audience. He went on to say after the pre and post-colonial investments, something changed that makes it hard to reconcile what we see in much of Africa today. For example, in Nigeria, when you examine the scale of infrastructure development, “cottage industry solutions will not take countries out of these problems. We need strong bold solutions. Nigeria has hardly enough electricity for a city, let alone in entire country.”
Alli cautioned about China’s role in Africa. “China is investing huge amounts of money in the continent. They give a ray of hope that it is possible to close infrastructure gap. But China has a clear strategy, which it is implementing. We in Africa do not have a strategy as to how to deal with China”. He believes they are acting in their own interest, and to see that it is sustainable.
Ute Redecker, born in Namibia and the General Manager Digital Grid of Siemens Smart Infrastructure gave the Swiss and European perspective on the infrastructure gap in Africa. She explained that demographically Africa is developing very differently to Europe. Africa is getting younger and Europe is getting older. “It is a challenge, and we have the responsibility to pave the way so that the future is sustainable.” She expressed the need to prepare so that African youth are able to cope with globalisation and digitalisation. “Our common goal is to have a thriving young African going into the future,” she said.
She pointed out: “In Africa, For Africa and With Africa” is the mission of Siemens Africa. Siemens tries to partner with local partners, to run and own the project on the ground after it has been set up. Siemens trains and develops locals during the execution of the project. It also has financial services as well as partnering with financial institutions. The main pillar is ethical business with integrity.
Siemens has been active in Africa since the 1850’s in the infrastructure sector, she informed the gathering. Initially it supplied telegraph equipment and later started local offices and agencies. In the 1950’s it moved more towards power generation projects and the oil and gas businesses. These have sustained it in Africa ever since. Most recently it has been working on major Wind and Solar PV projects.
A panel made up of the three speakers, and moderated by Jens Zimmerman, a Senior Equity Analyst from Credit Suisse, looked into the issue of the huge infrastructure gap and what sectors should be prioritised to make the maximum impact. Philippe Valahu mentioned that within the launch of their 5 year strategy there is a priority focussed on power, without which it is difficult to have hospitals, classroom and storage. Mr Alli, also agreed that power on many levels should be the priority across Africa. He asked the question “where should the continent be in 10 years?” Ute added that it is important to have a long term plan as to how to invest in a country, and in power sector there is a need for a mix of large and small projects within power, including micro grids.
China was an underlying topic of conversation during the day, the panel discussion being no different. Zimmerman pointed out that “China has reacted to criticisms of their lack of sustainable financing”, but the question is whether the changes being made are going far enough in Africa?
Mr Alli, reminded the audience that Nigeria had higher reserves than China in the 80s. China then changed their system, and quickly overtook Nigeria. He continues by explaining that the government-to-government Chinese relationship only ends in debt accumulation to most of these African countries. Africa needs to negotiate and the bigger nations need to set an example and not allow China to set all the terms.
Sustainability is currently a buzzword worldwide, not least in Africa. The issue of sustainability as a consideration within the planning stage of a project was then discussed. The panelists suggested that it is a critical element alongside affordability. If projects are not affordable for everyone, governments and private sector are not interested in doing them. Siemens’ take on the issue that often big projects often skip some of the local communities that face the biggest negative impacts from the development of the project. They look at doing smaller projects at the same time, for example a mini grids in communities that won’t benefit from the bigger projects for years to come. On the switch side, Alli wanted to see big strides, not baby steps to bridge the gap.