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Engineering a better world | A new focus on efficient aid spending

Illo 1 cropped

The UK spends 0.7% of its GDP on international aid – about £12bn – one of the most generous aid budgets in the world.

About £1bn of this is spent on economic development, including infrastructure. So is it being spent well, on the right things, and effectively?

Sadly, even the experts in this field struggle to answer the question. It is because what counts as aid can be so varied, and the money often passes through so many hands – the World Bank, International Monetary Fund, non-governmental organisations (NGOs) etcetera – with overheads at every stage.

Department for International Development’s (DFID’s) infrastructure advisor, southern Africa Steve Beel  gives one concrete example of where aid for “infrastructure spending” ends up. He works on a new DFID programme called Cities and Infrastructure for Growth, aimed at Zambia, Uganda and Myanmar.

New face of infrastructure aid

“Basically it’s technical advisers who work with governments, investors and stakeholders in countries on things like institutional reforms, bringing forward projects, setting up public private partnerships, helping with standards around infrastructure delivery. They’re intended to be quite flexible to address the specific needs in each country.”

This is the new face of infrastructure aid. Procurement is upcoming and DFID is keen to show the supplier opportunities it provides, as well as the opportunity to showcase UK expertise in this area.

“A lot of people talk about financing challenges, but they’re not necessarily the primary concern,” Beel says. “It’s more about bringing forward projects, bringing reforms that allow the private sector to invest more in infrastructure.”

Illo 2 cropped

Illo 2 cropped

The total Cities and Infrastructure for Growth budget will be tens of billions of pounds over four to five years, with the amounts allocated to each country based on local needs and demands. Beel says all results are independently monitored.

Former ICE president and chair of the institution’s international development expert panel Paul Jowitt explains how the infrastructure aid budget moved away from directly building infrastructure:

“In years gone by, when the UK spent money on aid for infrastructure, the cartoon was: British consultants and British contractors going overseas and building something and then leaving. Which didn’t necessarily do much for the local economy. And without an adequate maintenance regime, the whole thing fails.”

A lot of people talk about financing challenges, but they’re not necessarily the primary concern

Steve Beel, DFID

Following this, Jowitt says, was a move towards investing in human capital, that put the onus on poor countries to develop their policies and frameworks, and which resulted in much less construction. “Now, the situation’s swung back to the middle, in a more sensible place.”

One example of current best practice might look like the Royal Academy of Engineering’s Africa Catalyst programme, which includes a wide range of short pilot projects each worth £40,000 running from mid-December 2016 until mid-June 2017. The intention is to evaluate the result of different interventions, to create a sustainable skilled engineering capacity. Africa Catalyst provides a two-pronged attack: increasing education at all levels, and supporting engineers’ professional development through things like online project management courses. Jowitt says he would be surprised if half of the projects were selected, but that would not be a negative, because finding what works is key.

Trickles and floods

Funding in the aid sector is notorious for coming through in trickles and floods, punctuated by natural disasters, headlines, heads of state and Hollywood celebrities.

Just ask Green Seesaw director David Schaub-Jones, whose business uses data analytics software and mobile technology to monitor water supply systems.

Based in Cape Town, South Africa, his company, founded five years ago, receives funds from direct donors, large NGOs and governments. With a handful of staff spread through Africa and over the world, the company works on projects to improve the productivity of  water suppliers and uses innovative technology to monitor payment schemes for projects.

“Payment by result or whatever you want to call it, is definitely a trendy topic in donor circles now,” says Schaub-Jones. “Previously they would pay the money upfront for the implementer, whether that’s a government, or consultant engineers, then check later that the work has been done properly, but by that time the money has gone.”

There are plenty of people who get fantastic degrees in Africa and don’t live in Africa anymore

David Schaub-Jones, Green Seesaw

“We started in water and communications, but we’re being asked into environment protection, disaster resilience projects, climate change mitigation, renewable energy – whether it’s South Africa or other countries our software can support different programme,” he says.

Schaub-Jones is now starting to focus more on Asia, as sub-Saharan Africa becomes more competitive.

“I think the challenge, conceptually, is that we offer software as a service. Wrapping your head around that, and wrapping your procurement systems around that is a bit of a challenge. Another thing we do is actioning the data and making it into serviceable information for our clients.

