According to the African Development Bank, infrastructure development is a key driver for progress across the African continent and a critical enabler for productivity and sustainable economic growth. It contributes significantly to human development, poverty reduction, and the attainment of the Millennium Development Goals (MDGs). Investment in infrastructure accounts for over half of the recent improvement in economic growth in Africa and has the potential to achieve even more.
This article by The African Catalyst reviews some institutional reports and publications on why infrastructure development in Africa matters, highlighting key facts and insights.
Infrastructure Development In Africa
In Sub-Saharan Africa, poor infrastructure cuts national economic growth by 2 per cent every year and reduces productivity by as much as 40 per cent. Currently, only 38 percent of the African population has access to electricity, less than 10 percent is connected to the internet and only 25 percent of Africa’s road network is paved. Studies have also shown that poor road, rail and port facilities add 30% to 40% to the costs of goods traded among African countries, thus adversely affecting the private sector development and the flow of foreign direct investment (FDI).
The poor state of infrastructure in many parts of Africa reduced national economic growth by two percentage points every year and cut business productivity by as much as 40%, making Africa – in spite of its enormous mineral and other natural resources – the region with the lowest productivity levels in the world.
According to Business Day, the insufficient stock of productive infrastructure in power, water, and transport services that allow firms to thrive in industries hinders industrialisation in Africa. Africa must industrialise to end poverty and generate employment for about 15 million young people who join its labour force every other year.
Infrastructure deficiency is also hindering learning and human capital development in Africa. Many African higher institutions do not have modern infrastructural facilities to make learning attractive and easy. As a result, many African graduates do not have what it takes to compete effectively for available opportunities in the global labour market.
Insufficient road infrastructure has posed a challenge to the movement of inputs to manufacturers and finished goods to consumers within and across African countries. The high cost of transportation has aggravated the cost of commodities in African markets.
The average cost of production in Africa is very high due to the low power supply. The majority of businesses depend on self-generated power sources to power their operations. The high costs of running and maintaining power-generating plants have resulted in inflation, unemployment, and low output in Africa.
This therefore makes the need for adequate infrastructure - secure energy, efficient transport, reliable communication systems, resilient sanitation, and affordable housing - of great importance.
Despite the constraints this challenge poses, it creates an opportunity to leapfrog to new, more efficient technologies. Accordingly, as Africa becomes more urbanized, public goods will become easier and cheaper to deliver to a more geographically concentrated population.
However, the financial gap to meet the estimated infrastructure demand remains highly exorbitant as the African Development Bank (AfDB) estimated Africa’s infrastructure financing needs to be as much as $170 billion a year by 2025, with an estimated gap of about $100 billion a year. This means that governments and donors alone may not be able to meet the infrastructural needs of the continent. Private-public participation will as well help in the fight against infrastructure deficiency in Africa.
According to Business Day, business investors like banks, insurance companies, pension funds custodians, and administrators have more than $100 trillion in assets under their management globally. A small portion of the excess global savings would be enough to invest in productive and profitable infrastructure in Africa.
African governments must expand their revenue generation base and reduce the cost of governance to have enough reserve for infrastructure development. The African government must make good economic policies that promote infrastructure development.
Africa has the potential to boost the world economy. Africa has one of the largest markets in the world to promote the global economy. Africa’s policymakers must strategise to close the infrastructure gap challenging Africa’s growth and development to make the continent a viable location for foreign direct investment inflows, thereby reducing the problem of growing unemployment, low growth rate, and poverty in the continent.
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