Question: COST COMPLEXITIES ON MEGA INFRASTRUCTURE PROJECTSMany governments recognise the importance of undertaking large - scale and high - impact infrastructure projects as asignificant lever to
COST COMPLEXITIES ON MEGA INFRASTRUCTURE PROJECTSMany governments recognise the importance of undertaking largescale and highimpact infrastructure projects as asignificant lever to develop their people and allow for expanded access to services. The World Bank estimated that in SubSaharan African countries needed to spend a minimum of of their Gross Domestic Product GDP onaverage on Sustainable Development Goals SDG related to infrastructure per year but were only spending onaverage annually. A November report titled Africa must tackle huge infrastructure gap to unlock opportunities fortransformation by the African Development Bank noted that lack of adequate infrastructure was one of the primaryimpediments to the realisation of the benefits of the Africa Continental Free Trade Area.The nexus between infrastructure development and human development is undeniable. At the core of human evolutionlies great scientific leaps in the scale and ingenuity of infrastructure deployed by various civilisations over time.The infrastructure differential is the most obvious and notable differentiator between developed and developingnations. Several developing nations lag significantly in terms of the quality and scale of infrastructure such as roads,railways, schools, hospitals, shipping ports, airports, dams, bridges, canals, housing, telecommunications, and manyothers. This deficit in infrastructure acts as a critical barrier to the ability of citizens, in particular, the youth to reachtheir full economic potential. If there is one thing most Africans could agree on we urgently need more infrastructure.Why if the case for infrastructure development is obvious, are so many large scale infrastructure projects includingprojects in other sectors such as mining or agriculture experiencing rising tensions caused by environmental andsocioeconomic related causes? This is not a phenomenon limited only to Africa. According to the United NationsPrinciples for Responsible Investing PRI article Building the conversation around social issuesin infrastructure investing, the US$ billion Dakota Access Pipeline in the US Melbournes proposed US$ billionEastWest Road link, and the Mexico City international airport are just three of many highprofile infrastructureprojects with large capital spends that have encountered strong resistance from civil society, politicians, andregulators. There are significant costs suffered by investors as a direct result of rising tensions due to failure tomanage project host communities and other key stakeholder concerns. In the case of the Dakota Access Pipeline, theinvestors are estimated to have lost US$ billion due to delays to construction and cost overruns with manyattributable to protest actions and legal challenges to the project. Some key deficiencies by project sponsors,developers, or governments in the design and commissioning of projects that may lead to rising tensions are: Lack of real and meaningful proactive consultation with host communities and ensuring that there is a robustmechanism in place to capture the feedback from communities and communicate back the remedial actions to beconsidered in the design and execution phases of the project. It is of limited value to consult with hostcommunities as an afterthought when the project has moved to the construction phase and changes in theapproved project schedules would impact the critical path and cause significant cost overruns. Failure to identify all the project stakeholders risks leaving out of your consultation and engagement processesstakeholders who may have a significant impact on the project. In some cases, this error has resulted in projectsbeing cancelled due to opposition from groups who previously had not been identified as strong or influential. It iscritical to develop a stakeholder management strategy that identifies stakeholders, defines the risk and rewardrelationships to the project, defines mechanisms for engagement, and develops risk mitigation plans for eachstakeholder group. A welldeveloped stakeholder management plan defines who the stakeholders are, theirdegree of influence on the project, the relationships among various stakeholders, how to communicate with them,how often and about what topics, and how to manage any risks emanating from stakeholders, including escalationprocedures within the project management team. Lack of rigorous and robust processes to manage the delicate issues related to how land will be made availablefor the project and associated compensation events. Host communities occupy an important part in projectdevelopment. It is usually the host community whose land is expropriated or leased to the project, and thus,communities may lose valuable range lands. It is the host community that may have family bonds broken due toconstruction preventing them from travelling through paths they have known for generations, being resettled,having family graves relocated or environmental and heritage sites impacted by construction. It is also the hostcommunity that experiences noise pollution and other negative environmental impacts that may be caused byconstruction. Host communities experience the influx of economic migrants who may at times pose a risk to theculture or social fabric of the area. Lack of clear processes and procedures that ensure fair and transparent project procurement, recruitment, andreward processes. Failure to define clear and transparent processes and procedures may risk corrupt politicians,unscrupulous business owners, community leaders, or organised crime syndicates taking control of the project.Stakeholders may perceive the project as being biased, unethical or lacking integrity in its business practicesrendering it susceptible to external influences impacting on the project detrimentally.Though the above is not an exhaustive definition of all the social dynamics on a project that may trigger tensions, thelist is robust and covers many recorded causal factors identified based on research. To those in doubt about the realworld impact of social factors on projects, take the case of South Africa where, on the th of September theMinister of Human Settlements announced that over projects had been blocked by factors such as communityprotests, land invasions and by criminal syndicates known as the Construction Mafia. To achieve the Africa we want, afundamental rethink is required by all role players engaged in project development to formulate better strategies tointegrate the full set of environmental and socioeconomic dynamics in project life cycle planning. This will facilitatebetter relations amongst all stakeholders and achieve harmony, improve investor returns and meet the service delivery outcomes to the people.
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