Contribution of the AfDB to Infrastructure Development...Transport Sector Policy. The transport...

Drawing on the key findings from theprevious chapters, this chapter shifts focusto assess activities that the AfricanDevelopment Bank Group (AfDB) hasundertaken specifically in the areas of portsand related logistics. It points to critical areasof intervention where the Bank canconsolidate its leadership role and best

direct its support. The positive news is thatthe Bank places a very high level ofimportance on infrastructure developmentin its lending strategy, as emphasized by itsMedium-Term Strategy 2008–2012. Indeed,the AfDB considers the lack of adequateinfrastructure and, in particular, the lack oftransport infrastructure, as one of the main

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Contribution of the AfDB to Infrastructure Development

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constraints threatening the growth momen-tum in Africa. This vision is supported by aninternal policy framework which has been adriver of the Bank’s activities in developingtransport logistics including roads, railroads,and ports at both national and regionallevels. The main activities that have beenundertaken in this area fall under thefollowing broad functions: policyformulation, operations (both public andprivate sectors), regional integration, andpartnership activities with developmentfinance institutions (DFIs) and donors. Eachof these areas of Bank intervention isanalyzed below.

From the viewpoint of its investmentprogram in ports, between 1973 and 2000the Bank invested US$ 804.39 millionthrough 27 lending operations. Furthermore,the Bank’s Private Sector Department(OPSM) has been instrumental in the courseof the last decade in supporting the portsconcession process in several Africancountries (see Annexes 5.1 and 5.2). Thisapproach enforces some of the key findingsin this report, in particular the need toincrease private participation in the portsubsector.

Linking to other modes of transport, theBank has also taken a major role inaddressing transport infrastructure, inparticular roads, which are vital for theinterconnectivity of ports to the hinterland.This has been achieved through investmentsin both national and regional projects andprograms. Nonetheless, there is still room toexplore opportunities in railroad projectsand other modes of transport, for example,navigable rivers and lakes (e.g. theZambezi–Shire Waterway project between

Malawi and Mozambique; see Box 4.1 inChapter 4), to ease pressure on roads for themovement of goods across the continent. Interms of Bank strategy and policy, one areathat demands increased focus is maritimetransportation; here a strong policyframework is needed to guide investmentdecisions in ports and related logistics.

Policy Formulation

The Bank policy framework for portdevelopment in Africa is guided by itsTransport Sector Policy. The transport sectorwas selected by the Bank Group’s2008–2012 Medium Term Strategy (MTS) asone of its four key sectors of focus, tobenefit from a significant proportion of theBank’s new commitments to infrastructureinvestments. The Bank’s Transport SectorPolicy was approved in February 1992 andsuperseded its previous policy in this sector,dated October 1991. The OperationalResource and Policy Department (ORPC) inits 2010 Work Program is scheduled toupdate the Bank’s Transport Sector Policy.

The existing Transport Sector Policydistinguishes five subsectors based onphysical and economic characteristics.These subsectors generally correspond tothe primary modes of moving passengersand freight, and include roads, railroads,water transport (or maritime transport), airtransport, and urban transport. The Bank’spolicy has three specific objectives: (i) toprovide guidance to sector lending; (ii) to stimulate policy dialogue; and (iii) tostrengthen coordination. The PolicyGuidance to sector lending provides a frameof reference for internal decision-making bythe Bank Group regarding transport projects

Contribution of the AfDB to Infrastructure Development 155


and programs formulated by its regionalmember countries (RMCs).

The scope of the AfDB’s interventions onbehalf of its RMCs includes lending forprojects and programs, sector and structuraladjustment loans, and technical assistance.In order to increase the amount of financingavailable, the Bank Group promotescofinancing arrangements with otherorganizations that have complementarydevelopment objectives. These financialresources are channeled to transportprojects and programs which have beencarefully prepared and assessed by duediligence work carried out by the Bank. TheAfDB takes into consideration the followingfive general priorities in its lending program:(i) investment, rehabilitation and main-tenance; (ii) regional trade and transport;(iii) role of government and private sector;(iv) cost recovery and financial considera-tions; and (v) institutional and humanresources development (see Box 5.1).

Among these objectives identified in theTransport Sector Policy and to meet the keychallenges of the water transport in thecontinent, the Bank has identified strategicoptions for the promotion of maritimetransport. These options are described inTable 5.1. Although this blueprint articulatesthe focal areas that guide the Bank in itslending policies, the strategy has not yetresulted in key interventions in the area ofmaritime transport. The new TransportStrategy, which is expected to be unveiled in2010, will provide more information andfoster a better understanding of thissubsector. This should result in a bettertargeting of activities, given the urgent needsof the port subsector. Areas for future

investment and support, such as buildingregulatory institutions, managementreforms, human resources development,shipping coordination, strengtheningmaintenance procedures, inland waterwaydevelopment, and multimodal regulation,which are highlighted in Table 5.1, resonatewith the findings presented in previouschapters of this report.

156 African Development Report 2010

Box 5.1: Transport sector – the AfDB’s

five lending priorities

• Investment, Rehabilitation and

Maintenance: Fostering an appropriate

balance of expenditures for new

infrastructure and equipment, rehabilita-

tion and maintenance, based on national

investment planning and coordination.

• Regional Trade and Transport:

Eliminating nonphysical and physical

barriers to regional and international trade

and transport, particularly along major

transport corridors.

• Role of Government and Private Sector:

Creating regulatory environments

conducive to the provision of efficient and

safe transport services, minimizing the

intervention of government in transport

operations and services, and encourag-

ing the involvement of the private sector.

• Cost Recovery and Financial

Considerations: Reducing or eliminating

public subsidies to transport infra-

structure and operations, increasing

operator revenues and decreasing costs,

and strengthening financial and

management systems.

• Institutional and Human Resources

Development: Fostering institutional

reform, training, education and pro-

fessional development.



Table 5.1: Strategic options for the promotion of maritime transport in Africa

Focal Area Issues Strategy

Institutional • Inappropriate institutional frameworks for • Establish and strengthen national

maritime administration organization for maritime administration

• Inadequate institutional support for • Form a national trade and transport

multimodal transport promotion group to address multimodal

issues in maritime administration

Management • Inefficient management of ports • Reform management practices to

• Lack of port security encourage decision-making freedom and

• Lack of organization and application of accountability

modern management practices by • Strengthening the organization and

African shippers staffing of port security

• Improve organizational structures and

management procedures

Human • Inadequate training and human • Establish and strengthen regional

Resources resource management training programs

Development • Hazardous working conditions on shore • Review and improve work rules and

and at sea regulations

Shipper • Lack of shipper representation in port • Strengthen the role of shippers’

Coordination administration and management decision- councils and other coordination bodies

making

Maintenance • Inadequate shoreside and seaboard • Establish and strengthen maintenance

maintenance practices management procedures

• Shortage of skilled maintenance personnel • Provide technical training programs

for maintenance personnel

Regional • Lack of shipping policy coordination • Improve the organization and

Cooperation and cooperation management of port associations

Inland • Lack of inland waterway facilities • Prepare integrated investment

Waterway plans for inland waterways development

Investment

Multimodal • Inappropriate regulation of multimodal • Rationalize regulations pertaining to

Regulation transport multimodal transport


AfDB’s Operational Approach toInfrastructure Development

This section looks at the Bank Group’sinvestments in infrastructure and relatedactivities, followed by specific inventions inthe public and private sector related to portsand other modes of transport. The Bank

recognizes that the InfrastructureDepartment of the Bank (OINF) and thePrivate Sector Department (OPSM) mustcontinue to develop a clear understandingof the strengths and constraints of the localinfrastructure networks and marketpotentials. In that regard, Country and


Box 5.2: The AfDB’s environment policy for infrastructure projects

Infrastructure and port projects, although crucial for Africa’s economic development, can sometimes have

unintended negative environmental impacts. A Bank Group Environment Policy was first adopted in 1990,

to promote environmental mainstreaming in all Bank operations. Environmental and Social Assessment

Procedures and a new Environment Policy were released in 2001 and 2004 respectively.

