Resource corridors, infrastructure development and private investment
Following on from our previous post: Leveraging resources for infrastructure development in Africa, we take a look at case studies of resource-related infrastructure development, and discuss what the continent’s existing resouce corridors have taught us.
Based on the principles of the Spatial Development Initiative (SDI) conceived by the South African government in 1995, resource corridors in Africa are areas in which opportunities (mainly resource-based anchor projects and associated infrastructure) have been identified that can be realised through investments to achieve sustainable development, particularly development brought in other sectors through access to the resource infrastructure.
A study on the subject of resources corridors
A highly illuminating study into the subject has been prepared by the School of Mining Engineering and Centre for Sustainability in Mining and Industry (CSMI) at University of the Witwatersrand in South Africa. Titled “Resources Corridors: Experiences, Economics And Engagement: A Typology Of Sub-Saharan African Corridors”.
It considers five African resource corridors: Mozambique’s Maputo Development Corridor and Zambezi Valley Development Corridor, Tanzania’s Mtwara Development Corridor and Central Development Corridor, and the DRC’s Bas Congo Development Corridor.
For the purposes of this discussion we’ll look at just two: the Maputo Development Corridor and the Central Development Corridor.
The Maputo Development Corridor
The Maputo Development Corridor (MDC) connects the South African provinces of Gauteng, Limpopo and Mpumalanga to the port of Maputo in Mozambique. Significant projects include the $250 million upgrade of the N4 highway between South Africa and Southern Mozambique into a modern toll road. The Maputo port is being rehabilitated at a cost of $749 million over 20 years, and telecoms, electricity and railway links have also been upgraded.
The success of the corridor lies in the $5 billion worth of private sector investments facilitated through successful public-private partnerships (PPPs). Factors contributing to the viability of the MDC include:
- political support by the South African and Mozambican governments
- the existence of strong anchor projects around natural resources (Duvha Power Station, Mozal Aluminium, Sasol and Pande gas pipeline)
- strong project managers appointed on both sides
- well organized involvement from stakeholders in the private sector
- skills and technical capacity on the part of both governments and
- support for forward- and side-stream linkages for the mega projects, with the major projects providing opportunities for the small, medium and micro enterprises (SMMEs).
Central Development Corridor
In contrast, the Central Development Corridor in Tanzania, whose main resource is gold, will probably struggle to leverage its mining resources to bolster large-scale infrastructure development.
A bulk commodity is needed to rehabilitate the region’s dysfunctional rail infrastructure, and with gold being the main anchor, road infrastructure can suffice. With limited anchor projects in all sectors, private sector involvement is small. Mining is treated with some caution by locals (who have not benefited from mining in the past) and investors alike (who are put off by recent calls for higher mining taxes). Forward- and side-stream linkages are currently limited, with comparatively little support from government and mining companies.
Admittedly, the corridor is still in the scoping stage and the government is busy with its 2025 Integrated Industrial Strategy which links spatial development initiatives to promoting growth in the country. However in the more established Mtwara Development Corridor, also in Tanzania, many of these same issues are experienced. The lack of an anchor project that will require major infrastructure development is the main reason for its failure to thrive as a successful corridor.
Key requirements for success:
Amongst other things, the CSMI Report concludes that in order to be successful, a development corridor requires:
- inherent economic and infrastructure potential
- the participation of all economic and infrastructure ministries
- the carrying out of sector scans, using the SDI methodology, along the potential corridor to expose latent investment potential
- proper packaging of investment projects for investors
- promotion and marketing of the corridor (dependent upon the attractiveness of the packaged projects)
- large-scale anchor projects (meaning that deliberate government action would be required to create spinoff opportunities for SMMEs)
- bilateral (or multilateral) agreements and political support for cross-border corridors
- an enabling policy/regulatory environment where PPPs are actively encouraged and supported
When the above conditions are met, resource corridors pose an enormous opportunity for investment and growth. Their potential has been greatly enhanced by the Asian demand-led commodities boom, which has increased the economic viability of many hitherto marginal resource (and now anchor) projects.Do you think resource corridors are the answer to delivering on Africa’s promise?
About David Okwara
Africa challenges, Africa opportunities, economics, engagement, government, industrial mining, infrastructure, infrastructure development, infrastructure potential, Invest Africa, investment, investment projects, mega projects, Mining, Mozambique, policy, PPP, private sector, public-private partnerships, regulation, resource corridors, South Africa, sub-Saharan Africa, successful corridor, Tanzania, transformation, WEF, World Economic Forum