Negotiating development corridor projects in Africa

An important opportunity regarding Africa’s future is currently unfolding: development corridors, or regional transportation and transmission networks.

With so many corridor projects, a database detailing them now exists. Some garnering considerable attention include Lobito (Angola, DRC, Zambia) and the Central Corridor Transit Transport Facilitation (Burundi, DRC, Rwanda, Tanzania and Uganda).

Corridors are typically driven by mining, and together with Africa’s rich supply of critical minerals needed for the global energy transition—like lithium, cobalt, copper, and graphite—they constitute an immense regional development opportunity. Indeed, the African Union’s Vision 2063 raises a host of issues related to corridors, and the G20’s Brazil Presidency has equally highlighted “cross-border infrastructure” as a priority.

Corridor development is particularly important in Africa, where the physical geography can be challenging and a dearth of investment means that each project must be as economic as possible. The opportunity to “load up” corridors—with rails, roads, and cables—can help achieve economies of scale.

What should governments consider when negotiating development corridors?

Governments have a myriad of issues to consider during their negotiations. Below are just a few of many.

Company track record

Due diligence of a company’s similar projects, balance sheet, and environmental, social, and governance policies is essential. Many megaprojects—those costing $1 billion or more—have been “strategically misrepresented.” In short, some parties knowingly smooth over the very real challenges—physical, financial, and political—regarding the project’s delivery, leading to dramatic cost overruns or halting projects altogether. Indeed, more than 90% of megaprojects globally do not come in on budget, on time, and with the expected service. Some of the largest offenders are in mining and rail—respectively 27% and 39% over budget on average. Financial fortitude is particularly important, as Tanzania learned late last year, when its main contractor for the Standard Gauge Railway ran into financial difficulties, leading to an eventual strike. Governments should equally understand the company’s commitments (and implementation) to the environment, local content opportunities, and communities.

Understanding the company’s track record is important for another reason—arbitration risk. The International Center for Settlement of Investment Disputes shows that close to 70% of its current cases are related to corridor development—oil, gas and mining, power and other energy, transport, construction, and information and communication. With a relationship that will span at least one generation, governments need to ensure that companies are constructive, ready to compromise, and will not immediately trigger arbitration over a disagreement.

Feasibility studies: Maintaining knowledge

Companies will usually write the feasibility study. Stringently examining the feasibility study, backed up with an alternative (governmental) viewpoint, may be extremely beneficial for the entire project. Some projects take decades to come to fruition (e.g., this Terms of Reference for the Lobito Corridor in 2004, with studies going back to 1992), usually after more than a few attempts. To retain knowledge, governments should negotiate who actually owns the feasibility study if the project does not advance.

Third-party access

The bulk of corridor access will be for minerals, however agriculture—usually left out of industrialization planning—is crucial. Looking at the future, what if a mine is found 10-20 miles away in the coming decade? Does the contract foresee that possibility and provide access to third parties or a mechanism for negotiating access? Finally, any rail project should have considerable access rights for citizens.

Regional hubs: Sell or lease land?

A few aspects should be considered concerning whether to sell or lease land in regional hubs. First, as inflationary pressures around mass development are common, governments could attempt to dampen land speculation through density around transport hubs with commercial and retail offerings. Second, leasing land at reasonable rates around hubs would ensure a steady stream of income outside of mineral exports, which could fund local and regional public services.

Security and maintenance

As the world saw with the recent damage to undersea cables off the West African coast, which took multiple countries offline, corridor disruption is easy. Long and remote, a corridor is extremely exposed and expensive to maintain. As industrial zones, governments should try to avoid the establishment of fenceline communities along corridors to avoid accidents and fatalities as well as any other possible disruption. In this respect, negotiating ample budget allocation for security and maintenance is vital.

Why do some corridors succeed while others fail?

Corridors provide governments an opportunity to exert their authority, their footprint, and their governance through newly developed areas. To succeed, a culture of megaprojects is crucial, with a focus on long-term thinking, strategic planning, and assembling an experienced team of multiple ministries and external experts. Most importantly, economics must be the overriding principle of corridor development.

Indeed, in providing multidisciplinary negotiation support since 2017, the G7 CONNEX initiative has learned that it is nearly impossible for governments to keep up with the private sector financially or in expertise. Governments just don’t negotiate often enough, nor do they have the financial resources. However, negotiation support is increasingly making an impact in helping governments to negotiate better deals.

In 30 years, which corridors will go from pencil and paper to planning and completion? Some ideas will be good and even interesting, but they won’t make it through a lack of focus, financing, and/or politics.

But whichever corridors do eventually come to fruition will make a massive difference to millions.