A set of new approaches is currently adopted by the Bank in its operations in order to: (i) mainstream

environmental sustainability considerations into all the Bank’s operations; (ii) strengthen existing environmental

assessment procedures and develop new environmental management tools; (iii) clearly demarcate internal

responsibility in implementation; (iv) assist RMCs to build adequate human and institutional capacity to deal

with environmental management; (v) improve public consultation and information disclosure mechanisms; (vi)

build partnerships to address environmental issues, harmonize policies, and disseminate environmental

information; and (vii) improve monitoring and evaluation of operations.

In this way, environmental impacts of a project are reviewed throughout the project cycle, from the

conception and programming stage, through to appraisal, supervision, and monitoring. In each operational

department of the Bank, environmental and social specialists provide guidance and support and follow the

project’s progress.

Project categorization based on four levels of risk (4 being the lowest risk, 1 the highest) is one of the

tools to address environmental issues. Port and infrastructure projects are rated as category 1, covering all

projects that are likely to induce important adverse environmental and/or social impacts. As such, before an

infrastructure project is presented to the Board for approval, the following steps need to be taken:

• conduct a full Environmental and Social Impact Assessment (ESIA), which examines the project’s

potential beneficial and adverse impacts, compares them with those of feasible alternatives, and

recommends any measures needed to prevent, minimize, mitigate or compensate for adverse impacts

and to enhance environmental and social project benefits;

• conduct an Environmental and Social Management Plan (ESMP), which summarizes the impacts;

develops mitigation and enhancement measures with quantitative and qualitative details; and

provides provisions for monitoring;

• conduct a Resettlement Action Plan (RAP) if relevant; and

• allow a period of 120 days’ disclosure before Board presentation.

The Bank’s promotion of, and adherence to, the highest international environmental and sustainability

standards in its projects serves an important demonstration effect by encouraging the participation of other

investors and partners.


Regional Strategy Papers, which areprepared in collaboration with the respect-ive governments of countries concerned,should continue to be used as tools to definethe needs and ensure coherence andsynergies between assistance to the publicand private sectors.

Based on consultations with RMCs as wellon economic sector work, the public sectordepartments develop programs to address theweaknesses and constraints in the enablingenvironment. This may include the provisionof public goods in “hard” infrastructure,comprising the sectors of energy, water andsanitation, transport, and telecommunicationsas well as in “soft” infrastructure, such asregulatory and legal frameworks, which areessential for economic growth and privatesector development.

The Bank’s Private Sector Departmenttakes the lead in supporting private sectoroperations through a variety of instrumentswithout a sovereign guarantee, includingloans, lines of credit, guarantees, equity andquasi-equity investments, and technicalassistance. These interventions are under-taken with private corporations, financialinstitutions, or state-owned enterprises andin partnership with other developmentinstitutions. In this way, the Bank seeks tobuild confidence around projects, and toattract other investors by creating a strongdemonstration effect. In addition to thestrategic alignment above, private sectorprojects are often assessed on the basis oftheir commercial viability, developmentoutcomes, additionality, and complement-arity.

Overview of AfDB Investments tothe Sector

Infrastructure development in Africa, whichincludes transport but also energy, telecom-munications, and water and sanitation, isone of the AfDB’s top priorities. This iscurrently reflected in the Bank’s 2010operational work program, where infra-structure will account for 49 percent of totalfinancing.

Since 2000, the renewed emphasis oninfrastructure development has led to asharp increase in AfDB investments to thesector, both in value and relative terms (seeFigure 5.1). Lending approvals in theinfrastructure sector reached a record highof US$ 3.05 billion in 2007 (75 percent oftotal approvals), an increase of around 125percent over the 2006 level of US$ 1.29billion. Of this US$ 3.05 billion, 40 percentwas allocated to transport infrastructure. Interms of subregional allocations to hardinfrastructure, North Africa received in 2007the largest share (Figure 5.2).

However, as shown in Figure 5.1, in 2008Bank Group investment approvals forinfrastructure decreased to US$ 2.17 billion,although this still represented 45 percent ofthe AfDB’s total commitment for the year.Regional infrastructure projects accounted for12 percent of the Bank’s total commitment.With respect to the transport subsector, in2008 the Bank Group contributed US$ 393.94million of its own funds to cofinance projectsin the transport subsector, and mobilized anadditional US$ 114.41 million from externalpartners and private sector institutions, with afurther US$ 243.62 million coming fromgovernments and local firms.



In terms of the split between financingwindows for approvals in the infrastructuresector in 2008, US$ 1.05 billion (48 percent)came from the ADB window, compared toUS$ 1.12 billion (52 percent) from the ADFwindow. The development of regionalinfrastructure also increased from US$193.80 million in 2006 to US$ 213.70 millionin 2007, reflecting the Bank’s emphasis onregional integration (AfDB, 2008; ICA,2008a, 2008b, 2009). As a result of its strongcommitment toward infrastructure develop-ment in Africa, the Bank emerges as one ofthe key players in this sector. Nevertheless,much remains to be done to bridge the

infrastructure investment gap in Africa,which is estimated by the Africa Infra-structure Country Diagnostic (AICD) studyto stand at US$ 31 billion per annum (WorldBank, 2009).

To improve resource mobilization for thedevelopment of African ports, the Bank hasmainly focused on developing public–private partnerships through its PrivateSector Department. The public sector arm ofthe AfDB has targeted the development ofthe hinterland interface, mainly through theconstruction of road networks and thecreation of regional trade corridors.


Figure 5.1: AfDB Investment in hard infrastructure, 1985–2008 (US$ mn)

Source: AfDB, Statistics Department.

3500

3000

2500

2000

1500

1000

500

0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

US$ million

Power Supply

Water Supplyand Sanitation

Communications

Transport


AfDB Investments in Ports: LessonsLearned

Between 1973 and 2000, the AfDB assumeda leadership role by carrying out substantialinvestment in ports, as documented in the2001 Review of Bank Group Operations inthe Maritime Subsector (AfDB-COD, 2001).In that 17-year period, the Bank Groupcommitted to US$ 804.39 million, represent-ing 27 financing operations in regionalmember countries (see Annex 5.1). ADFfinancing accounted for 48 percent of theBank Group’s total maritime investments(see Figure 5.3).

The main areas of Bank Group supportto the maritime sector during 1973–2000included: (i) construction of new ports; (ii)

reconstruction and rehabilitation of ports;(iii) procurement and installation of safetyequipment; (iv) institutional support (e.g.capacity building, trade facilitation; enhanc-ing the regulatory framework); and (v)maritime studies (i.e. to prepare projects orto evaluate the performance of thesubsector). Within the Maritime Review’stimeframe (1973–2000), approximately 74percent of the operations were implementedbefore 1990, while the remaining 26 percentwere completed in 1997. The decline in theAfDB’s pipeline of projects in the maritimesubsector during this period is due to thefact that under the ADF-VII lending policy,there were no resources allocated to theports subsector. This gave the Bank the


Figure 5.2: AfDB investment in hard infrastructure in Africa by subregion, 2008

Source: ICA (2009).

1000

900

800

700

600

500

400

300

200

100

0

Energy Non-ODA

Energy ODA

Water Non-ODA

Water ODA

Transport Non-ODA

Transport ODA

North Africa Western Africa Eastern Africa Central Africa Southern

Africa except

SA

South Africa


opportunity to explore the use of its privatesector window to finance port projects.

Another key finding of the 2001Maritime Review was the need to supportregional integration, which is articulated asone of strategic areas of Bank intervention.In this respect, the Report highlighted thefollowing critical focal areas:

• the need to finance inland waterwaystudies on selected lakes and rivers(such as Victoria, Chad, Niger, andNile) that have significant regionalintegration impacts;

• the need to finance studies andmobilize resources to support thesetting-up of inland multimodalcontainer ports, which are required tofacilitate the transit of cargo tolandlocked countries; and

• to encourage RMCs and RECs,through policy dialogue, to cooperatein rationalizing their ports in terms ofneed and use, to adopt minimumtariffs for transit cargo, and topromote access to landlockedcountries.

On the knowledge side, the Report stressedthe need to conduct more economic andsector work, in order to fully evaluate thecontribution of the maritime subsectorprojects to the overall economicdevelopment agenda.

