Infrastructure Blitz: Putting the Horses Before the Cart

HERE they start again. African Development Bank President Dr. Akinwumi Adesina made headlines to celebrate a $58 billion loan package for construction projects across the east and west of the African continent, l Abidjan/Lagos highway and a rail corridor linking Tanzania, Burundi, DR Congo and Rwanda. On the drawing board are other mega infrastructure projects such as the Mambilla Dam which will require huge amounts of construction materials. Should we proceed by putting the cart before the horse?

These projects are financed by foreign loans and the creditors gladly extend these loans to Africa because they benefit more from them despite the fact that the projects are located in Africa. A cost-benefit analysis reveals why they can’t lose. Usually the factories located in the countries from which the loans come provide cement, iron bars and steel. They supply bitumen and asphalt plants and, until recently, cement. Low-skilled engineers, pseudo-engineers, technicians and builders from these countries will be hired for years to carry out these projects. That is, of the $60 billion in costs, $55 billion will remain in the creditor country. The payment of interest over a number of years in foreign currencies is another advantage for the supplier country. Meanwhile, the capital remains unpaid and must be paid in cash or in kind, which means long-term expropriation of natural resources.

This writer is not anti-infrastructure, rather there are certain fundamentals that should be in place and there are questions that need to be answered before shiny projects are imposed on any country or continent. Questions about how much trade is going on along the West African coast to justify spending $15 billion? This leads to the chicken-and-egg question: should trade come first, moving from potential trade to actual trade, or are proponents of the route saying the route will energize and stimulate trade? Would the motorway be chargeable and would payment be made in convertible currency?

We should go to the ants and learn, the Chinese being the ANTS. How has China done so well for itself by providing such infrastructure that besides being manufacturers of the world, it has become the preferred manufacturers of the world? To shed light on China’s path, let’s take a look at how they went from having no high-speed rail 15 years ago to being the nation with the largest high-speed rail network. France put its first high-speed train into service in 1964. Japan followed in 1983; for 30 years, China had virtually none. However, from the years 2000 and 2008 to be precise, China started and in 15 years overtook Japan and France in operational high-speed trains! What was going on during those lag years?

The Chinese didn’t go full speed ahead until they perfected wealth creation and displaced hundreds of millions into the middle class. The middle class uses the trains and pays economical fees, no need for a lot of subsidies like the Abuja-Kaduna route. We in Africa have yet to acquire the skills to lift hundreds of millions of people out of poverty and into the middle class. In China, it wasn’t infrastructure first, it was double-digit gross domestic product growth first, and then massive infrastructure acquisition followed.

During the lag years, China also acquired the technology domestically to build the railways and build the high-speed trains themselves. They now lead the highest speeds achieved by high-speed trains. They learned, and probably stole, the precursor patents, adding their own flavor. They do not depend on the Japanese or the French to go further. In Africa and Nigeria, we are forever dependent on outsiders for the construction, maintenance and management of medieval infrastructure.

Infrastructure projects require huge amounts of heavy materials that are expensive to ship, so the Chinese have produced them in large quantities and are the main producers of steel and cement for over a mile. China produces 2.5 billion tons of cement, followed by India with 330 million tons. Nigeria, thanks to Dangote and Samad Rabiu, produces about 40 million tons and is expected to do more. Any country or continent that ships these heavy materials for infrastructure ends up with more expensive infrastructure being delivered at a slower rate. However, once the production of these building materials is in place, an infrastructure blitz can begin.

China has embarked on a global infrastructure blitz to consume surpluses from its steel and cement factories. To mop up more and create demand, they engaged in major investments in real estate, building several new towns and cities. They are continuing the Belt and Road Initiative to recreate ancient silk trade routes to Europe. Yes, let’s go to the ants and learn.

The Chinese also have an impact on the supply of software for software infrastructure. Chinese brands are taking over long distance freight transport in Nigeria, we are seeing fewer traditional brands like Mack and Volvo. The same will apply to rolling stock and cabins for railways and haulage along the Abidjan/Lagos coastal road. Who wins the cost-benefit analysis?

History has something to teach us about this unbalanced evolution. The Chinese have a millennial history of undertaking large-scale construction projects. They never stopped after the Great Wall was built. Before the Great Wall, they also built networks of water canals for transportation across the Middle Kingdom. Africans stopped building after the pyramids and we seem to have lost the urge to build megastructures ourselves.

This lack of propensity to build must be remedied. We invite the Chinese to build stadiums and call them national stadiums or national theaters. Until our nationals build our monuments, let’s name them for what they are: Chinese National Stadium or Austrian National Theatre.

The Central Bank of Nigeria has a 15 trillion naira infrastructure fund in the pipeline, specifically for the acquisition of infrastructure. Much of its modus operandi is unknown. Will it provide seed money or bulk funds for AfDB-type projects or does it approach things differently? Will the InfraCorp fund help put the horse before the cart or will we continue to let the cart pull the horse?

The Infrastructure Corporation of Nigeria Limited is expected to channel much of its initial investment not into finished infrastructure projects like the Abidjan/Lagos highway, but have domestic steel production for railway tracks, iron rods , cement, quarries by investing in factories. Make bitumen for asphalt readily available locally. Each of these factories should be ready to engage in global trade from the start, a good example given by Dangote Fertiliser. With only these in place, the infrastructure blitz will begin in Nigeria and Africa. Only with this approach will infrastructure acquisition become a vehicle of wealth creation rather than a vehicle of wealth depletion, as John Perkins explains in his eye-opening book, Confessions of an Economic Hitman.

As we get wiser, the neighborhood’s new economic colonizers, the Chinese, might not like it, but we have to show them that it’s a win-win situation. However, if they drop out (since this is not to be confused with their own plans to revitalize their economy), there are other competing axes that Nigeria and Africa can turn to, in particular the Germans, who have a plan Marshall for Africa. Wouldn’t a bombardment of infrastructures be a means of slowing down the dangerous crossing of the Sahara and the Mediterranean by a frustrated African youth?

No doubt it would be good for the fund to help build and deepen the construction skills of these young people and our engineers in air-conditioned offices. Machine tools and foundries to cater for the manufacture of spare parts for these machines must be in place with current technologies. Only the above can prevent a large percentage of the AfDB’s $58 billion bill from blowing away and staying in Africa.

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