Outcome Statement from ICA Plenary Session 2012
25 July 2012
Infrastructure Consortium for Africa (ICA)
8th Annual Meeting
11-13 June 2012
13 June 2012
United States Government
African Development Bank
Unlocking Private Investment in Clean and Renewable Energies in Africa
The 8th Annual Meeting of the Infrastructure Consortium for Africa (ICA) was held in Tunis, Tunisia, from 11-13 June 2012. The meeting was co-organized by the African Development Bank (AfDB), which hosts the ICA Secretariat, and the United States government.
The ICA Annual Meeting consisted of three separate meetings, namely: the ICA Members’ Meeting, the African Stakeholders’ Meeting and a Plenary Session on the theme of ‘Unlocking Private Investment in Clean and Renewable Energies in Africa’. The current outcome statement is for the plenary session. The outcome of the ICA Members’ Meeting of 11 June 2012 has already been distributed to members. However, highlights of the ICA Members’ and African Stakeholders’ meetings are included in this statement.
The ICA Annual Meeting was attended by representatives from ICA members, the African Union Commission (AUC), NEPAD Planning and Coordination Agency (NPCA), African Regional Economic Communities (RECs), and national governments, along with Africa infrastructure financiers/investors. A full list of participants is attached as Annex 1.
1.1. ICA Members’ Meeting
The ICA Members’ Meeting was opened by Gilbert MBESHERUBUSA, Vice President of Infrastructure, Private Sector and Regional Integration at AfDB, and Mr. Walter C. JONES, US Executive Director at AfDB, noting that the meeting had come at an important time for African infrastructure. The adoption of the Program for Infrastructure Development in Africa (PIDA) by AU Heads of State and governments in January 2012, outcomes from the G20 Cannes Summit and the Mexican G20 Presidency all place high priority on infrastructure projects, particularly those involving low-income countries, Africa and regional projects.
The Members’ Meeting provided important strategic outcomes that will enable ICA to scale up its work, namely:
- commencing in 2013, to hold only one annual members’ meeting instead of two,
- to extend ICA’s Strategic Business Plan (SBP) 2010-2012 by one year to 2013, and
- to include data on agricultural infrastructure in ICA annual reports.
1.2. African Stakeholders’ Meeting
The African Stakeholders’ Meeting sought to strengthen coordination and synergies, and build consensus on issues in African infrastructure development. This year’s meeting focused on issues related to effective implementation of PIDA and its Priority Action Plan (PAP). Discussions focused on resource mobilization and capacity-building needs, particularly those of RECs, to operationalize the Institutional Architecture for Infrastructure Development in Africa (IAIDA).
African stakeholders agreed that the capacity building needs to implement PIDA-PAP must be prepared and structured in accordance with IAIDA. It was therefore decided to establish a thematic Working Group, led by the Southern African Development Community (SADC), to identify capacity building needs and propose a strategy. The group would also be responsible for designing and establishing Project Implementation Units at the REC level.
Stakeholders also identified strong financial and human resource mobilization needs for the PIDA PAP, particularly in project preparation and implementation. ICA members and partners were requested to strengthen the capacity of the NEPAD Infrastructure Project Preparation Facility (IPPF). A Nigerian-led Working Group that is supported by NEPAD-IPPF was established to design a resource mobilization strategy that includes both local and private sector resources.
African Stakeholders also noted progress on the ICA Assessment of Project Preparation Facilities for Africa and confirmed their support of data collection and implementation of subsequent outcomes.
2. PLENARY SESSION
The plenary session was opened by her Excellency, AUC Commissioner, Elham IBRAHIM, and co-hosted by Oren WHYCHE-SHAW of USAID, and Alex RUGAMBA, Director of the NEPAD, Regional Integration & Trade Department at AfDB.
Main outcomes of the plenary session are presented below.
2.1 PIDA INTRODUCTION
The meeting began with AfDB’s presentation on PIDA, its priority projects and the institutional infrastructure to be implemented for delivery of the PIDA PAP. Following detailed discussions, participants unanimously agreed on the following:
- The need for innovative financing models, including domestic/national financing (e.g. budget, infrastructure bonds, pension funds), and strategies for unlocking private sector financing (need for harmonized regulatory frameworks in the region, e.g. public-private partnerships [PPPs]).
- RECs should play an important role in providing a common matriculation and mutual recognition framework/agreements (building common markets). To further this goal, ICA was requested to support REC capacity building, thereby enabling RECs to fulfill this role.
- The adoption and implementation of IAIDA will set the groundwork for PIDA PAP, and ICA was requested to strengthen its focus on PIDA implementation.
- Successful implementation of PIDA PAP will depend on four critical factors: leadership, commitment and resource mobilization, good project preparation, and regional coordination. Therefore, participants called upon ICA to increase its support of NEPAD-IPPF to obtain sufficient funds for Project Preparation.
Participants noted that the next steps in implementation of PIDA require establishing milestones for each project/program, with project preparation playing an important role in the planning process.
2.2 FUNDAMENTAL ENABLING ENVIRONMENT ACTIONS REQUIRED TO UNLOCK THE PIDA ENERGY PAP
This session focused on key issues in enabling the infrastructure environment, including proper government sector planning, development of legal and regulatory frameworks, and the necessary participation of regional organizations, such as power pools, in project preparation. The need for an effective PIDA PAP marketing strategy was also underlined.
