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Strong governance structures are critical to governments’ ability to deliver the infrastructure their communities need. When governments are better able to identify, develop, and co-ordinate their infrastructure pipeline, project financing—both domestic and foreign—will flow. It is indisputably within the power of governments, the business community, and civil society to make this happen. There are many success stories in developing countries to prove it.

Governance in the spotlight at infrastructure eventA major factor hindering infrastructure implementation in Africa is a lack of good governance. For this reason, representatives from African governments, the global private sector, multilateral institutions, and other development partners have met in Cape Town to participate in the region’s first roundtable on the governance of infrastructure, hosted by the Development Bank of Southern Africa (DBSA).

The roundtable, Building the Right Infrastructure for Tomorrow, aims to provide the insights, new ideas, and solution-focused tools that will help improve the governance of public investment in order to deliver essential services and goods—with direct and indirect benefits for the economy and society as a whole. This is the first of a series of roundtables about infrastructure governance that will be organised around the world, with the next roundtable in sub-Saharan Africa planned for May 2018.

Chris Heathcote, CEO of Global Infrastructure Hub (GI Hub) (GIhub.org), which is co-hosting the event, says that it’s understandable that the investment focus over the past 10 years has been on utilities and trying to improve access to electricity and water, but the strongest driver of investment is the rule of law.

“The InfraCompass tool created by GI Hub recently studied infrastructure markets across 49 countries to pinpoint the best conditions for infrastructure delivery and found the strongest driver of investment was the rule of law. This is why governance, rather than development finance, is the primary focus of this roundtable,” he explains.

“Of course, finance is vital. Without it, infrastructure development would not be possible. But there’s a growing realisation globally and in Africa that if you get the governance aspects right, the finance will follow. Get it wrong and the investment will dry up. Getting the governance right also allows for efficient and disciplined planning, which is crucial if a proposed infrastructure project is to be sustainable and contribute to growth and lift people out of poverty.”

A 2014 study by the International Monetary Fund (IMF) found that increased public infrastructure investment raises output in the short term by boosting demand and in the long term by raising the economy’s productive capacity. More specifically, the study found that an increase of one percentage point of GDP in investment spending raises the level of output by about 0.4% in the same year and by 1.5% four years after the increase. In addition, the boost to GDP a country gets from increasing public infrastructure investment offsets the rise in debt, so that the public debt-to-GDP ratio does not rise.

“In other words, investment in public infrastructure can pay for itself and more, but only if it’s done correctly. That’s a big if. We’re all familiar with projects that have turned into white elephants, beset with fraud, waste, and inefficiencies,” says Heathcote.

“Which brings us back to the crucial importance of the rule of law. Investors want to know what legal frameworks exist and whether they are being fairy applied and in a timely manner. The question is no longer whether to invest in Africa, but which countries in Africa will be most likely to stand behind the sort of long-term contracts investors are interested in and have the economic plan to create and maintain the stability they require.”

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