Road construction on the Narok-Maai Mahiu road in Kenya. A new report says Africa has the weakest infrastructure in the world but, ironically, Africans in some countries pay twice as much for basic services as people elsewhere. Photo/FILE
The poor quality of Africa’s infrastructure is costing the continent’s economies around two per cent of their potential economic growth each year.
The state of infrastructure in sub-Saharan Africa – its electricity, water, roads, and information and communications technology (ICT) – also reduces business productivity by as much as 40 per cent.
Africa’s Infrastructure: A Time for Transformation finds that Africa has the weakest infrastructure in the world but, ironically, Africans in some countries pay twice as much for basic services as people elsewhere.
The study, which was conducted in 24 African countries by a partnership of institutions – including the African Union Commission, the African Development Bank, the New Partnership for Africa’s Development, and the World Bank – is one of the most detailed one ever undertaken on the continent.
It argues that well functioning infrastructure is essential to Africa’s economic performance and that improving inefficiencies and reducing waste could result in major improvements in Africans’ lives.
The report estimates that $93 billion is needed annually over the next decade, more than twice what was previously thought, to bring Africa’s infrastructure up to a satisfactory standard.
Almost half of this would address the continent’s current power supply crisis that is hindering its growth.
The new estimate amounts to roughly 15 per cent of the continent’s gross domestic product.
The study also found, however, that existing spending on African infrastructure is much higher than previously known – at around $45 billion a year.
Most of this is domestically financed by African taxpayers and consumers.
But waste is a big problem in infrastructure provision and the report says a number of efficiency improvements could potentially expand the available resources by a further $17 billion.
However, even if major efficiencies are gained, there is still a funding gap of $31 billion every year, much of it for power and water infrastructure.
Relative to the size of their economies, the gap is daunting for low-income countries (who would need to spend an additional 9 per cent of their GDP) and particularly for the region’s fragile states (who would need to spend an additional 25 per cent of their GDP).
Resource-rich countries like Nigeria and Zambia face a more manageable funding gap of 4 per cent of GDP.
Particularly now with the global financial crisis, investing in African infrastructure is critical for Africa’s future.
“Modern infrastructure is the backbone of an economy and the lack of it inhibits economic growth,” says Obiageli Ezekwesili, World Bank Vice-President for the Africa Region. “This report shows that investing more funds without tackling inefficiencies would be like pouring water into a leaking bucket. Africa can plug those leaks through reforms and policy improvements which will serve as a signal to investors that Africa is ready for business.”
Closing the efficiency gap requires improving management of utilities, ensuring adequate maintenance, promoting regional integration, recovering costs while recasting subsidies to enable broader access, and improving allocation and spending of public resources.
To close the funding gap a wide range of sources will be needed, including public budgets, resource rents, local capital markets, private sector and non-OECD finance, as well as traditional donor assistance.
The report recommends action in four crucial sectors – energy, water, transport and ICT – that underpin national economies and are critical for reducing poverty in Africa.
Countries with the greatest infrastructure needs are often the least attractive to investors.
Many of the countries in Africa will probably take longer than a decade to catch up on infrastructure and will probably have to use lower cost technologies.
But action is needed urgently, the report argues, and the global financial crisis is underscoring the need for a massive effort to overhaul Africa’s infrastructure.
“Africa’s Infrastructure: A Time for Transformation” recommends action in four crucial sectors – energy, water, transport, and ICT – that underpin national economies and are critical for reducing poverty in Africa.
The report says that prioritizing these sectors, increasing investments, and improving efficiency can help African countries avert the worsening impacts of the financial crisis and begin laying the foundations for future growth as the global economy rebounds.
The report’s findings were based on surveys conducted among 16 rail operators, 20 road entities, 30 power utilities, 30 ports, 60 airports, 80 water utilities, and over 100 ICT operators, as well as the relevant ministries in 24 countries.
The results were derived from detailed analysis of spending needs (based on country-level microeconomic models), fiscal costs (which involved collecting and analysis of new data) and sector performance benchmarks (covering operational and financial aspects as well as the country’s institutional framework).
