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African projects need better controls says NZ co.

African projects need better controls says NZ company

A New Zealand company is helping devise ways for African governments to more effectively provide water and electricity for their people.

Alex Sundakov, executive director of Castalia, told a high level World Bank “Growth and Poverty Reduction” conference in South Africa this week that if African countries are to make the most of investment money, partnerships between governments and investors have to be better structured, and need to involve a wide range of reforms in addition to simply contracting with investors.

Castalia works internationally across a range of sectors, including water, energy and communications.

In this review, for the World Bank, the international consultancy examined lessons from 10 recent water and power projects on the African continent that had attracted private investment.

The bank’s President Paul Wolfowitz, who is visiting parts of Africa June 12 -18, has declared the bank and the international development community must make Africa first priority if it is to become a “continent of hope”.

Africa’s poverty, famine and indebtedness are also a major focus for the G8 world leader’s conference in Scotland in July and stimulated the Bob Geldof Live 8 concerts on July 2.

Castalia’s Wellington team looked at water and power projects in Senegal, Gambia, Guinea, Cote d’Ivoire, Gabon, Uganda, Tanzania, Malawi and Mozambique.

Since 1990 there have been 34 contracts that included private investment covering water and energy projects in sub-Saharan Africa. Of these, Castalia says 25 remain operational.

Sundakov says from those Castalia looked at there were a variety of reasons some failed or struggle to survive.

One reason is that some sub-Saharan Africa governments need to pay their own water and power bills. Fiscal management is weak in many of the countries, he says.

Another problem, Sundakov says, is that it is not politically popular for some governments to allow projects to charge tariffs that reflect the real cost of their service. Nor is it popular to provide subsidies - even if the government has the financial resources to do so.

“This leads to unpredictable and poorly planned patterns of investment and ‘hand-to-mouth’ existence for the sector,” Sundakov says.

Castalia’s analysis concludes it would be wrong to stop the private sector being involved in the restructure and development of infrastructure in the region. But new approaches are needed so that both parties’ expectations of the outcome are better matched. It says reliable financial management and better public sector management are also inseparable.

Sundakov says private sector investment in the sub-Saharan region needs to be part of comprehensive institutional overhaul.


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