Why infrastructure development in Africa matters
Why infrastructure development in Africa matters
The story of Africa’s development is changing. Six of the world’s fastest growing economies are in Africa! Democratic governance has been strengthened over the past five decades, enabling a platform for stable growth and prosperity in most parts of the continent. The New Partnership for Africa’s Development (NEPAD) is happy to be part of this upward transformation process, through the implementation of its programmes.
But while we boast of having some of the fastest growing economies, what we don’t generally say is that we also have seven of the ten most unequal economies in the world. If we look at the GINI coefficients, an index which measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution, Africa is the most unequal continent in the world. Added to that specificity is the fact that 75% of Africa’s population is under the age of 25.
This growing youth population, most of which has access to modern and rapid communications systems, and requires instant results, could impact adversely on the African countries if social inequality and the current systems of government are not revised. Inclusive policies are an absolute pre-requisite for political stability.
By ‘inclusive’ I mean creating jobs for the youth and facilitating access to public services. The equation of the most unequal yet youngest continent is one that could explode.
Tunisia is an interesting model that failed. The North African country was praised for its good transport system, highest penetration of information and communication technology (ICT) on the continent, good ports, relatively good airports, fairly good agricultural production, highest literacy rate of girls…but the country imploded.
Fundamentally, the majority of the population did not perceive the level of inclusion of the youth as satisfactory. This is why whatever we do in agriculture, infrastructure, ICT, if we do not resolve the key issue of inclusiveness, we are carrying very fragile systems that at one moment or another will implode. So, inclusiveness is very fundamental.
But for real development in every sphere to happen, we need to improve our infrastructure. At NEPAD, we believe that infrastructural development is the key to all aspects of social and economic transformation.
Antonio Estache and Grégoire Garsous, both experts in infrastructure investment in Africa, state in their literal notes on “The impact of infrastructure on growth in developing countries” that there is, indeed, a plethora of anecdotal and more technical evidence that better quantity and quality of infrastructure can directly raise the productivity of human and physical capital and hence growth. For example, transport access can improve education and markets for farmers’ outputs and others by cutting costs, facilitating private investment, improving jobs and income levels for many.
Despite the gains registered in improving regional infrastructure connectivity across the continent since the establishment of the African Union along with NEPAD, Africa still faces serious infrastructure shortcomings across all sectors, both in terms of access and quality.
For instance, only 38% of the African population has access to electricity, the penetration rate for internet is less than 10% while only a quarter of Africa’s road network is paved. Studies have 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).
Furthermore, a recent World Bank study found that 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.
In order to boost intra-African trade, we need to improve infrastructure. That’s why we designed PIDA (Programme for Infrastructure Development in Africa), a 30-year strategy by NEPAD, the African Union and African Development Bank (AfDB), focusing on regional trans-boundary projects. The good thing about PIDA is that it was designed from the bottom up. The priorities are consensual. Given our global context, some of the minimal conditions for structural economic transformation require a less top-down approach in our planning processes.
The 4,500-kilometre highway from Algiers in Algeria to Lagos in Nigeria, for example, would not have been possible without the political and technical support of each of the affected countries. Ten years ago a private sector operator who wanted to discuss a regional project with two governments would be lacking a rational framework.
PIDA is that rational framework. Jointly coordinated by the African Union Commission, NEPAD, the regional economic communities and AfDB, PIDA provides the strategic framework for priority projects to transform Africa through the construction of modern infrastructure into an interconnected and integrated continent that is competitive domestically and in the global economy.
PIDA also forms the basis for the Dakar Financing Summit for Africa’s Infrastructure, which took place in Senegal in June 2014. Hosted by President Macky Sall, who is also Chairperson of the NEPAD Heads of State and Government Orientation Committee, the summit’s aim was to accelerate the mobilisation of both domestic and international financial support for the implementation of the high impact regional infrastructure projects in Africa.
We have picked 16 out of 51 largely programme-based PIDA projects that were discussed at the Summit. The objective of this summit was to create a dialogue between policy makers, heads of government and private sector operators. Financing will develop from public-private partnerships.
The 51 projects require an estimated $68 billion for their implementation to 2020 whilst an additional $300 billion is envisaged as requirement for the PIDA projects to be implemented through to 2040. With such quantum resource requirements in the long term, there exists a huge financing gap which needs to be addressed for the successful realization of PIDA projects.
When high level politicians, business entrepreneurs, industry experts and researchers met in Dakar, it was not be just another talk-shop on Africa’s development. The summit was about producing results in terms of new approaches to project preparation that will lead to an increased level of funding being directed to PIDA projects within a shorter timeframe.
Dakar summit highlighted the need to scale-up Africa’s domestic financial resource mobilisation and provided a unique high-level platform to convene and engage African leaders, business-persons, regulators and policy makers on specific aspects that have hampered the roll out of transformative regional projects across the continent.
Working closely with the private sector, the summit produced tangible outputs that will, over time, contribute to regional transformation. The summit marked the beginning of a strong collaboration between public and private capital, based on effective project risk mitigation and project structuring to match different investor groups with a range of investment securities. The significant outcomes of the summit, which was a nouvelle approach to tackling the changing landscape of Africa’s shifting development paradigm, will be an opportunity for NEPAD to be key point for investment in Africa.
Dr. Ibrahim Mayaki is the chief executive officer of NEPAD.