Bank’s Private Sector InfrastructureInvestments

A principal objective of the Bank’s PrivateSector Department (OPSM) vis-à-vis theinfrastructure sector is to promote PPPs bycombining resources from both the publicand private windows, as well as byproviding technical assistance (TA) andcapacity building to the Bank’s RMCs. Thecombination of nonconcessional andconcessional resources from the AfDBboosts the bankability of a project andmakes it more attractive to private sectorcofinanciers. Furthermore, a Public–PrivatePartnership Strategy is under preparationthat should, among other things, defineinternal incentives and procedures forpromoting private participation morerobustly. As a result of this strategicorientation, all infrastructure projectssubmitted by OPSM for approval by theBoard in 2007 and 2008 took the form ofPPPs.

As African ports are increasinglyprivatizing part of their activities through


Figure 5.3: AfDB maritime investments

by financing instrument, 1973–2000

(% of total)

Source: AfDB–COD (2001).

NTF11%

ADB41%

ADF48%


concessions, OPSM is also focusing on portinfrastructure projects to be managed underconcessional agreements. Over the lastdecade, about 25 percent of the cumulativeapproved operations emanating from thePrivate Sector Department have been in thetransport sector, and of these, 50 percent aredirectly related to the development of portsin Africa.

Over the past decade, the Bank hasapproved four major port projects: (i) asenior loan of US$ 10.0 million for theDjibouti Bulk Terminal (2003); US$ 150.0million for the Damietta Container Terminalin Egypt (2007); US$ 80.0 million for theDoraleh Container Terminal in Djibouti(2008); and US$ 71. 36 million (Euro 47.50million) for the Dakar Container Terminal inSenegal (2009) (see Box 5.4 and Annex 5.2).All these projects were PPPs, financed byboth the private and public sectors.

Private sector operations in the portsubsector thrive where an enablingenvironment has been created by way ofport reforms and the formulation of legaland regulatory frameworks. However, thereare still ports in Africa that need to bederegulated, and this poses a challenge toprivate investment in these countries. Inaddition, other constraints impeding privatesector involvement include: governanceissues; insufficient capacity to design;contraction and regulation of the privatesector participation; lack of local capitalmarket to support private projects; the longgestation period needed for infrastructureprojects; and reconciliation of recovery ofcost with constraints in customers’affordability and availability of subsidies.

Given that many ports continent-widehave weak onshore and offshore infra-structure, poor management, shallow draftand low terminal capacity — and given toothe advent of post-Panamax vessels(supersize ships), there is an urgent need toidentify and develop hub ports alongregional lines in order to attract internationalshipping lines. This will bring about greatereconomies of scale for ports, and so reduce


Box 5.3: AfDB’s Technical Assistance

support toward a feasibility study of

road/railroad linkages between Kinshasa

and Brazzaville

One example of technical assistance provided

by the Bank to the transport sector in 2008 was

to cofinance a study into a project designed to

link the capital cities of the two Congos,

Kinshasa (Democratic Republic of Congo) and

Brazzaville (Republic of Congo) and to construct

a 1,015-km railroad to connect the cities of

Kinshasa and Ilebo in the DRC.

The study comprises two components:

(i) feasibility and final design of the road/railroad

bridge between the two capitals, including

terminal facilities as well as access roads to

existing road and railroad networks in both

countries and (ii) the feasibility of the

Kinshasa–Ilebo railroad.

These infrastructure linkages aim to increase

interregional trade, reduce transportation costs

and travel times between countries located

along the corridor, and to fill one major missing

link in the Tripoli–Windhoek corridor.

The Bank contributed an ADF grant of UA 5.0

million toward the total cost of the study (UA

5.44 million), with the remainder provided by the

governments of the DRC and the Republic of

Congo.

Source: AfDB (2008).


maritime transport costs. Notwithstandingthis overarching objective, there are goodprospects for further development andexpansion of container terminals in someports. Indeed, OPSM is in the process ofcarrying out its due diligence on a number ofport projects with PPP investment potential.

Public Sector InfrastructureInvestments

Public infrastructure investments by theAfDB have traditionally focused on the

development of the hinterland infrastructurenetworks through roads and, to a lesserextent, railroad projects and programs. Eventhough these networks may not link to aport interface, such infrastructures facilitatethe movement of people and goods tomarkets, and ultimately boost trade.

In 2008, for example, the public sectordivision of the AfDB supported thedevelopment of road networks in Tunisia(Road Project V [AfDB — OINF, 2008b]) andBurkina Faso (AfDB — OINF, 2009c). In


Box 5.4: The Doraleh Container Terminal project in Djibouti

The Middle East has seen soaring container port volumes, and virtually all ports with privatized container

operations are increasing their capacity and/or their capability to handle larger vessels. This includes the

transshipment range comprising the Arabian Sea/Gulf of Aden ports. By contrast, cargo-handling facilities

at most East African ports remain fairly basic.

Forecast demand in the subregion is strong for both the transit and transshipment businesses. Container

port demand arising from Ethiopia’s foreign trade has been increasing at around 1.5 times the rate of

Ethiopian GDP growth over the last 5 years. For example, Ethiopian traffic at the Djibouti port has increased

at an average growth rate of 20 percent per annum over the last 5 years and at 18 percent per annum over

the last 10 years. Container port throughput in the broader region (which comprises Djibouti’s potential

transshipment market), increased by 218 percent over 1995–2005, reaching 32.6 million TEUs in 2005.

Container transshipment demand for the Arabian Sea/Gulf of Aden port range, consisting of Salalah (Oman),

Aden (Yemen), and Djibouti ports, is forecast to increase by 164–280 percent over the 2005–2015 period,

to around 7.06–10.15 million TEUs.

To tap into the existing growth potential, in 2008 the Bank agreed to cofinance the construction of a new

terminal at the natural deepwater port of Doraleh under a 30-year concession agreement awarded to Doraleh

Container Terminal (DCT). The port is located a few kilometers from the existing Djibouti port, and will handle

exclusively all container business in Djibouti. The Djibouti port will continue to operate for bulk cargo traffic

only. The project will have a 1.5 km quayline length and the capacity to handle 1.55 million TEUs by 2015.

The terminal will have the deepest draft in the region at 18 m and will be able to receive vessels with a

capacity of up to 12,000 TEUs. The new site at Doraleh will be the first port after Suez capable of

accommodating the latest generation of supersize container ships and is set to become an important transit

port and transshipment hub.

The Bank agreed to invest US$ 80 million (20 percent of the total project cost). The project is co-

sponsored by the Port Autonome International de Djibouti (PAID) and Dubai Port World (DPW).

Source: AfDB — OPSM (2008).


Tunisia the objectives were to support theupgrading of the classified roads networkthroughout the country, and to improveaccessibility to the principal developmentpoles to boost trade and economic growth.In Burkina Faso, the project aimed to reducegeneral transportation costs and to improvethe state of roads along the main nationalcorridor of the country. Burkina Faso is alandlocked country without a seaboard, sothe diversification of its access corridors iscritical to its development. The road targetedby the project was identified as the mainhighway corridor (among the five existingones) to access neighboring ports located inTogo and Ghana in particular.

Nevertheless, the Bank also considers thedevelopment of public infrastructure in thebroader framework of regional integration.The Bank’s approach in this regard is thedevelopment of trade corridors, through thedevelopment of transnational multimodaltransport networks, to link nationaleconomies and allow landlocked countriesto access ports. The Bank considers thisapproach as a necessary condition ofintraregional and global trade developmentas well as integration of national markets.

The identification of regional transportcorridors is a key development strategy in aresource-constrained environment. In itsrecently approved Regional IntegrationStrategy, the Bank proposes to validate theidentified development corridors byinvestigating their linkages and economicpotential. This process would involveassessing individual development corridorsin terms of growth, development impactopportunities, indicative infrastructurerequirements, investment potential, and

ability to support regional integration. In thisrespect, the Bank will combine thedevelopment of the corridors with parallelinvestments in trade facilitation. In thisregard, the Bank will promote and supportprivate sector activities along the corridors,especially small and medium enterprises(SMEs), by promoting the implementation offavorable policy and regulatory frameworksand facilitation of trade. Support to SMEswill also help to promote economicdiversification and exports.

