Enhancing Negotiating Capacity in Africa to Benefit from Infrastructure Deals and Agreements

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By Alkali Amana

Africa’s huge infrastructure gap in 2018 stood at $45.5 billion, and between 2018 to 2040, this investment gap is expected to stand at $1.6 trillion. A Deloitte report on ‘Addressing Africa’s Infrastructure Challenges’ notes that Africa’s economic growth and development are intrinsically linked to infrastructure development, stating that without this infrastructure, Africa will not achieve the growth levels expected or required. Infrastructure planning and development are therefore critical if Africa’s huge economic and developmental potential is to be realized, and key in helping the continent realize its economic potential is the careful construction of a sustainable infrastructure that can assist to turn the situation around.

In recent times, governments in Africa have picked up the challenge to address the infrastructure challenges in their regions with the aim of creating a better environment for business, economic sustainability and development, and growth generally.  Listing the Top 5 African Infrastructure Projects in 2020, The Business Year on its website mentions the:

  • Trans-Maghreb Highway
  • Mambilla Power Plant (Nigeria)
  • Nairobi – Naivasha Railway
  • Walvis Bay Container Terminal (Windhoek)
  • Caculo Cabaca Hydropower Project (Angola)

This commendable development of infrastructure in Africa is not limited to the above, and it compliments recent figures from McKinsey which suggest that infrastructure investment in Africa has been steadily increasing over the past 15 years. However, this is not without aid from foreign elements, nations and investors alike with strong appetites and funds to spend much more on the continent. For instance, China is taking the lead in developing some the continent’s most ambitious infrastructure projects including the ones mentioned above, spreading its aid across the continent from the Horn of Africa to the Gulf of Guinea. It is purported that the Chinese invested $380 billion in Africa between 2005 – 2018 alone, across road, rail, concrete production, and electricity projects. With an intent to develop and manage private equity infrastructure funds designed to invest a long-term institutional unlisted equity in African infrastructure projects, the African Infrastructure Investment Managers (AIIM) actively manages investments in East, West and Southern Africa, having an equity under management of $1.6 billion with a track record extending across seven African infrastructure funds. The A.P Moller Capital Africa Infrastructure Fund is another investment fund creating and enabling opportunities through investments in African infrastructure, with a purpose to support sustainable economic growth and prosperity on the continent targeting infrastructure projects within energy and power including transmission, as well as roads, rail, distribution centres, and other sectors in demand for significant new investments.

With the level of various investments coming into the African continent on infrastructure, it is relative to view the possible dimensions of growth which might be imminent for the continent. However, of concern to African minds and interested parties in the progress of the continent is sometimes how inadequate the deals with foreign investors for the development of the continent are often negotiated as they have seen as debt-traps. Folashade Soule, one of the world’s leading experts on the negotiation practices of African governments, observed in an article proffering solutions on how Africa can improve its negotiation process, the impression among African public servants about infrastructure deals with Beijing that ‘You don’t negotiate with China’, accepting whatever terms are offered so as not to lose the investment fund that is to come. According to Chinaafricaproject.com, Africa’s rising indebtedness to China is prompting concern across the continent that governments need to do a better job negotiating infrastructure financing deals through which, too often, critics contend, the investors are simply out-manoeuvring their African counterparts in the negotiating process. These observations, when considered keenly, tend to create a notion which strips African governments of their Agency in the negotiating process i.e. it is either they don’t know what they are doing or they are just negotiating bad deals.

Opposing the notion of a stripped or inadequate agency in the negotiating process, Folashade perceives, however, that the reality is far more complex and intricate revealing that although past arguments tilt towards the fact that African governments lack a strategy in negotiations, she sees ‘plenty stratagems and tactics on the African side’ but a vital element with which to operate is lacking. According to her, ‘What is required is a more coordinated and coherent approach’ with which to boost Africa’s negotiating capacity on infrastructure deals. Providing another dimension to what is needed to achieve an Africa first diplomacy and better infrastructure deals for the continent, Ahadu Y. Assefa, an LLM student at Greenwich University in London, believes that African governments need to be more assertive in their approach with terms they bring to the table. With an understanding of these issues which disturb Africa’s negotiating capacity, it becomes imperative to explore possible means which can serve the aim and purpose of fixing the situation.

Using evident research into China-funded infrastructure projects, Folashade puts forward the proposition that Africa can start negotiating its best deals by incorporating the following four conditions into its practice:

  1. Involve Everyone: Bringing in all relevant departments, ministries and agencies into the negotiation process will help make it more coherent with a result which is less likely to breach national regulations, although the process may be longer. The practice of not involving everyone does not enhance the experience in dealing with external investors (in this case China) as she explains that a disconnection means that some departments press ahead on their own speed up the negotiating process without experience from any engagement in the past to rely on. She contends that this increases the potential of corruption as the possibility is that one arm of government is not clear about what another is doing.
  2. Empower The Negotiations: Citing the likelihood of frequent interventions in the negotiation process by the President or Senior Officials due to political motivations (centred around the need to fulfil electoral promises around infrastructure development) or pressure from the Chinese authorities, Folashade reveals that negotiators can be pressured into cowering and bypassing national regulations. She stated a situation in Benin, for example, where during negotiations over road projects several years ago, the Chinese contractors were unhappy about certain conditions being imposed and upon the discovery of such, then-President – Yaya Boni agreed to intervene on their behalf to bypass national regulations in areas including labour and construction. This is not a healthy practice and must be avoided at all costs. Incorporating an assertive stance and mechanism on national regulations, and non-intervention from higher authorities will empower negotiators and state actors to represent the interests of their countries better, leading to greater negotiating capacity and better infrastructure deals.
  3. Keep The Public Onside: It is important that the citizens of the country are carried along on policies and developments involving foreign investors as dealing with certain entities (like China) can be controversial in some countries. The image ascribed to foreign investors by the public should be factored into consideration when African countries decide to seek negotiations with them.
  4. Increased Knowledge: Advising every opportunity in building the knowledge base in dealing with foreign investors, Folashade quips that African governments should take the opportunity to network – share lessons with one another as they are relatively new in the venture. She advocates for educational institutions to be improved and structured to study such agreements and close the gap between information and knowledge.

Assefa argues that the primary responsibility for improving negotiations towards better infrastructure deals for Africa rests on African leaders, with the belief:

  1. African leaders should be able to negotiate on terms that will favour their nation while ensuring that information on the negotiations of loans and agreements are disclosed and made open.
  2. Transparency in public accounts is a necessary improvement which should be carried out by African countries. For instance, the Ministry of Finance in Angola grew increasingly transparent in its dealings disclosing public information previously hidden, including the government’s public accounts, the management of China’s loan and audited financial reports on projects.
  3. Drawing from the situation with China, some form of responsibility should be shared also by the international communities and investors in ensuring that high standards are maintained on engaging local communities.

Summarily, an interconnection is needed for growth and the benefit(s) of such relationship which is evident where there is a balance between both parties in gestures and terms which they offer and reciprocate to each other. In relation to Africa’s infrastructure engagements, there is, even more, to gain if governments from the continent can improve and build their negotiating capacity through the means espoused herein and also via extensive research on best practices to imbibe for such purposes.

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