To establish the proper enabling environment for attracting and fostering investment in the PIDA PAP, panellists and participants agreed that governments must:
- facilitate harmonization of policies and processes (including PPP framework) at the regional level,
- support project preparation, and
- incorporate regional projects into national programs
The private sector must also apply an increasingly long-term view on the energy sector and engage in smaller profitable projects within PIDA PAP and look for opportunities to scale up.
In addition, ICA should play an important role in coordinating PIDA PAP resource mobilization efforts, by using its sector platforms and member network. Future ICA annual reports could also feature information on PIDA project financing by members and partners.
Participants also tabled the need for RECs to focus on marketing PIDA projects and creating multi-country coordination for project delivery.
The ever-growing need to provide online information on PIDA projects (e.g. financing requirements, timeline, background information, etc.) was also discussed, along with the possibility of an implementation scorecard to monitor progress.
Tools should be identified to incentivize PIDA implementation and/or coordination. Examples were discussed, such as the Presidential Championship of Priority Projects and biennial reporting to AUC and other Heads of State to encourage political will/backing.
2.3 POSSIBLE PROJECT FINANCING OPTIONS TO BE APPLIED TO DELIVER PIDA ENERGY SECTOR PAP
Initial discussions focused on the Islamic Development Bank’s approach to private sector financing and private-sector investors’ views on the African infrastructure marketplace. The session also explored country-level implementation of regional projects, International Development Association (IDA) instruments vs. sovereign support, and the use of infrastructure and project bonds.
Given the continual effect of the financial/economic crisis on global financial markets, and thereby capital/equity availability for infrastructure in Africa, participants question the effectiveness and highlight the need to rethink current PPP models.
As next steps, ICA should consider organizing a focus working group to discuss PPP financing models for private sector financed projects and assess scalability to support the PIDA PAP.
Participants also addressed the need for capitalization and increased use of sub-regional development banks (Development Bank of South Africa, the West African Development Bank [la banque ouest africaine de développement], etc.) to provide long-term local currency financing. Raising local capital through infrastructure bonds and pension funds are also viable options.
2.4 UNLOCKING PRIVATE SECTOR INVESMENT IN SUPPORT OF CLEAN AND RENEWABLE ENERGY DEVELOPMENT IN SUB-SAHARAN AFRICA
Speakers presented case studies on solar photovoltaic, wind and biomass projects in different regions of Africa. Presentations provided a diverse picture of the possibilities and challenges of planning, implementation and financing of renewable energy projects.
During the ensuing discussions, there was consensus among participants that it was not a problem of unlocking private investment, but rather redirecting available capital to the African market. Additionally, given the critical needs and the objective to generate/produce affordable energy, the selection of energy sources (which will still include fossil fuels but also increasingly renewable sources) will depend on the natural resources and the environment of the generating country.
Participants highlighted the significant challenge of transmission and connection to the national grids in the case of renewable power generation projects, and discussed maximization of concessional funding and the use of partial risk guarantee structures for payment or liquidity risks.
2.5 INNOVATIVE RECENT RENEWABLE PRIVATE SECTOR INITIATIVES
The US government presented ”Powering Agriculture”, a new initiative that seeks to integrate renewable energy with food security to help generate innovative ideas for farmers. The US has already committed US$1 billion for renewable energy development, such as solar, wind, and mini-hydro power projects. The US underscored the importance of renewable energy development that could help increase commercial viability of projects and decrease greenhouse gas emissions. The US invited ICA members to become partners of this initiative. USAID also made a presentation on ‘The New Alliance for Food and Nutrition Security’ and the ‘Agriculture Fast Track Facility’.
AfDB presented its overview of AfDB-financed projects with integrated agriculture/irrigation systems and solar power generation in Malawi. AfDB emphasized that reliable and low-cost energy is essential for development, particularly for agriculture, which in turn, benefits food security. AfDB noted the replication of similar projects in Chad and Zambia.
The US presented progress on the ‘UN Sustainable Energy for All (by 2030)’ initiative launched by the United Nations Secretary General. Its main objectives are: 1) universal access to energy by 2030, 2) doubling the global rate of improvement on energy efficiency, and 3) doubling the share of renewable energy. The group sent a field mission to selected countries, including Ghana, Kenya, Uganda, Mozambique, Tanzania, Liberia and Sierra Leone. National action plans have been drafted for presentation at Rio+20.
KfW and the Geothermal Development Corporation in Kenya made presentations on geothermal energy in East Africa to mobilize public and private investment and financing for development of geothermal power plants in East Africa. Funding is generated by general governments and the European Union-Africa Infrastructure Trust Fund. Five countries (Tanzania, Kenya, Uganda, Rwanda and Ethiopia) are eligible thus far.
Overall, the ICA 8th Annual Meeting proved a success. The meeting reaffirmed the need for continued efforts in unlocking private investment in African infrastructure, particularly in clean and renewable energy. Implementation priorities remain within the context of the AU Heads of State endorsement of the PIDA PAP. Participants requested that ICA play a leading role in coordinating resource mobilization efforts via its sector platforms and member network.
Therefore, the ICA Secretariat and ICA members are expected to play a key role in implementing the PIDA PAP, and in exploring ways of supporting the African Union agenda for operationalization of IAIDA.
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