|Africa and the Middle East II 2002
|Financing Of Connectivity In Africa – Hard Choices
|African Development Bank Group
Interconnecting telecommunications networks in Africa is still a major challenge, despite the initiatives to remove bottlenecks that impede development in African countries. Opening of the sector to competition has allowed access to new financing modes for telecommunication infrastructure development. Funding of less profitable segments, though, is still difficult. To facilitate financing of telecommunication development, the many available funding modes should be used rationally to maximize the leverage of telecommunic- -ations on the growth of the African economy particularly in rural areas.
Despite substantial progress achieved since the early independence years, interconnecting the telecommunications networks in Africa is still a major challenge across the continent. Many initiatives have been launched at sub-regional level to remove bottlenecks that impede the development process in African countries. The objectives of the said initiatives are mainly to bridge the overall development and penetration gap of basic telephony and IT services (i) between rural and urban areas; (ii) between countries of the same sub-region; (iii) between different sub-regions; and (iv) between Africa and the rest of the world. It should be noted that harmonious development of telecommunication network interconnection is the only factor that may promote, in a sustainable manner, efficiency in the communication chain. Total or partial opening of the sector to competition has allowed access to new financing modes for telecommunication infrastructure development. However, though private financing is easy to mobilize for the most viable categories of Information and Communication Technologies (ICT) services, funding of the less profitable segments of the information and communication business is still a major difficulty. To facilitate financing of telecommunication network development and interconnection, the many funding modes should be rationally used so as to maximize the leverage effect of telecommunications on growth in the other sectors of the African economy, and mostly in rural areas. The following aims, after a short review of the pro- connectivity initiatives in Africa, at presenting the status of ICT financing in the African Development Bank and making proposals for relevant financing schemes of telecommunication interconnection in the continent Financing Connectivity in Africa Until recently, governments have in the main provided financing of telecommunication infrastructure. Reforms initiated these last years have allowed the separation of the regulatory function from service operation. The newly built environment has promoted the flow of private investments, generally from developed countries, which largely contributed to the development of local markets, but did not include regional or sub-regional integration among their priorities. Some countries have established funds for “universal access” to promote connectivity between rural and urban areas; these funds are fed with tax proceeds from private operators’ turn over and dispatched on the basis of clearly defined regulations. Some other governments have incorporated in the conditions of contract, for concessionary companies, obligations of extending the telecommunication networks to the rural areas, based on an agreed timeframe. Despite these mechanisms however, governments will continue to be involved in the financing of connectivity in the rural areas, due to the huge needs for achieving universal access to telephony. Establishing an enabling regulatory framework and enforcing good governance practices would create an environment conducive to enhanced intervention by private sector. Utilization and operation of new technologies (fixed or semi-mobile GSM, IP telephony) at an increasingly dwindling cost will allow a decrease of the financing needs and catalyse access to telecommunication services. Regarding the development of sub-regional and regional connectivity in particular, it is worth noting that African governments have spearheaded the New Partnership for Africa’s Development (NEPAD), within which the Bank is acting as a technical advisor for the infrastructure development, banking and financial standards components. Physical infrastructure projects have already been identified for implementation within the NEPAD Short-term Action Plan, to accelerate the connectivity and network interconnection processes at regional and sub-regional levels. They are namely: · COMTEL spearheaded by the Common Market for Eastern and Southern Africa (COMESA), which aims at putting in place a sub-regional network for improvement of the quality of consumer services, traffic increase, tariff reduction and integration strengthening among member countries; · SRII (Region Information Infrastructure) initiated by the Southern Africa Development Community (SADC), covering 14 member countries, and aiming at achieving interconnection between countries at affordable cost and harmonizing tariffs; · INTELCOM, similar to COMTEL and sponsored by the Economic Community of West African States (ECOWAS). The objective of the project is to rehabilitate and upgrade to digital the telecommunication arteries linking the ECOWAS countries and hence provide the Community with access to a modern and reliable sub-regional network, offering to consumers a wide variety of possibilities, including access to multimedia services and large frequency band; · The continental RASCOM project (Regional African Satellite Communications Organisation), which aims at putting into orbit and operating a satellite along with the necessary terrestrial infrastructure. In addition to interconnecting African countries among themselves, RASCOM would also link the Africa telecommunication network with those of the other continents, while servicing the rural areas at affordable cost; · The sub-marine optic fibre cable SAT-3/WASC/SAFE linking Asia, Africa and Europe, with 17 landing points in 16 countries of which 11 are South and West African states. This cable is already operational and the current activities of the project will concentrate, among others, on connecting land-locked countries to the new system. Interconnection between Africa and the rest of the world is already ensured through satellite links and sub-marine cables. This segment of the telecommunication business being viable, it is rather easy to mobilize the necessary resources for its funding. This is confirmed by the high quality of the countries’ access to international calls. Ensuring financing for telecommunication infrastructure implies that the countries’ political will be reaffirmed. It means, at national level, that an enabling environment for private investment should be created; this environment necessitates the establishment of fair regulatory measures and good governance system. At regional level, a strong determination in facilitating exchange and free movement of goods and services, and in creating good conditions for advancing integration would constitute a strong signal towards potential investors. Increase in exchanges would result, among others, in an increase of telecommunication traffic and hence in more profitable connectivity investments. Bank’s Strategy in the Financing of Telecommunication Connectivity in Africa Since inception, the African Development Bank has financed telecommunication projects for about US$ 1 billion; these projects have included infrastructure development operations as well as institutional support and assistance for sector reforms. The Bank’s Vision adopted in 1999 has set the overarching goal of reducing poverty and promoting sustainable development in the Regional Member Countries (RMCs) as its priority. It builds on the following blocks: i. Promoting, at national level, agriculture and rural development, education, health, good governance and private sector development; and ii. Developing economic cooperation and integration, at regional level. In addition to the above-mentioned priorities, the Vision stipulates the mainstreaming of Bank Group policies on cross-cutting issues such as the environment and gender issues in Bank-funded operations. At national level, rural infrastructure projects, which contribute to poverty reduction are carefully examined by the Bank. In the same vein, economic cooperation and regional/sub-regional integration oriented projects are also recognised to be in harmony with the Vision. In respect of its intervention in the ICT sector, the Bank will continue to contribute to the establishment of an enabling environment for intervention by developing partners both in the public and the private sectors. The Bank’s Private Sector Window will pursue and strengthen its interventions for the financing of private-sector-sponsored infrastructure. The Bank will continue, among other things, to: · Provide support for promoting reforms to establish fair competition in the telecommunication sector and hence promote a more efficient supply of services; · Assist countries in their ICT capacity building programmes; · Fully play the coordinating/advisory role in infrastructure development, banking and financial standards, entrusted to the Institution by the African governments within the NEPAD framework; and · Promote the inclusion of ICTs in the priority sectors of the Bank’s Vision that aim at reducing poverty, particularly in the fields of education, health and rural development. Conclusion Financing connectivity in Africa should be undertaken within the framework of a joint action of all stakeholders in the telecommunication sector. It implies the establishment of a clear regulatory framework that tends to reassure the various actors and to get commitment from the whole range of partners (Governments, donors and private investors). Demonstrated political will in creating enabling conditions (at national as well as regional levels) for financial flow will be the basis for financial resource mobilisation. As for the African Development Bank Group, it is committed to contributing to this objective. The Bank Group will therefore continue to support any action or project aimed at reducing poverty, in particular those rural development projects, which have included ICT components.