The Bank has established itself as aleading financier of regional (multinational)operations in Africa, and this funding hastraditionally come from the AfricanDevelopment Fund (ADF), which is theAfDB’s concessionary window. However,more recently, increasing emphasis is beingplaced on mobilizing nonconcessionaryfinance for regional operations. Forexample, recent major AfDB regionalinfrastructural projects and initiativesdeveloped with various developmentpartners include: the North–South Corridorproject (Box 5.7); the Central AfricanEconomic and Monetary Community(CEMAC) Transport and Trade Corridorproject (Annex 5.3); the second phase of theMombasa–Nairobi–Addis Ababa RoadCorridor project (Box 5.5), and the NacalaRoad Corridor project (see Annex 5.3).These projects aim at removing criticalbottlenecks to trade and transport flows, bydeveloping the hinterland interface andimproving access to ports, which willultimately reduce transport delays and costs.

The Bank also intends to produce aseries of country reports on measures thatcan be taken by member governments,



individually and collectively, to accelerateintegration of their economies. The firstreport was produced by the Bank in 2009,and focused on priority infrastructureoptions in Burundi (Box 5.6).

In addition to “hard” infrastructureinvestment, “soft” infrastructure is also crucialto an RMC’s economic development. Softinfrastructure can be defined as the socialoverhead capital of a region or country, whichenhances the commercial environment forbusinesses and trade — for both domestic andforeign companies who may be thinking ofscaling up investment. Soft infrastructurecovers a broad spectrum of areas, including:governance, regional leadership, education

and knowledge, research and development,technical and business advisory services,access to capital and finance, support tobusiness and trade associations, crimeprevention, health, and social inclusion issues.

Soft infrastructure is increasinglyrecognized as the foundation of successfuland sustainable economies (Stimson et al.,2006) and for that reason has even beentermed “smart” infrastructure (Smilor andWalekin, 1990). Some economists haveargued that trade costs are negatively relatedto the existence of improvements in softinfrastructure (Khan, 2006). For example, inthe first phase of the Mombasa–Nairobi–Addis Ababa Road Corridor Project, approved


Box 5.5: Mombasa–Nairobi–Addis Ababa Road Corridor Project, Phase II

The Mombasa–Nairobi–Addis Ababa Road Corridor Project, approved by the AfDB in 2009, aims at

promoting trade and regional integration between Ethiopia and Kenya by improving transport

communications between the two countries. The project involves the construction to bitumen standard of

438 km road sections including a 245-km Merille River–Marsabit–Turbi road section in Kenya and a 193-km

Ageremariam–Yabelo–Mega road section in Ethiopia. The total cost of the project is US$ 510.31 million.

The project is to be cofinanced by the Bank Group (64 percent), the European Union (23 percent), and

the governments of Ethiopia and Kenya (13 percent). The expected outcomes of the project include reduced

transport and shipping costs between Kenya and Ethiopia; reduced transit time for import and export goods;

and increased volume of Ethiopian transit goods using the port of Mombasa. Ultimately, transit to/from

Ethiopia via the port of Mombasa should increase from zero in 2009 to 500,000 tonnes by 2014; and to over

1 million tonnes or 20 percent of total Ethiopian sea freight by 2018. The average transport cost of US$ 0.50

per veh-km on the corridor in 2009 should reduce by 20 percent by 2011 and by 50 percent by 2014. Transit

and travel time of 5 days between Addis and Nairobi in 2009 should be reduced by 20 percent (1 day) by

2011; and by 60 percent (3 days) by 2014.

The development of the corridor will expand market sizes beyond national boundaries and foster an

enabling environment for the private sector and for attracting foreign direct investment. In addition to

enhancing trade and strengthening regional integration, the project will contribute to poverty reduction in

both countries by increasing access to markets and social services for the surrounding areas, and by

empowering women and other disadvantaged groups through adequate roadside socioeconomic

infrastructure and services.

Source: AfDB — OINF (2009a)


in 2004 by the AfDB, one of the sevencomponents was a study of the containerterminal on the Ethiopian side of the corridor.The aim of this study was to present anintegrated development plan of the wholecorridor into a viable trade route, taking intoaccount all the necessary construction orimprovement to the physical infrastructure,including transit infrastructure facilities.Among the facilities, a one-stop border post(OSBP), which is considered as softinfrastructure, was identified as a possibleimprovement to the efficiency of the corridor.The Chirundu, between Zambia andZimbabwe (mentioned in Chapter 4), is thefirst OSBP along the North–South Corridor

Project. Another active OSBP financed by theBank is between Rwanda and Burundi.

The Bank Group’s RegionalIntegration Activities

The Bank’s Regional Integration Strategy,approved in March 2009, articulates threeprincipal objectives. First, it supports theestablishment of an effective and efficientpan-African and subregional institutionalframework to promote trade and managethe integration process. Second, the strategyaims to facilitate an enabling investmentpolicy framework for the continent. Third, itsets out the different resources that the Bankhas at its disposal, in terms of financial


Box 5.6: An infrastructure Action Plan for Burundi: accelerating regional integration

Burundi has badly suffered as a result of conflicts over the last two decades, which has left a legacy of

substandard and poorly maintained infrastructure. The challenges that this presents are compounded by

the fact that Burundi is a landlocked and densely populated country. Against this background, significant

changes are underway to overhaul the regional trade and infrastructure landscape. On the one hand,

Burundi has recently become a member of the East African Community (EAC), which could induce shifts in

the trade structure with its partners. On the other hand, several major regional projects are in the pipeline

which could deeply affect the relative competitiveness of existing transport corridors, as well as the supply

of electricity and the structure of energy trade.

To address the problem of pervasive poverty in Burundi, the government is committed to accelerating

the economic GDP growth of the country to 6–7 percent per annum in real terms. To support the government

in meeting this objective, in 2009 the Bank conducted a study in Burundi to suggest priority infrastructure

options, with a focus on transport, communications, and energy, to maximize the economic benefits of

regional integration. The study produced a medium-term Action Plan to develop the proposed

infrastructures. The report provides the government, the donor community, and the private sector with a

detailed assessment of infrastructure investment opportunities in Burundi and the wider region. It will

therefore underpin the government’s ongoing dialogue with donors and the business community about these

opportunities. Finally, this report contributes to a better coordinated action within the donor community.

The African Development Bank and the World Bank are collaborating on the preparation of a Country

Economic Memorandum (CEM) for Burundi. The relevant findings of this report on infrastructure will be

integrated into the forthcoming CEM.

Source: AfDB — OREA (2009).


investment, technical assistance, andknowledge to facilitate delivery of priorityregional infrastructure.

This new strategy is expected to result ina number of benefits for its RMCs and thecontinent: greater economies of scale andincreased competitiveness; higher levels ofFDI and a more enabling environment forprivate sector participation; enhancedAfrican presence in the global marketplace;a scaling-up of intraregional trade; theestablishment of a more effective African“voice” on issues of development andregional integration; and a more efficientprovision of regional public goods. Toachieve these concrete results, the strategy isunderpinned by two mutually reinforcingpillars: regional infrastructure and institu-tional capacity building, the latter includingtrade facilitation and capacity buildingmeasures.

The Bank has traditionally supportedregional infrastructure, but without buildinginto it trade facilitation programs. The newstrategy, therefore, marks a shift toward amore balanced approach, and will includecapacity building to the Regional EconomicCommunities (RECs) in the soft areas oftrade facilitation, in addition to thedevelopment of trade-related infrastructure.Specifically, this support will aim to:

• Assist and build capacity to developtrade facilitation strategies andimplement trade facilitation audits;

• Promote the harmonization andcoordination of regional tradepolicies, with a view to eliminatingtariff and nontariff barriers (NTBs) tothe cross-border flow of productionfactors, goods and services;

• Harmonize environmental standardsand regulations;

• Streamline cross-border infrastructureregulations and remove publicprocurement bottlenecks; and

• Support the implementation ofcustoms unions.

The NEPAD Infrastructure ProjectPreparation Facility (NEPAD-IPPF) in 2009funded a feasibility study on the extensionof the Port San Pedro and related infra-structure in Côte d’Ivoire. The objectives ofthe proposed project are to stimulateeconomic growth and socioeconomicdevelopment, and to build an efficientregional transport system to facilitate accessto reliable services for the landlockedcountry of Mali and some parts of Guineaand Liberia. The broad focus of the projectis to support import and export-orientedSMEs by facilitating trade and contributingtoward regional integration. More specific-ally, the project aims at extending thecapacity of the port so that it can serve as aregional hub, as well as promotingmultimodal transport (road/rail) for a freeflow of people and goods.

