African Infrastructure, World Bank Responsibility and
the Economics of 10%
When you drive into Gaborone, Botswana’s capital from the airport there
area number of iconic buildings on the right side of the road. The most
imposing is the Diamond Trading Corporation buildingwhere most of the nation’s diamond
wealth is traded. Next to it is the Bank of Botswana and not far down the road
is a building that is also a metaphor for everything about Botswana that seems
to make no sense. The imposing structure is the Botswana Bureau of Standards
(BOBS), a huge building that, was when I last visited in 2015 was largely
empty. It is large enough, it is said, to hold
two large Boeing jets and is frequently used for religious ceremonies and
marriage celebrations. The obvious question is why does Botswana, a tiny country
of two million which is a member of SACU and which draws on the standards of
its larger neighbor South Africa need such a large Bureau of Standards building?
The superficial answer so commonly heard is that BOBS is a classic case of African gigantamania, a condition
that appears to be common to those who
design infrastructure projects throughout large swathes of Africa. But there is
a better and simpler explanation that can explain what we see and that is the
economics of the kick-back and the consultancy fees for construction. It is
regrettably common practice to receive a kickbackfrom largeinfrastructure projects
and when a project like BOBS does not make cents (read sense) then it is
invariably making someone a lot of dollars. More simply put, a 10% kick-back on
$40 million project is much more than
10% of$4million and this may be a much more useful economic explanation for the
apparent Africangigantamania than any psychological condition.
The World Bank has long argued that Africa needs to invest more in
the development of infrastructure whether that is in electricity, water roads
and railways. The continent is commonly said to require US$38 billion of investment per year, and a further US$37 billion per
year in operations and maintenance; an overall price tag of US$75 billion. The
total required spending translates into some 12 percent of Africa’s GDP. There
is currently a funding gap for infrastructure in Africa of US$35 billion per
year.
Some governments like that of resource rich and
middle income Botswana and Namibia,
having proven the economic viability of a particular project,can still readily
obtain loans from the World Bank and the African Development Bank. These are
after all banks and they make their profits principally from providing loans to
their customers and hence these same institutions have a strong interest in
expanding infrastructure. If the AfDB and the World Bank provide a very large loan
for a particular infrastructure project they commonly set up what is called a
project management unit where their own consultants or staff work for the life
of the project to make sure that the
sort of backhanders that are common in Africaninfrastructure don’t happen. But
in some cases the AfDBand World Bank view particular African governments as
having an internal governance structure to make sure that the project was
implemented properly and on time without a project management unit. This is
certainly the case, or at least has been in the past but in countries like
Botswana where the international community has helped foster the common myth
that good governance prevails in infrastructure tendering and so loans can be
provided directly to the state with only limited oversight.
Recently the bankers in Washington and Tunis
fell victim of their own propaganda about good governance in Botswana.
Botswana, like Namibia is trying to transition from an energy model where it
relies on the South Africans for its supply where the National power authority, the
BPC in Botswana or Nampower in Namibia become power generators in their own
right. In Botswana, to achieve that objective.In 2009Botswana the World Bank, the
AfDBand the government of Botswana and the Chinese government provided roughly
equal parts for financing of US $1.66
billionproject to build the Moropula B, a simple and straightforward 600MW ( 4x 150MW)
coal fired power plant. The power plant was supposed to be completed by 2012
but was eventually handed over in 2014
with many technical problems.
Such 600 MW thermal plants are extremely common
and had the project worked properly it would have put Botswana well on the path
to energy self-sufficiency which it still aims to achieve by 2019. Botswana has
an estimated 212 billion tonnes or 2/3 of Africa’s coal resource. Alas,nature
makes coal but men make power stations and at least in the case of Moropula B, was
pretty much of a disaster which has, since commencement, rarely operated
anywhere near its design capacity. Recently the Botswana Minister of Minerals
and Energy MrKitsoMokailahas suggested in parliament that he wants to sell the
project to a private developer. It has been such a disaster that Botswana onceseen
as the paragon of good governance and the epi-center of what is called by visitors, ‘Africa-lite’
now seesGaboronesitting in the dark, like so many other less well endowedand
corrupted African capitals. Botswana continues to buy power from Eskom at very high
spot market prices linked to the cost of diesel power generation.
How did this grand and expensive disaster occur?There
are many reasons but there has never been, nor shall there ever likely be a
public or parliamentary enquiry into the failure of Moropule B which has so retarded
private sector development in the country. The failure to investigate what
happened and possibly punish those responsible is part of Botswana’s culture of
complete legal impunity for the great and the powerful. In what is as close to a World Bank criticism
of the way Botswana chose the contractor, a recent review of the project by the World Bank listed the projects undertaken by the contractor, China National Electric Corporation, none had ever
been as big as this. The then
Chinese Ambassador to Botswana, Ding Xiaowen, in 2009 had reportedly
advised then Minerals and Energy
Minister PonatshegoKedikilwe that CNEC was not qualified for the job and yet
Kedikilwestill went ahead with the company.
The ambassador suggested
that there were other Chinese firms tendering that had considerably more
experience in such projects.
The World Bank and AfDB say they believe in open
government and transparency and given that both know that Botswana will never investigate
what happened at Moropula B then it is
incumbent that they to do so if they are to have even a shadow of credibility
in a the sector where they intend to lend heavily. These banks need to conduct an open and transparent review of this
Moropule B but they will almost certainly never do so and sadly it will be buried.
In Namibia there is the creeping suspicion that policy
makers making decisions over $7 billion dollar airport up-grades anda new $2.2 billion parliament buildings may not necessarily be pursuing the public
interest. What is needed in both countries is the equivalent of the South
African Office of the Public Protector,but for such infrastructure projects
with same funding and modus operandi as the US Congressional Budget Office
which has assured funding and provides
independent analysis to the US Congress. What would stop such an agency from
also becoming corrupted like so many tender boards- only vigilance and an
independent reporting route directly to parliament?
For a real economic transformation to occur in Africa massive infrastructure investments
will be necessary as the World Bank and AfDBcorrectly point out but citizens need a completely open and independent
assessment of how new projects are chosen, ranked,designed, costed and
implemented. Under the current system the economics of 10% commonly prevails in
many infrastructure projects and hence a completely independent and
authoritative public assessment of new infrastructure projects is needed to
assure that the citizenry are getting value for their money.
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