“When you look at some of the donor contracts, they haven’t quite caught up with this. With DFID or the World Bank, they say ‘you work for us and you hand over your intellectual property’.

Staffing challenge

Another challenge is staffing.

“We’re always on the lookout for new talent. South Africa has a good talent pool, but we are working across many countries and languages. Finding staff and keeping them, on the salaries we can offer, compared to what they might have been getting before, can be tough.”

The sad truth is Africa produces more than enough engineers to facilitate work, but getting them to stay in their homeland can be tricky.

“Although the universities aren’t as well staffed as they’d like to be, there are plenty of people who get fantastic degrees in Africa and don’t live in Africa anymore,” Jowitt says. “If you’re an ambitious engineer, you might find you can’t really operate in some of those environments – if you live in an area where the impact of the professional institution is weak, and where there is corruption in the infrastructure sector, you can’t operate. You need to go somewhere where you can do what you’ve trained for.”

Tackling corruption

So tackling corruption is one way of ensuring Africa hangs onto its home grown talent.

Engineers Against Poverty (EAP) is working to this end, as one of the leaders in fighting corruption.

“Estimates of losses from corruption tend to vary from 10% to 30%,” says Engineers Against Poverty chief executive Peter Matthews. “It’s notoriously difficult to measure precisely the resources lost, because most often it isn’t detected, and when it is, prosecuting is difficult.”

But if tackling corruption makes the local working environment more acceptable, another major challenge is inefficiency on the ground.

Mismanagement and inefficiency

“Interestingly what we find is the losses through mismanagement and inefficiency are just as large as those lost through corruption.  So, conservatively, we can say a third of total investment is lost,” says Matthews.

He notes that mismanagement and inefficiency are not problems unique to the developing world. In the UK, studies have shown that up to 50% of the cost of a typical project is spent on management, technical coordination and other transaction costs and up to half of the hours worked on construction sites are wasted.

“The value of global construction is estimated to grow by $15 trillion  (£12.5 trillion) per annum by 2025, so if we don’t act between now and then, with a third of investment lost, by 2025 that could be £4.2 trillion lost annually. So that’s the prize,” says Matthews.

 

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Illo 3 cropped

The World Bank, through its African infrastructure Country Diagnostic series of reports, has found that of most governments can only execute two-thirds of their budget, and increasing capital budget execution to 100% could potentially capture an additional £2.5bn per annum.

“In one Sub-Saharan African country, we found time and cost overruns, which is typical of poorer countries. But we found a lot of fat being built into budget estimates. They had one quantity surveyor for all the projects, that individual was overworked, receiving no assistance, and the way he was managing that was by overestimating, so that if something did go wrong, there was room in the budget to fix it.

“The suggestion was made: more staff, surveying more efficiently, or he should be able to outsource to private sector.

“It makes you think: there are arguments that more money needs to go into infrastructure, but if you increase that money without strengthening governance systems at the same time, then the danger is you’re just fuelling corruption and mismanagement.”

Payment by result or whatever you want to call it, is definitely a trendy topic in donor circles now

David Schaub-Jones, Green Seesaw

As a charity, Engineers Against Poverty, as a charity, literally trades on its accountability.

“As an organisation, we’re values-driven. Now I’m not saying that the private sector doesn’t have values, but we don’t have shareholders. So we are cautious about the work we get involved with. And part of the attraction of working with us is that we bring that to the table.

“I think charities have to work hard to demonstrate their accountability.”

Accountability

The World Bank, European Development Fund, European Commission and other multilaterals have been criticised for a lack of accountability. Research by Oxfam has shown that 51 of the 68 companies funded by the World Bank’s private finance arm 2015, the International Finance Corporation, to fund investments in sub-Saharan Africa, use tax havens. But aid business is good business, with the World Bank’s primary lending unit committing £24.7bn in loans this financial year, nearly doubling the amount from four years earlier.

During this time extreme poverty (those earning less than £1 a day) has indeed dropped. But some argue this can be attributed to a rise in Chinese living standards that would have happened anyway. Sub-Saharan Africa is struggling, yet now it also is generating more finance through economic growth than through aid. It’s a complex picture.