The NEPAD-IPPF Special Fund con-tributes to these objectives by (i) reducingcosts while improving the quality oftransport services to improve competitive-ness and (ii) supporting regional integrationand the integration of markets by improvingtransport services. The development of roadlinks converging to the Port, namely,Odienné (Ivory Coast)–Bougouni (Mali) andDanane–N’Nzérékoré (Guinea) forms part ofthe West Africa Monetary and EconomicUnion (UEMOA) Community Priority Road



Network articulated in the CommunityInfrastructure and Transport Road ActionProgram (PACITR). This road network,together with the bridge over the CavallyRiver linking Côte d’Ivoire to Liberia, seeksto (i) capture the road traffic from thesoutheast of Mali, Guinea, and Liberia, and(ii) to transit goods at least-cost through theport of San Pedro by land and sea routes tothe markets in the regional hinterland.

The Bank has also taken into account themain issues stated in West and Central AfricaMemorandum of Understanding (MoU) onPort State Control, which was signed in Abujain 1999. The Abuja MoU regulates theimplementation of port state controlprovisions, i.e. the inspection of foreign shipsin national ports to verify that their conditionand equipment comply with the require-ments of international conventions, and thatthe ship is operated in compliance withapplicable maritime laws. The aim of theMoU is to foster the eradication ofsubstandard shipping practices, to ensuresafety and security of persons on board ships,and protect the marine environment frompollution. A presentation of the MoU tookplace in 2008 at the African Union conferenceof Ministers of Transport in Algiers, whichidentified areas of improvement for a betterimplementation of the MoU, especiallyrelated to institutional commitments.

On softer issues, the Bank’s RegionalIntegration Department (ONRI) hasdeveloped a strong trade facilitation programwhich is aimed at addressing cross-bordertransport regulations/procedures relating tothe development of the corridors. Theseinclude the development and management ofOSBPs, transit traffic regimes, cross-border

movement of persons and standardspertaining to vehicle size, weight and safetyrequirements. In this regard, ONRI hasorganized two consultation missions to assistmembers of RECs to formulate positions inthe World Trade Organization negotiations ontrade facilitation. The Bank aims to strengthenthe capacity of ECCAS and CEMAC, within theframework of the ongoing development of acapacity-building program for the implemen-tation of the Consensus Transport Master Planof Central African States. The secondconsultations will be held with COMESA,EAC, and SADC as a follow-up to theTripartite Summit of these three RECs, gearedtoward their eventual merging into one body.

In addition, the Bank continues to helpshape Africa’s regional infrastructuredevelopment through its knowledgeproducts. First, it undertakes periodic reviewsof the NEPAD Short Term Action Program(STAP) to identify implementation challengesand make appropriate recommendations.Technical support is provided to addressshortcomings identified in the STAP process,including weak definition of projects andprograms, the need for improved leadershipand ownership, as well as the lack ofenabling policy and regulatory frameworks.Second, by expediting the development ofthe medium- to long-term strategic Programfor Infrastructure Development in Africa(PIDA), in collaboration with the AUC andthe NEPAD Secretariat, ONRI providessupport toward its eventual implementation.Third, it provides advice and technicalsupport and collaborates with the NEPADSecretariat, RECs, and RMCs to facilitatealignment of national, REC, STAP, and PIDAinfrastructure priorities, and to prioritize



infrastructure projects for funding andimplementation. In this regard, prioritizationis based on criteria already agreed with theRECs and RMCs. Lastly, the Bank alsosupports the harmonization process forregulations, procedures, and standards thataffect cross-border connectivity.

The AfDB is working with the WTO andUNECA to implement the WTO’s Aid for

Trade (AfT) Agenda, which supports thetrade liberalization agenda by addressingsupply-side constraints. The North–SouthCorridor is one of the pilot programs inwhich the Bank is participating as part of theAfT agenda (Box 5.7).

Partnerships and theInfrastructure Consortium forAfrica

The Bank leverages resources withdevelopment-oriented financing institutionsto support projects in its RMCs. InSeptember 2008, the Bank established afinancing mechanism, namely the AfricanFinancing Partnership (AFP), which


1 This was originally organized through theRegional Trade Facilitation Program website(www.rtfp.org). However, the RTFP officially cameto an end in October 2009, after achieving significantsuccess. A follow-on program, to be calledTradeMark Southern Africa, is due to commence inthe near future.

Box 5.7: The North–South Corridor: an Aid for Trade pilot program

The North–South Corridor (NSC) has been identified (in full collaboration with DfID) as a pilot program under

the Aid for Trade (AfT) initiative to help reduce transport and transit costs, and boost trading opportunities

in southern and eastern Africa. The Bank has committed to contribute US$ 600 million over 2009–2012 to

support activities along the Corridor.

The Corridor traverses the vast area from the copperbelt of southern DRC and northern Zambia to the

port of Dar es Salaam in the northeast, and to the South African ports in the south. Its development involves

the Secretariats of COMESA, EAC, and SADC, which have already set up a joint Task Force to enhance

implementation of the program and its benefits. The main objectives are to:

• Remove main bottlenecks to trade flows and target areas of intervention along the Corridor;

• Address the Corridor’s development in a holistic manner, looking at regulatory, administrative and

infrastructural constraints to transport and transit systems as a whole;

• Ensure that interventions to reduce costs and time are effected in a coherent and sequential manner

to generate a “knock-on” effect in terms of savings along the entire Corridor;

• Allow all information to be collated and made available on a GIS database to help informed decision-

making;1

• Support regional trade policy regulation and trade facilitation initiatives.

Significant progress has already been made, including preparation of financing proposals, identification of

transport networks and bottlenecks, mapping of existing and planned investments, and strengthening trade

facilitation measures. Some development partners, including DfID, are providing support. The challenge is

now to take the pilot to the next phase and secure more support.


facilitates collaboration with some of thelarger DFIs, with a provision for the eventualparticipation of smaller DFIs and privatefinanciers. The principal objective of theAFP is to optimize the consolidated marketknowledge and project financing skills ofthe DFIs, including the AfDB, and therebymitigate financial risks for cofinanciers. TheAFP focuses on very large projects thatrequire massive capital injections — theseoften fall within the infrastructure sector.The AFP enables all partner institutions toavoid unnecessary duplication of efforts,lower legal and administrative costs,increase financing capacity, and achievegreater diversification and synergies,thereby maximizing project effectiveness.

The Bank has also taken steps to build astrong partnership with the African FinanceCorporation, which will yield huge efficiencybenefits for both institutions. Furthermore,the Bank leverages the networkingopportunities afforded by its Annual Meetingsto create a forum for representatives fromnational authorities, investors, financiers,promoters, and contractors to meet and shareproject ideas. All these mechanisms providean opportunity to build synergies andcatalyze additional financing for infrastructuredevelopment in Africa.

Similarly, the Infrastructure Consortium forAfrica, which is hosted by the AfDB in Tunis,facilitates a more coordinated approach toinfrastructure development. It has in particularpromoted collaboration between the AfDBand other donors and helps to define acommon approach to support policy reforms,negotiations, and the involvement of theprivate sector. The Consortium has also beeninstrumental in promoting partnerships to

leverage financial support to bridge theinfrastructure gap in Africa.

In 2007, the Bank successfully mobilizedclose to US$ 2.7 billion in cofinancing in thetransport, energy, and ICT subsectors (ICA,2008b). In 2008, the Bank Group con-tributed US$ 393.94 million of its own fundsto cofinance projects in the transportsubsector, while it mobilized a further US$ 114.41 million from external partnersand private sector institutions, with anadditional US$ 243.62 million of fundingcoming from governments and local firms.

Conclusion

Between 1973 and 1997, the Bank assumeda leadership role vis-à-vis investments in theport subsector in Africa, mainly using publicsector instruments. However, more recently,public investments have declined in favor ofprivate sector investments. To date, almostall Bank port development projects havebeen prepared by its Private SectorDepartment, including those in Egypt,Djibouti, and Senegal. Nonetheless,opportunities for a scaling-up of participa-tion by both public and private sectorsshould be explored, given the substantivefinancial needs of the ports subsector.

