An important opportunity regarding the future of Africa is currently unfolding: the development corridors or regional transportation and transport networks.
With so many runway projects, a database their detail now exists. Some that are garnering particular attention include Lobito (Angola, DRC, Zambia) and the Central Corridor Transit Transport Facility (Burundi, DRC, Rwanda, Tanzania and Uganda).
The corridors are typically driven by mining, and together with Africa’s rich supply of critical minerals needed for the global energy transition—such as lithium, cobalt, copper and graphite—they represent a huge regional development opportunity. Indeed, the The African Union Vision 2063 raises a number of issues related to the corridors, and the Brazilian Presidency of the G20 has equally emphasized “Cross-border infrastructure” by priority.
Corridor development is particularly important in Africa, where the physical geography can be challenging and a lack of investment means any project must be as cost-effective as possible. The opportunity to “load” corridors—with rails, roads, and cables—can help achieve economies of scale.
What should governments consider when negotiating development corridors?
Governments have many issues to consider in their negotiations. Below are just a few of the many.
The history of the company
Due diligence on similar projects, balance sheet and a company’s environmental, social and governance policies is essential. Many large projects—those costing $1 billion or more—have been “strategically presented.” In short, some parties are knowingly smoothing over the very real challenges—physical, financial, and political—to project delivery, leading to dramatic cost overruns or complete disruption of projects. Indeed, more than 90% of major projects worldwide are not delivered on budget, on time and with the expected service. Some of the biggest offenders are in the mining and rail sectors—respectively 27% and 39% over budget on average. Financial strength is particularly important, as Tanzania learned late last year when its main contractor for the Standard Gauge Railway faced financial difficulties, which led to a possible strike. Governments should equally understand the company’s commitments (and implementation) to the environment, local content opportunities and communities.
Understanding the company’s history is important for another reason – arbitrage risk. The International Center for Settlement of Investment Disputes indicates that nearly 70% of its current cases relate to the development of corridors—oil, gas and mining, power and other energy, transport, construction and information and communications. With a relationship that will span at least a generation, governments must ensure that companies are constructive, willing to compromise and will not immediately invoke arbitration over a dispute.
Feasibility studies: Knowledge retention
Companies usually draw up the feasibility study. Rigorous examination of the feasibility study, supported by an alternative (government) point of view, can be extremely beneficial to the entire project. Some projects take decades to complete (eg, the present terms of reference for the Lobito runway in 2004; with studies dating back to 1992), usually after more than a few tries. To retain knowledge, governments will have to negotiate who actually owns the feasibility study if the project does not go ahead.
Third party access
Most access to the corridors will be for minerals, but agriculture – usually left out of industrialization planning – is vital. Looking ahead, what if a mine is found 10-20 miles away in the next decade? Does the contract provide for this possibility and does it provide third party access or a negotiated access mechanism? Finally, any rail project should have significant access rights for citizens.
Local Hubs: Selling or Leasing Land?
Certain aspects should be considered regarding the sale or lease of land in regional hubs. First, since inflationary pressures around mass development are common, governments could attempt to curb land speculation through densification around transport hubs with commercial and retail offerings. Second, leasing land at reasonable prices around hubs would ensure a steady stream of revenue outside of mineral exports, which could fund local and regional public services.
Safety and maintenance
As the world saw with the recent damage to submarine cables off the coast of West Africa, which took many countries offline, disrupting the runway is easy. Long and remote, a corridor is extremely exposed and expensive to maintain. As industrial zones, governments should try to avoid creating fenced communities along the corridors to avoid accidents and deaths as well as any other possible disruption. In this regard, negotiating an ample fund for security and maintenance is crucial.
Why do some corridors succeed while others fail?
Corridors provide governments with the opportunity to exercise their power, footprint and governance through newly developed areas. To succeed, a culture of big projects, with a focus on long-term thinking, strategic planning and bringing together an experienced team of multi-ministerial and external experts, is vital. Most importantly, the economy should be the dominant principle of corridor development.
Indeed, by providing cross-disciplinary negotiation support since 2017, the G7 CONNEX initiative has learned that it is almost impossible for governments to keep pace with the private sector in terms of finance or expertise. Governments simply do not negotiate often enough, nor do they have the financial resources. However, negotiation support is increasingly having an impact by helping governments negotiate better deals.
In 30 years, which corridors will move from pencil and paper to design and completion? Some ideas will be good and even interesting, but will not succeed due to lack of focus, funding and/or politics.
But whatever runways they ultimately achieve will make a huge difference to millions.