Infrastructure: How Government can actually contribute to local economic growth

Image credits: http://www.cjbuildsllc.com

In 2009, as the recession was gripping the world, I was on an unusually difficult road trip through Germany. The trip was difficult because the German Autobahns, famed for their lack of speed limits, were not very pleasant to drive on due to huge construction projects going across Germany. I remember how a 20 minute drive into Koln took two hours, because between the icy rains, the construction, and the weekend return of workers into Koln, traffic had backed up miles outside the city.

The question then was, why would the government put so much money into building up already great road infrastructure, especially as Germany was headed into the recession? It was simple, really. Infrastructure projects tend to transfer monies from government reserves into the economy, most times quicker than any bailouts could. It’s one thing to bail banks and corporations out, which puts money into the pockets to very rich people, with the hopes that they would hire more, and it’s another paying for visibly beneficial infrastructure projects, which puts the money directly into the pockets of blue collar individuals who are the bread and butter of the construction industry. This model works even better in Germany, which is built on generations of family-owned companies.

So how does this work in Nigeria?

If you think of large scale infrastructure projects in Nigeria, you’ll think of road construction, and Julius Berger in the same breath. Well, this is where the problem lies, and it has nothing to do with Julius Berger’s abilities as a builder of fine roads. In fact I love JB, but JB (or any other big construction company) revenues will go to big stock holders, and every kobo going to JB stock holders means a kobo off the streets. The question is, how do we invest in infrastructure, while also making sure the billions get to the local neighbourhoods?

Roads built in Bassey’s backyard

Let’s face it, the big airport road in Abuja is not going to reward any poor people, so our focus here will go to the local roads Governor Akpabio is building in my home state. On my last visit to Akwa Ibom, I missed the proverbial old tree to the grandfather’s house so many times, the new roads became a nuisance – but one thing was sure: a lot of infrastructure investment was being made. But again, the builders were the big construction companies. The local people loved the roads, but the roads do not address the immediate economics needs.

So here is one way out: Bassey, the village brick layer, helping build the road to his village, and earning from it.

The government could do what is being tried in the oil industry, building a local content component into every road construction contract in their states and local governments. If you are building a road in Shagamu, a percentage of input into that road is set aside for the local people. The government could assist the community, and work with the construction companies to train local people on construction needs and practice, and help the local people form cooperatives who are assigned contracts for supplying much needed services to the construction companies.

Even more practical, the government could change the road construction methods, from asphalt to brick pavings, which allows more participation from local people. In this scenario, Julius Berger is still awarded the contract, but the bricks for constructing the roads is built by to local people.

How does this work?

Contracts! The government structures the contracts such that JB is only responsible for building the roads, but buys the bricks for paving the roads from local people, who are trained by the project on how to make these bricks. In fact, the government could go as far as having the paving to be done by the locals under JB supervision.

It comes to the question: how would quality be maintained?

Training is a big component. JB trains locals on making road building bricks a few months before construction is set to begin, government works with local banks and chiefs to provide seed funding for interested entrepreneurs. Entrepreneurs, based on training and supervision from JB, build bricks to JB specification. This is similar to what the local content practice in the oil industry is, where the OilCo trains and supervises local contractors on project execution.

In order to ensure that local entrepreneurs are faithful to the task, JB will only accept bricks from suppliers if they are up to standard. If you want your bricks bought by us, Mr. Bassey, your bricks have to be up to standard. When Mr. Bassey realizes that he has to make his bricks solid enough for JB to buy, he will make them solid.

Now we can think past when the road construction is done, and Mr. Bassey had made a decent income from making paving bricks, to when he realizes he has a viable skill and can set up a small workshop to make bricks for the roads to the next village, in cooperation with Victor, who comes from there, but doesn’t have the means…

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