The AfDB should be commended forincreasing its support to transport projectsand programs, which account for the bulk ofits total infrastructure investments. However,there is a need to ease pressure on the roadtransport systems and to focus on othermodes, such as rail and navigable rivers andlakes (e.g. the Zambezi–Shire WaterwayProject; see Box 4.1).

Beyond hard infrastructure, the AfDBalso supports soft infrastructure investments,



such as OSBPs, which are essential nodes inthe movement of goods in and out of portsand through transport networks andcorridors. The Bank is well placed throughits key partnerships with RECs, governmentbodies, and civil society organizations, toexplore other areas where it might interveneeffectively to assist its RMCs, such as inhelping to streamline and harmonizecustoms procedures and enhance theinstitutional regulatory framework.

Discussions with national authorities andother partners reveal that there is room forthe Bank to invest further in ports andrelated logistics. However, as these types ofinvestments are expensive, the Bank shouldcontinue to leverage all the instruments at itsdisposal and strengthen its partnerships, inorder to catalyze the participation andresources of other key players.

References

AfDB. 2008. Annual Report, 2007. Tunis:AfDB.

——. 2009. Annual Report, 2008. Tunis:AfDB.

AfDB — CEPR. 1992. Transport SectorPolicy. Presented to the Board of the AfricanDevelopment Bank on February 26, 1992.

AfDB — COD. 2001. Review of BankGroup’s Operations in the MaritimeSubsector, April 2001.

AfDB — OCIN. 2002. Project AppraisalReport: “Multinational — BCEAO: Proposalfor an ADF loan of UA 6.20 million to financethe project to reform systems and means of

payment in UEMOA countries.” Prepared byOCIN. Submitted to the Board of the AfricanDevelopment Bank on October 2, 2002.

——. 2003. Project Appraisal Report:“Ghana: Proposal for an ADF loan of UA 18million, an NTF loan of UA 3 million and aTAF grant of UA 0.80 million to finance theRoad Infrastructure Project.” Prepared byOCIN. Released on August 11, 2003.

AfDB — OINF. 2008a. Project AppraisalReport: “Ghana: Proposal for supplementaryloans of UA 43.10 million to finance three(3) on-going road transport projects. BoardMemorandum.” Prepared by OINF.Submitted to the Board of the AfricanDevelopment Bank on February 11, 2009.

——. 2008b. Project Appraisal Report:“Tunisia: Proposal for an ADB loan of Euro174.33 Million to finance the Road ProjectV.” Prepared by OINF. Submitted to theBoard of the AfDB on May 28, 2008.

——. 2009a. Project Appraisal Report:“Mombasa–Nairobi–Addis Ababa RoadCorridor Project Phase II.” Prepared byOINF. Submitted to the Board of the AfDBon July 1, 2009.

——. 2009b. Project Appraisal Report:“Multinational — Mozambique/Malawi/Zambia — proposal for ADF loans of UA102,720,000 to Mozambique and UA14,320,000 to Malawi to finance the NacalaRoad Corridor — phase I.” Prepared byOINF. Submitted to the Board of the AfDBon June 24, 2009.

—— 2009c. Project Appraisal Report:“Burkina Faso: Proposal for an ADF loan of



UA 10 million and ADF grant of UA 31million to finance the project to rehabilitatethe Koupela–Bittou–Cinkanse–Togo borderroad and the Mogande access road.”Prepared by OINF. Submitted to the Boardof the AfDB on February 11, 2009.

AfDB — ONIN. 2004. Project AppraisalReport: “Mombasa–Nairobi–Addis AbabaRoad Corridor Project.” Prepared by ONIN.Released on November 5, 2004.

AfDB — ONRI. 2009. Bank Group RegionalIntegration Strategy, 2009–2012. Presentedto the Board of the AfDB in March 2009.

AfDB — OPSM. 2003. Project AppraisalReport: “Djibouti: Proposal for an ADB loanof US$ 10 million to finance the DjiboutiBulk Terminal project.” Prepared by OPSD.Submitted to the Board of the AfricanDevelopment Bank on December 3, 2003.

——. 2007. Project Appraisal Report:“Egypt: Proposal for a US$ 150 millionsenior loan to finance the DamiettaContainer Terminal.” Prepared byOPSM/GECL/OIVP. Submitted to the Boardof the African Development Bank onDecember 4, 2007.

——. 2008. Project Appraisal Report:“Djibouti: Proposal for a senior loan of US$80 million to finance the Doraleh ContainerTerminal (DCT) project.” Prepared byOPSM. Submitted to the Board of the AfricanDevelopment Bank on September 24, 2008.

——. 2009a. Project Appraisal Report:“Senegal: Proposal for a loan of 47.5 millionEuro to finance the Dakar Container

Terminal.” Prepared by OPSM. Submitted tothe Board of the African Development Bankon July 20, 2009.

——. 2009b. “Information Note on theTrade Finance Initiative.”

AfDB — OREA. 2009. “An InfrastructureAction Plan for Burundi: AcceleratingRegional Integration.”

Infrastructure Consortium for Africa(ICA). 2008a. ICA Annual Report, 2007.

——. 2008b. “Questionnaire for thepreparation of the 2007. Annual Report.”

——. 2009. “Questionnaire for the prepara-tion of the 2008 Annual Report.”

Khan, H.A. 2006. “Soft Infrastructure,Trading Costs and Regional Co-operation”,CIRJE Discussion Paper, University ofDenver.

Smilor, R.W., and M. Wakelin. 1990.“Smart Infrastructure and EconomicDevelopment: The Role of Technology andGlobal Networks,” The TechnopolisPhenomenon. Austin, TX: IC Institute,University of Texas.

Stimson, R.J., R.R. Stough, and B.H.Roberts. 2006. “Regional EconomicDevelopment: Analysis and PlanningStrategy.” New York: Springer.

World Bank. 2008. “Abidjan–LagosTransport and Transit Facilitation Project,Report No.: AB2798, Project InformationDocument, Washington, DC: World Bank.




No. BANK GROUP REGION PROJECT NAME

WINDOW

ADB

1 Côte d’Ivoire WST DEEPENING OF VRIDI CANAL ENTRANCE

2 Cameroon CEN EXTENSION OF DOUALA SEA PORT I

3 Cameroon CEN EXTENSION OF DOUALA SEA PORT PHASE II

4 Comoros EST MUTSAMUDU PORT DEVELOPMENT

5 Gambia WST BANJUL PORT DEVELOPMENT PHASE 1

6 Congo, Dem. Rep. CEN MATADI KINSHASA PORTS DEVELOPMENT

7 Guinea WST CONAKRY PORT DEVELOPMENT

8 Madagascar EST PANGANALES CANAL DEVELOPMENT

9 Seychelles EST VICTORIA COMMERCIAL PORT

ADF

1 Madagascar EST PANGALANES CANAL DEVELOPMENT

2 Cape Verde WST MAIO PORT CONSTRUCTION

3 Burundi CEN BUJUMBURA SHIPYARD CONSTRUCTION

4 Cape Verde WST SAO VINCENT SHIPYARD IMPROVEMENT STUDY

5 Multinational ZZMULT NAVIGATION STUDY ON RIVER SENEGAL

6 Eritrea EST ASSAB PORT DEVELOPMENT PROJECT

7 Cape Verde WST MINDELO SHIPYARD IMPROVEMENT

8 Madagascar EST THE PANGALANES CANAL STUDY

9 Multinational (OMVS) ZZMULT STRENGTHENING OF THE RIGHT BANK DYKE OF THE DIAMA

DAM PROJECT

10 Egypt NOR TWO CANALS STUDIES

11 Gambia WST BANJUL PORT II

12 Madagascar EST THE REHABILITATION OF THE PROTECTIVE DYKE OF TOLIARY

TOWN AGAINST FLOODING BY THE FIHERENANA RIVER

13 Madagascar EST TOLIARY TOWNSHIP PROTECTION PROJECT

NTF

1 Benin WST COTONOU PORT

2 Cape Verde WST MAIO PORT CONSTRUCTION

3 Burundi CEN BUJUMBURA SHIPYARD CONSTRUCTION

Source: AfDB-Central Operations Department (2001).