And it’s not all about money – poverty has always been much more than a mere lack of capital. Being in poverty means being excluded from a range of other valuable things:  legal protection, justice in the courts, freedom for land ownership, the right to start a business, access to trade.

Misdirected aid

Sometimes all the good intentions in the world can still make a country worse off than when it started. An oft-quoted example is the case of Haiti, where the economy was flooded with rice following the disastrous 2010 earthquake. While the help was appreciated, the cheap rice kept coming, putting farmers out of work. It has been a net negative impact on the economy, with billions of dollars wasted.

Jowitt says another part of the aid industry and engineers’ failure to end the world’s crises lies in mindset.

“If we can put a man on the moon, and tunnel under the Channel, why can’t we do something much simpler than that – proper sanitation and drinking water for all? The reason is, the moon question has a technical solution. Engineers are good at technical solutions. Whereas sanitation and drinking water in Africa is not a straightforward technical solution.

“Putting water supply systems into villages is easy. Fantastic. But if you look at Kibera – 750,000 people, living in a slum north of Nairobi – the challenge is a little larger, you almost wonder where you can start, and it needs a real systems approach. What can be transformative, rather than incremental?

“So we find it difficult, but that doesn’t mean we should stop trying.”

Simple targets

Amid the complexity, Engineers Against Poverty keeps its target simple: “Improve infrastructure policy and engineering practice in order to help reduce and eventually eliminate poverty,” is its motto. But, as a small organisation with only a handful of engineers around the world, how representative of the values of the wider engineering community does it think it is?

“I think I’ve seen an attitude change in the last 15 years, “ says Matthews. “The UK Bribery Act for one. The statistics show there is still an outflow of wealth from the poor to the wealthy nations, so there is still quite a serious structural problem, but international aid can go some way to dealing with those problems, and trade is extremely important,” he says.

“There is more recognition now to be sensitive towards the environment, the poor and the marginalised, and I think the smartest companies get an alignment between their commercial interests and societies’ interests.”

Local suppliers

“If you use local suppliers, it builds relationships, good faith, and often it’s cheaper. It comes with additional risks, around quality for example, and ensuring continuation of supply.

“Green Seesaw has had success in this area, with 90% of businesses assisted lasting five years or more.

“We’re doing it by putting in good business principles. We are a social enterprise, but we’re not going cap in hand for grants or government handouts. So we’ve funded it on business loans,” says Schaub-Jones.

UK interest

“But overall, as a believer in the multilateral world order, getting (African countries’) economies more stable is in the UK’s interest,” he says.

Another engineer with a wealth of experience on the ground is academic Priti Parikh, who two years ago started the University College London’s MSc in engineering for international development.

The course attracts a variety of students from all over the world but  Parikh says the work keeps a local focus.

“Our programme encourages going out to look at the context, see what the requirements are, what’s feasible, then use engineering skills to come up with a solution. There’s an increasing awareness that it’s not a top-down approach”.

Multiplier effect

Parikh’s most recent research findings were within “resource limited settings” such as slums or farms, which gained a direct “multiplier effect” from proper infrastructure.

“If you spend £100 per family on water and sanitation infrastructure, it increases literacy by 30%, and doubles family incomes within five years’.

“Another remarkable finding is that if you invest £100 in water and sanitation infrastructure in slums, and the slum residents are homeowners they then start investing in their housing stock by an average of £1,000 over eight to 10 years.”

Integrating engineering effort

It has led to her next project which aims to formalise and integrate these engineering, health and education interventions.

This approach comes directly from an in-context experience, with Parikh spending much time in Africa and Asia, handing out surveys and conducting interviews.

Parikh believes engineers should have more say about what infrastructure aid should be spent on.

“The best interests of the funding organisation can conflict with the interests of the local residents,” she says. “For instance, if you build a public toilet in a community, without providing lighting and safe access, that could result in violence against women.

 “If you look at donor finance organisations they’re usually headed by economists, rather than engineers, even though engineers understand infrastructure, its construction and maintenance more clearly.

“We do have a lack of engineers who can communicate and are willing to take on those types of policy roles. I hope that will not be an issue in the next generation – I’ve noticed more engineers are willing to go outside their comfort zones and engage with venture capitalists, policymakers.”

 

 

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