Efem Nkam Ubi, Senior Research Fellow, Nigerian Institute of International Affairs
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Subjects of Interest
- Economic Development
- Geopolitical Analysis
- International Affairs
- International Trade
Africa's need for infrastructure to fast-track development 16 Nov 2018
By comparison with other developing regions, Africa’s infrastructures are by far the most dismal. They are also the most costly to maintain and upgrade due to lack of local expertise and the need for capital importation. Many of the colonially-bequeathed infrastructures are in varying states of dilapidation. And generally, misgovernance and corruption are the bane of Africa’s infrastructure development.
The poor state of Africa’s infrastructure hampers the movement of goods and services, thereby limiting trade on the continent. Trade infrastructure deficits in Africa include poor warehousing of commodities and poor road infrastructure for transportation of goods to markets, leading to significant post-harvest losses. These deficits have also made doing business in Africa quite costly.
Africa’s infrastructural problems are so intractable that many multilateral meetings have strategised on how to help develop the continent’s infrastructure. For instance, at the Gleneagles G8 summit in 2005, world leaders pledged to establish an infrastructure consortium for Africa (ICA) to increase investment in Africa’s infrastructure. The G8 and other donors committed to increase official development assistance to Africa by $25 billion a year by 2010. This was followed by an inaugural meeting of ICA in 2010, when the World Bank was commissioned to undertake the Africa Infrastructure Country Diagnostic (AICD) study to generate a common quantitative baseline database against which future developments will be measured. Part of the objectives of the AICD was to serve as a vehicle to provide the appropriate response to Africa’s infrastructure problems.
At the NEPAD-OECD Ministerial Conference in April 2011 in Dakar, Senegal, a call was made for a new development paradigm to mobilise investment in infrastructure and agriculture in Africa. Development partners, including the G-20, were called upon to take action to support infrastructure development on the continent.
Infrastructure development is also top on the African Union (AU) framework for development (Agenda 2063). All this depicts how Africa’s infrastructure needs are urgent preconditions for the region’s economic growth and development.
Africa’s trade infrastructure deficits are responsible for the depression in intra-Africa exports, which only accounted for 18 percent of total global exports in 2016. Meanwhile, intra-Asia exports accounted for 59 percent and intra-Europe exports accounted for 69 percent, respectively, of global exports in the same year, according to the Brookings Institution.
A snapshot of the continent’s infrastructural gaps shows that electricity access in West Africa ranges from below 20 percent in Liberia, Sierra Leone, Niger and Burkina Faso, to more than 70 percent in Ghana. Across Central Africa, it ranges from a relatively high of 66 percent in Equatorial Guinea, 60 percent in Gabon and 54 percent in Cameroon, to less than 3 percent in Central African Republic, and 4 percent in Chad. DR Congo, with very large hydropower potential, has electricity access of 9 percent and in Nigeria, which is Africa’s largest economy, 55 percent of the population (90 million people) do not have grid access.
The infrastructural deficit in Nigeria requires an investment of $3 trillion over the next 30 years. It has been noted that $800 billion is needed to upgrade transportation infrastructure – with $350 billion for roads, $75 billion for rail, and $50 billion for aviation. And in those 30 years, the country’s spending on infrastructure needs to increase from the current 3-5 percent of GDP to an average of 9 percent per year.
While the World Bank estimates that between $800 billion to $900 billion is invested globally in infrastructure each year, the multilateral development bank says to upgrade global infrastructures, around $1 trillion more investment is required. With regard to Africa, building and upgrading infrastructures will cost $93 billion per year. In which case, the power sector will need $40.8 billion; water supply and sanitation (WSS) will require $21.9 billion; and the transport sector will need investment of $18.2 billion.
The fact remains that if African countries are to build productive infrastructure in terms of access and quality, Africa’s per capita economic growth could increase by 2.2 percentage points. Because infrastructure, just like technology, is a critical enabler of any country’s economic growth and development.
Many countries in Africa do not have the financial muscles to close their infrastructural funding gaps. The question then is; how will African countries fund their infrastructural gaps? And where will the funding come from?
As stated earlier, support for Africa’s infrastructure development rose significantly since 2005. By 2007, commitments from donors reached $12.4 billion, a 61 percent increase from the $7.5 billion in commitments that were received in 2006. This was also above the roughly $7 billion pledged in 2005. In 2007 alone, China’s commitments amounted to about $4.5 billion, while Arab countries and India committed $2.6 billion and $700 million, respectively.
Studies have also indicated that development finance institutions and export credit agencies are by far the largest funders of infrastructure in Africa. Thus between 2009 and 2014, an estimated total of $328 billion was spent on six main categories of African infrastructure. Private capital and commercial lenders are also funding about $10 billion of infrastructure each year, partly because of a lack of "bankable" project environments in many African jurisdictions.
While the West and its financial institutions are funding infrastructures in Africa, China remains the highest investor in Africa’s hard infrastructures today – at the country level, that is. China and a few emerging economies have emerged as important investors in Africa’s infrastructure. Nevertheless, private investment is also rising, although much of this is concentrated in Africa’s fast-growing telecommunications sector and to a lesser degree in power and energy.
The two areas of infrastructure I deem more critical to fast-track and guarantee Africa’ development are energy and inter-modality transportation (which refers to the development of seamless integrated transport chains). These two areas, if properly harnessed, could go a long way to guarantee Africa’s development. But I must also add that education and human capital development are key to managing and scaling the physical infrastructures.
Goal 9 of the Sustainable Development Goals calls on countries to build resilient infrastructure, promote sustainable industrialization and foster innovation. Specific targets of Goal 9 include development of quality, reliable, sustainable and resilient infrastructure, including regional and trans-border infrastructure. All this is important because infrastructure is widely acknowledged to play a vital role in supporting a high standard of living.
Whereas China is already playing a very important role in funding the infrastructure gaps on the continent, African governments should also endeavour to use frameworks such as public private partnerships (PPPs) to attract available global equity and debt financing as well as the technical competencies required to build complex and large-scale projects. But suffice to say a more sustainable approach will be to build the pools of skills and human capital necessary to develop such projects. This is why investment in education and human capital development is key.
Africa’s infrastructure deficits constitute a drag on economic growth and development prospects. For instance, Nigeria's infrastructure challenges partly account for the country's declining trade-to-GDP ratio, which peaked at 81.81 percent in 2001, but has since declined to 64.97 percent in 2008 and 18 percent in 2017. This is why the United Nations Industrial Development Organisation (UNIDO) has noted that Nigeria needs internationally-recognized National Quality Infrastructure (NQI), with the capacity to ensure safety, integrity and marketability of goods and services. The NQI will also help in removing technical barriers to trade.