Annex 5.1: Bank Group Approvals in the TransportMaritime Subsector, 1973–2000



DATE APPROVED YEAR APPROVED AMOUNT APPROVED TOTAL COST (UA mn)

(UA mn)

19/12/1973 1973 3.30 23.10

21/12/1976 1976 5.00 40.00

18/08/1977 1977 5.00 40.00

26/11/1981 1981 10.00 39.20

22/06/1982 1982 7.00 17.47

30/09/1982 1982 20.00 80.27

26/04/1983 1983 12.69 28.50

25/01/1984 1984 11.00 32.78

25/01/1984 1984 18.42 30.19

19/11/1984 1984 2.76 9.74

27/11/1986 1986 0.55 7.42

17/09/1987 1987 0.53 0.56

20/09/1988 1988 0.34 0.37

17/04/1989 1989 41.02 55.37

18/03/1991 1991 4.60 5.11

27/01/1992 1992 1.84 2.03

05/1992 1992 4.83 5.38

06/01/1993 1993 1.56 1.68

14/12/1993 1993 16.00 27.00

10/1993 1993 6.85 7.61

11/1997 1997 6.44 7.16

17/10/1978 1978 2.42 9.68

19/11/1984 1984 6.00 33.68

27/11/1986 1986 4.45 7.42



(i) Djibouti: Bulk Terminal Project(2003)

At project preparation phase, Djibouti hadan acceptable level of infrastructure,although further investment was required tomeet the country’s growing level ofeconomic activity. The Port of Djibouti wasidentified as the most significant infra-structure to kick-start its economy, and onethat could benefit other countries in thesubregion, since the road and rail networkslink Djibouti with Ethiopia. The develop-ment of Djibouti Port was identified ashaving broader beneficial impacts, since by facilitating the supply of grains andfertilizers to neighboring countries(Ethiopia, Eritrea, Somali, and Sudan) itwould raise living standards and mitigate theeffects of famine, which is a recurrentaffliction in this subregion of Africa.

The project had to be implemented on afast-track basis in a subregion that hadpreviously failed to generate significantinvestments from international commercialbanks, which proved reluctant to providethe long-term financing required by capital-intensive infrastructure projects. Further-more, the financial market perceptions(creditworthiness and sovereign risks of thecountry) and sector constraints (regulatoryarrangements of the port and nature of thedomestic financial market) also made itdifficult to obtain local debt financing of theproject.

Consequently, the Bank’s participationwas sought to build comfort and confidencearound the project and thereby attract othercommercial lenders. The following needswere identified: (i) to facilitate the localbanks’ understanding and assessment of therisks of the project; (ii) to ease discussionswith prospective international lenders whohad also revealed their reluctance to assumeDjibouti’s sovereign risks over long periodsand/or were unable to participate withoutthe Bank’s involvement; and (iii) to givecomfort to the private investor (sponsor)about Djibouti’s sovereign risk, as the localprivate banking sector was not yet in aposition to absorb or manage those risks.The Bank’s expertise in project appraisal,supervision, and risk mitigation was alsosought.

The project comprised the development,design, construction, ownership, operationand maintenance of bulk terminal facilities forcereals and fertilizers, destined for export toEthiopia and the wider subregion. Initially,the concession granted the right to build,own, operate and transfer (BOOT) a bulkterminal project on an area of 42,000 squaremeters in the Port Autonome International deDjibouti for a period of 30 years. The bulkterminal has been successfully built asconceived and is now fully operational.

In terms of impact, the project hasconsiderably improved the port turnaroundtime. It has also had a more far-reaching

Annex 5.2: Examples of AfDB Private Sector PortProjects, 2000–2009


impact, by contributing to food security andpoverty reduction in Ethiopia, the majoruser of the port. The project has improvedcargo handling and reliability, and hasadded value to the port as a whole byincreasing its competitiveness. Furthermore,new business opportunities in servicing theport operations and associated logistics havebeen created by the project. It hasencouraged the growth of local andindigenous companies, for example byemploying subcontractors who providetruck haulage services and equipment rentalservices, all of which are spearheaded bythe private sector.

Nevertheless, delays in implementationstart-up often negatively impact project costsand expected revenues. By virtue of the timedelay and the nature of this particularturnkey Engineering, Procurement andConstruction (EPC) contract, the contin-gency provision was insufficient to cover theoverrun. As a result, the lesson was learnedto increase the amount of contingency insimilar future investments. Furthermore theproposed Operations and MaintenanceService Agreement did not materialize asplanned, thereby creating an operationalrisk. The Concessionaire will be advised topay closer attention to this aspect in futuredeals. The development of an Environ-mental and Social Management Plan (ESMP)was expected to be a condition precedent tofirst disbursement, but two years into projectoperations, an ESMP had still to bedeveloped. Relaxed adherence to projectconditions and covenants often increasesthe project’s related risks; in this case, theenvironmental risks mitigation effort wascompromised by this omission.

The total cost of the project, cofinancedby the Société Djiboutienne de Gestion duTerminal Vraquier (SDTV) and the ADB, wasestimated at around US$ 30 million. InDecember 2003 the Board of the ADBapproved a US$ 10.0 million senior loan,which represented 33 percent of the totalproject cost.

Source: AfDB–OPSM (2003).

(ii) Egypt: Damietta ContainerTerminal project (2007)

For Egypt and its neighboring countries, thecontainer transshipment industry has grownrapidly in recent years and this trend isexpected to continue. For the period1990–2005, the average annual growth rateof container shipments in Egypt was 18.6percent, rising to 21.2 percent since 2000.This strong demand is directly linked to thelevel of economic activity. In addition todirect trade-related factors and trans-shipments, container port demand has beenboosted by the continuing containerizationof general cargoes in some commoditytrades and of backhaul bulk cargoes. From1995–2005 the annual increases incontainer-handling demand in Egyptexceeded Egyptian GDP growth by anaverage of 7 percent. The total volume ofcontainers generated by the Egyptianeconomy and handled via Egyptian ports isexpected to increase by around 118 percentin the period to 2015 and then demonstratea further growth of 26 percent from2015–2020. The total range of possibleimport/export container port demand in2020 is projected to be in the range 2.8–3.9million TEUs.



In order for Egypt to capture a significantportion of the Egyptian and regionaltransshipments container activity, the AfDBagreed in December 2007 to cofinance theupgrading and expansion of the Damiettatransshipment port under a 40-yearconcession agreement. The two othersponsors of the project are the Kuwaiti GulfLinks Ports International (KGLPI) and theAref Investments Group. Together they formthe Damietta International Ports Company(DIPCO), which is the SPV executing theBOOT concession.

Damietta port began operations in 1986.It is situated on the Mediterranean coast ofEgypt, about 37 km west of Port-Said. Theport currently handles exports of agriculturalproducts, fertilizers, and furniture as well asthe delivery of imported goods such aspetrochemicals, cement, grains, flour, andgeneral cargo with a total capacity of about5.6 million tonnes annually. Damietta is wellconnected by roads and railroads; this givesthe port a competitive advantage over otherEgyptian terminals. However, the port’sexisting facilities are unable to serve thepotential demand of 4.5 million TEUs, whichwould make it one of the largest trans-shipment facilities in the Mediterranean andthe only one capable of handling the newgeneration of supersize container ships.

To take advantage of Damietta’s naturalcomparative advantages, a new containerterminal would be built and equipped withmodern transshipment facilities. The projectconsisted of: (i) construction of quay walls;(ii) dredging of the access channel andturning basin; (iii) installing the moderntransshipment equipment; and (iv)developing the terminal area and container

yard. These new terminal berths of about2,360 m will be able to accommodate thelatest-generation container vessels, with amaximum draft of 16 m, a length of 400 m,and a width of 53 m. The project will occupyapproximately 130 hectares of land at theport. Ultimately by 2014, the port will reacha maximum capacity of 4.5 million TEUsannually.

The total project cost was estimated atUS$ 680 million. The ADB Board approveda US$ 150 million Senior Loan, whichrepresented 22 percent of the total cost. Twoother leading Middle Eastern commercialbanks invested US$ 330 million (48 percentof the total), with the Sponsors providingUS$ 200 million (30 percent) in equity.

Source: AfDB — OPSM (Nov. 2007).

