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It has been two years since the African Continental Free Trade Area (AfCFTA) came into force for the 24 countries that had deposited their instruments of ratification by May 30 2019. As of May 2022, 43 of the 54 signatories (80%) had deposited their AfCFTA ratification instruments, according to the Trade Law Centre for Southern Africa (Tralac). Numerous studies have hailed AfCFTA as a game-changer for Africa’s economic integration efforts, but for the continent to reap the benefits, it needs to address one of the critical challenges to intra-Africa trade — the infrastructure deficit.
According to the Programme on Infrastructure Development in Africa (PIDA), the continent is quickly expanding and is ready to become an economic success story and model for other parts of the world. However, the continent’s huge infrastructural deficit is preventing it from progressing. In Africa, just 34% of people have easy access to road transport, compared to 50% in other emerging countries, and transportation expenses are twice as high. Only 30% of the population of Africa has access to electricity, compared to 70%-90% in other emerging countries. Only 5% of farmland is irrigated, indicating that water resources are underutilised. The internet-penetration rate in the developing world is only 6%, compared to an average of 40% elsewhere. This comparison paints a problematic picture about the state of Africa’s infrastructure when compared with other emerging economies.
Is it money that Africa lacks or is there a deeper crisis?
First, the question of infrastructure is a complex one that requires analysis that captures all the nuances of the structural realities of Africa. Second, the solution to this challenge should be dynamic and pragmatic. There tends to be a misconception that money is the solution to Africa’s infrastructure woes, but various studies have revealed that the problem is deeper than that. The root of Africa’s infrastructure conundrum has been proven to be a lack of financially successful infrastructure projects, rather than a lack of finance.
Despite a recorded increase in international-investment appetite and funding for infrastructure on the continent, most of the planned projects never achieve financial close, with up to 80% failing at the feasibility/business-plan stage. Clearly, while there is no dispute over the lack of financial capability to invest in infrastructure by African governments on their own, there is another aspect that needs to be addressed: how do they facilitate cross-border infrastructure investment and facilitation through feasible and investment-returning projects?
There is a misconception that money is the solution to Africa’s infrastructure woes — the problem is deeper than that. The root of Africa’s infrastructure conundrum is a lack of financially successful infrastructure projects.
The AU, regional economic communities and various development banks in the continent have made some strides in addressing the infrastructure crisis, such as PIDA and the NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF). However, we are still sitting with the same white elephant in the room: how can the infrastructure deficit be addressed?
We do not need to invest in new programmes or policies — we have enough mechanisms to address the question of infrastructure. We need to take lessons from existing successful initiatives. The concept of developmental economic corridors in Africa was initially championed by the postapartheid government in SA as the Spatial Development Initiative (SDI), an integrated planning tool to encourage investment in undeveloped but growth-orientated areas of the country. This initiative provides an opportunity not only for co-operation on cross-border infrastructure investment, but also a platform to put AfCFTA into operation.
Developmental economic corridors: two birds with one stone
Developmental economic corridors aim to improve trade capacity to access new markets, join new global value chains and reduce export competitiveness constraints, kicking off a virtuous economic cycle. Moreover, it has the capability of rallying different stakeholders for investment purposes; private-public partnerships are cultivated for fiscal relief on the side of public sector.
At the same time, economic development corridors have not been without criticism. Smalley, Sulle, Chome, Duarte and Gonçalves suggest that low infrastructure investment is part of the problem when contextualising political economy difficulties. It might also be linked to a failure to acknowledge smallholders, small agribusinesses and women’s demands and realities.
However, African Development Bank (AfDB) infrastructure & urban development department head Amadou Oumarouat argued back in 2019 that “they invariably promote international and intraregional trade by reducing transport and shipping costs, as well as transit time for imports and exports. By removing physical barriers to cross-border trade and expanding markets beyond national boundaries, international road corridors foster a conducive environment for the private sector and for attracting foreign direct investment (FDI). In addition to enhancing trade and strengthening regional integration, cross-border road corridors contribute to poverty reduction by increasing access to markets and social services.”
Developmental economic corridors could go a long way towards fostering co-operation on infrastructure investment and facilitation, but they can also play a critical role in regional economic growth. Therefore, as we reflect on Africa Month, the continent needs to further invest in pragmatic and dynamic methods of dealing with critical challenges that might undermine the progress and the capacity of AfCFTA. Developing economic corridors are an opportunity worth exploring.
• Maneli is a master of philosophy in development policy & practice candidate at the University of Cape Town's Nelson Mandela School of Governance.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.