Solving Africa’s infrastructure paradox
Multiple stakeholders need to increase support for infrastructure development to ensure growth across the region
The Covid-19 pandemic not only revealed how critical Africa’s infrastructure is to the continent’s development, but also underscored how vulnerable it is.
Even before the pandemic hit African governments were mapping new strategies to navigate the continent’s infrastructural needs against the development of an intraregional free trade area. The pandemic amplified the urgency to develop critical infrastructure to facilitate industrial development and intraregional trade.
Many parts of Africa need to upgrade their economic infrastructure to facilitate movement in-country and around the continent. This includes the improvement of land, sea, air, and digital infrastructure. In 2021 Cameroon was presented with the opportunity of hosting the Africa Cup of Nations. Yet for soccer enthusiasts in Sierra Leone, about 3,700km away by road, getting to the tournaments in Yaoundé proved almost impossible due to transport infrastructure constraints. Direct flights between the two countries are nonexistent and using indirect routes cost about $1,000 per flight and covered twice the distance with multiple stopovers. Never mind the additional costs for hotels, food, immigration and customs requirements.
This paints a picture of how the lack of infrastructure in Africa not only limits individuals from travelling but also has an impact on businesses and the overall industrialisation agenda. Without good road networks, bridges and railways, how can businesses in one country ensure that their products arrive in another country in a timely manner, in prime condition and at a reasonable price?
How can an East African food and beverage producer best export their products to West or Southern Africa without experiencing these challenges? In addition, physical infrastructure is rendered useless without the human capital to complement it. What plagues the African continent is not a skills dearth but more a lack of experience. The lack of experience to build and use innovative and sophisticated infrastructure, the lack of experience to derive the most benefit from it and the lack of experience with synergies that can exist in different industries and sectors, let alone countries.
Other factors retarding infrastructure development in Africa include the lack of finance. The continent has a reported $100bn a year gap in infrastructure financing, which is expected to increase to $170bn a year by 2025, according to the AfDB. This financing gap is attributable to the poorest and least developed African economies such as Malawi, Mozambique, and the Democratic Republic of the Congo. It is no secret that the capital markets are skewed towards SA, Egypt, Morocco and Nigeria. SA accounts for nearly 80% of the region’s stock exchange market capitalisation and more than 50% of government and corporate issued bonds.
It is important to note that the process of developing Africa’s infrastructure landscape will be defined by long-term decision-making around asset classes with a 30 to 40-year lifespan. Institutional investors such as insurance companies, pension funds and sovereign wealth funds have more than $100-trillion in assets under management globally. A small percentage of the excess global savings and low-yield resources from these institutions would be enough to plug the infrastructure financing gap. However, when approaching these financiers and institutions we need to have our ducks aligned.
Agreed, infrastructure investments are not cheap, which is why African governments need to prioritise based on local needs and leverage private sector participation to obtain buy in from financiers. Open dialogue with the private sector, including entrepreneurs in the informal sector, could help governments understand their priorities and align the infrastructure development plans to that.
For example, in Sierra Leone is it more prudent for the government to focus on negotiating better external shipping routes or to focus on positioning the country to benefit from intraregional trade and the Africa Integrated High-Speed Network? Definitely the latter if internal growth is the priority. It is the prerogative of all African governments to create platforms for private sector stakeholders to be proactively involved in the development of policy frameworks and infrastructure that will enhance business operations, productivity, market access, and competitiveness.
The need for collaborative action is more urgent now than ever. Greater amounts of concessionary and blended capital are required to plug the continent’s infrastructure funding gap. Aligned, collaborative action anchored on improving domestic capabilities will be the key to infrastructural transformation in Africa. The hope is that multiple stakeholders — government, the private sector and development financiers — will increase support for infrastructure development to ensure growth across the region.
• Panashe is a senior researcher at advisory firm Birguid.
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