(iii) Senegal: The Dakar ContainerTerminal (2009)

The Port of Dakar is the busiest in WestAfrica, handling 90 percent of the total valueof Senegal’s foreign trade. It has a naturaladvantage in terms of geographical position,as it is situated at the crossroads betweenEurope, North America, South America, andSub-Saharan Africa. It has a dredgednavigational channel and breakwater, andfacilities for handling liquid and dry bulk,general cargo, and containerized cargo.

The demand for container volume isgrowing and expected to reach 416,000TEUs by 2012 and 580,000 TEUs by 2016. Inorder to improve the port’s facilities and tosafeguard its competitiveness, a 25-yearrenewable Concession Agreement wassigned in October 2007 between theGovernment of Senegal (represented by the



Port Autonome de Dakar [PAD]) and DubaiPort World (DPW). Under the Agreement,DPW has been awarded the concession toequip, operate, and manage the existingcontainer terminal in the Northern Zone ofthe Port of Dakar (“Terminal à Conteneurs”or “TAC”) under Phase 1 of the Project. Thesecond phase is to design, finance,construct, operate, and manage the Port duFutur, when the throughput of the existingport reaches 416,000 TEUs. Port du Futurwill have a potential capacity of 1.75 millionTEUs.

The Bank was invited to cofinance theproject, as part of its continuing effort topromote projects in the port subsector. TheBank has previously collaborated in asimilar transaction, where DPW was also asponsor. The Bank’s financial backing wassought at a time of liquidity constraints formost commercial banks, in the wake of theglobal financial crisis. By fulfilling acountercyclical role, the Bank’s participationserved a demonstration effect, helping to

attract other investors and lower theperceived commercial risks.

The proposed investment will coverPhase 1 of the project, which consists ofupgrading the stacking areas, the improve-ment of other port infrastructure (railroadinstallations, electricity, roads and buildings)and the acquisition of equipment (mobileharbor cranes, auto-twist spreaders, reachstackers, empty handlers, tractor-trailers)and installation of additional containerhandling and stacking equipment (STScranes, etc.).

The project cost for this first phase isestimated at Euro 210 million, of which theequipment (24 percent), civil works anddevelopment (24 percent), and concessionfee (22 percent) comprise the mostimportant components. The AfDB wasinvited to provide 50 percent of the totaldebt, on a par with Standard CharteredBank. In July 2009 the Bank approved a loanof Euro 47.5 million to that effect.

Source: AfDB — OPSM (2009).




(i) The CEMAC Trade Corridor project(2007)

The member countries of the CEMAC regionagreed in 2006 to develop the CEMAC TradeCorridor project to improve transport andtrade efficiency in the subregion. Trade inthe subregion was especially constrainedand transport costs were among the higheston the continent. Before project imple-mentation, delays at the Douala Port inCameroon could take up to 28 days andtransport of goods from the port toNdjamena (Chad) or Bangui (Central AfricanRepublic) took 15 days and 10 days,respectively.

The AfDB in collaboration with theWorld Bank, the European Commission, andthe French Development Agency (AFD)agreed to jointly finance the CEMAC TradeCorridor project. At preparation stage theAfDB and the World Bank agreed to sharetechnical expertise, while Cameroon, Chad,and CAR formed a steering committee usingthe CEMAC platform. In February 2007, theAfDB signed a US$ 67 million agreementwith CEMAC and CAR. In June 2007, theWorld Bank approved a US$ 201 millionpackage for the three country members ofthe steering committee, and in October2009, approved additional financing forCameroon and CAR for an amount of US$ 217 million.

(ii) Ghana: rehabilitation of sections ofthe Abidjan–Lagos Road Corridor

In Ghana, the AfDB has been financingrehabilitation of road sections of theAbidjan–Lagos Road Corridor since 2002. In2008, the following amounts wereapproved: US$ 40.14 million for theTema–Aflao Rehabilitation Road Project andUS$ 21.18 million for the Akatsi–Dzodze–Noepe Road Upgrading Project. Thetargeted sections are part of the broaderAbidjan–Lagos coastal corridor whichconnects Côte d’Ivoire to Nigeria throughGhana, Togo, and Benin via 1,028 km ofcoastal roads.

This regional corridor has beenidentified by ECOWAS and UEMOA as apriority to promote economic and socialdevelopment in the region. The corridor’simportance is major in terms of the dailymovement of people and goods, which isone of the highest in the Africa continent onseveral segments. The Abidjan–Lagoscorridor has the potential to become acatalyst for economic integration andsubregional cooperation of UEMOA andECOWAS member countries.

The roads targeted by the different AfDBprojects are considered by the Governmentof Ghana to be critical international roadsthat need immediate attention in order toreduce poverty, especially in the EasternRegion. Consequently, the roads have beenincluded in the current Roads Subsector

Annex 5.3: Examples of AfDB-Supported TransportCorridor Projects


Development Program. The project isdesigned to facilitate regional integrationactivities as well as access to social servicesand markets. It is therefore in line with theBank Group Policy on Regional EconomicIntegration, as articulated in its RegionalIntegration Strategy, and it conforms to thebilateral agreement between the Bank andthe ECOWAS.

Several donors financed other sectionsof the Corridor, including the World Bank,the European Union, and the Japan Bank forInternational Cooperation.

On the same corridor, a project iscurrently under preparation by the AfDB tofinance other sections in Togo.

Source: AfDB — OINF (2009).

(iii) SADC Region: the Nacala Corridor

The Nacala Corridor is one of the priorityprojects of the SADC region and isconsistent with the NEPAD and Bankstrategy for multinational infrastructureprojects. The objective is to removeobstacles to the movement of persons andgoods, and to support regional cooperation,integration, and trade. The Nacala Corridorcomprises a total of 1,033 km of road worksand two one-stop border posts (OSBPs).

To support the development of theNacala Corridor, the Bank approved in 2009the financing of the Nacala Road Corridor —Phase I, consisting of two ADF loans: (i) US$159.45 million to Mozambique and (ii) US$22.23 million to Malawi. The projectcomprises the improvement of roadtransport over 361 km or 35 percent of roadworks in Mozambique and Malawi. The nexttwo phases will cover 360 km or 34.9

percent of road works in Zambia (Phase II)and 312 km or 30.1 percent of road works inMozambique and Malawi. It will also includetwo OSBPs between Mozambique/Malawiand Malawi/Zambia (Phase III).

The project should provide Malawi,Zambia, and the interior of Mozambiquewith an improved road transport linkage tothe port of Nacala and improve transportservices along the corridor. It will improveaccessibility of the communities in the zoneof influence to markets and social servicesand contribute to the reduction of poverty.

Ultimately after Phase I, the averagetravel time in Mozambique will be reducedby 41 percent, from 9 hrs in 2008 to 5.3 hrsby 2014; and in Malawi by 60 percent, from50 minutes in 2008 to 20 minutes by 2013.Furthermore, delays at the Mozambique/Malawi and Malawi/Zambia borders shouldbe reduced from 36 hours to 6 hours by2015, due to the establishment of twoOSBPs.

Links between ports and harbors andmajor centers of economic activity in thehinterland should be improved. Import/export cargo handled at Nacala port shouldincrease from 0.9 million tonnes per year in2009 to 1.6 million tonnes per year by 2015.Mozambique’s rating in the GlobalCompetitiveness Index should improve from3.1 in 2009 to 4.1 in 2015. Furthermore, itspercentage share of transport and transitcost in cif and fob prices of import andexport should be reduced by 25 percent by2015.

Source: AfDB — OINF (2009b).



(iv) Agona Junction–Elubo Road Study:Part of the Road Infrastructure Project(Eastern and Western Regions)

As outlined above, the AfDB has financedseveral road projects in Ghana that aresections of the Abidjan–Lagos Corridor.

The second component of one of thoseprojects — the Road Infrastructure Project(Western and Eastern Regions) — compriseda feasibility study on the Agona Junction–Elubo road section. The Bank agreed tofinance the study in 2003.

The study was divided into two stages:the first aimed at assessing the feasibility,environmental impacts, and the impact onpoverty reduction of the civil works. Thesecond stage offered detailed engineeringdesigns, provided cost estimates andpreparation of tender documents for theapproved alternative.

This study was instrumental in planningroad infrastructure investments to rehabili-tate and strengthen the trade corridor.

Source: AfDB — OCIN (2003).



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