Photo: EPA
CAPE TOWN - Perhaps due to our many domestic challenges, our economic discourse has tended to overlook the importance of our international financial relations.

It, therefore, becomes important to highlight last week’s developments in this area, which demonstrate both the significant contribution our international financial relations can make to our development, as well as the leadership role South Africa is playing in this regard.

Last week South Africa hosted the 37th SADC Summit, launched the New Development Bank’s (NDB's) Africa Regional Centre, and signed a new Host Country Agreement with the African Development Bank.

All three of these events represented great strides in our efforts to accelerate regional development through infrastructure investment supportive of industrialistion.

The World Bank Africa Pulse (2017) estimates that infrastructure needs of sub-Saharan Africa exceed $93billion (R1.21trillion) per year.

More than half of these needs will be funded by the public sector, development finance institutions and multilateral banks.

Further, the African Pulse indicated that Africa performs below the global average in regulatory frameworks for procurement in public-private partnerships, especially in project preparation.

Thus, project preparation remains a binding constraint for the African Continent and SADC, which must be addressed to attract much needed private funding to supplement public investment.

Our determination to catalyse regional infrastructure investment in ways that attract private sector funding, was the unifying theme behind these recent events.

On August 17, the South African government in collaboration with the NDB launched the Africa Regional Centre; this launch follows a similar event that was held in Shanghai, China, where the headquarter was launched in February 2016. The launch marks the establishment of the bank’s presence on the African continent.

The centre will be responsible for stakeholder engagement, project identification, project monitoring and performing support functions necessary to ensure that the bank conducts its day-to-day operations successfully.

In the following 18 months the NDB aims to provide $1.5bn in development finance support to South Africa; including projects in transport and logistics, water, energy and other sectors.

We are excited by the prospect that in the future, the NDB will be able to extend loans in the local currency of project beneficiaries, as currency risks have often been a major challenge for developing countries borrowing from multilateral banks. The bank is also working on expanding its membership to other countries beyond Brics.

On August 19, South Africa and African Development Bank (AfDB) signed the new Host Country Agreement for upgrading the regional office into Southern African Regional Hub in Pretoria.

The Southern African Regional Hub is one of the five regional hubs created under the Presidency of Dr Akinwumi Adesina as part of the Bank’s decentralisation strategy.

The AfDB is also the implementing agent, on behalf of the AU and Nepad, of the Programme for Infrastructure Development in Africa, which President Jacob Zuma has championed strongly.

We believe the establishment of the hub will aid our efforts to increase the banks funding of projects in Southern Africa.

This month was capped by our successful hosting of the 37th SADC Summit where President Zuma was elected SADC chairperson.

Key importance

The summit approved the theme “Partnering with the Private Sector in Developing Industry and Regional Value Chains”.

Of key importance for the SADC finance ministers is that the heads of state will draw the private sector into the achieving infrastructure and industrial projects.

However, the SADC is faced with a lack of credible and bankable projects. Hence the summit decided to continue to place a premium on front-loading the project preparation phase in order to speed up the implementation of the SADC Regional Development Fund.

Project preparation comes at a cost: estimates by Nepad put project preparation costs between 10 to 12percent of total project costs according to research by the Infrastructure Consortium for Africa of 2014.

Through our chairing of the sectoral ministers of finance, we will ensure that during the first phase of implementing the SADC Regional Indicative Strategic Development Plan, the region will have achieved a robust pipeline that is not only well-prepared, but ready for project financing by the private sector.

We must also prioritise capacity building and exchange of best practice by leveraging existing initiatives such as the Project Preparation and Development Facility and Infrastructure Investment Programme; both hosted at the Development Bank of Southern Africa.

The expertise of our state-owned companies on infrastructure must also be utilised toward regional capacity building initiatives in the area of project preparation and development. In this way we can make an important contribution towards regional efforts to address the infrastructure gap.

South Africa is determined to use its influence in regional and global governance platforms to advance regional development. By improving our capacity to develop well planned and packaged infrastructure projects, we can attract the private funding needed to supplement public investment.

Regional infrastructure projects are an important part of our efforts to industrialise SADC, deepen our economic integration, and grow our economies inclusively for the benefit of all our citizens.