Africa's Infrastructure Bottleneck

28 March 2018

With technological advances, Africa is now connected. Despite this, growth has slowed in recent years after a decade of rapid expansion, reported The Economist.

Poor infrastructure, a lack of skills and excessive reliance on commodities has resulted in lower growth. What is needed is diversification in areas such as agriculture, manufacturing, healthcare, education and banking, claimed the Economist.

However, infrastructure, which is vital for a global economy, is still rickety in Africa, according to a report by in the World Economic Forum (WEF). Africa has performed particularly badly as far as transport infrastructure and energy supply is concerned, with both falling 6% and 3% respectively over past decade, said WEF.

The World Bank’s Africa Pulse revealed that Sub-Saharan Africa grew by about 8% in 2014 to 0.6% in 2015, but rebounded in 2017 to a forecast 2.6% growth. To sustain this trend, albeit a timid increase, Africa needs to lift investment, particularly in infrastructure, and create more jobs, the analysis stated.

Africa still faces a lot of challenges, said the World Bank. It noted, for example, poor progress has been made in per-capita electricity generation in over two decades and now only 35% of the population having electricity. The bank said capital spending levels are too low to meet the region’s infrastructure needs. The funds given by countries to infrastructure development is considerably less than allocated, which delays many projects and shows inefficiency in the sector. Public-private partnerships (PPPs) in Sub-Saharan Africa is a small market with focus on projects in only a few countries, namely, South Africa, Nigeria, Kenya, and Uganda. That is because PPPs have had a bad experience in certain projects.

The International Finance Corporation said Africa is rich in natural resources which, if harnessed properly, could help boost growth in the African economy. However, lack of modern infrastructure is a major setback for the development of Africa and to sustain the present growth in the economy.

Africa’s need for secure energy, efficient transport, reliable communication systems, resilient sanitation, and affordable housing is particularly apparent, reported IFC. The infrastructure deficit puts a strain on growth. If more funds are allocated to the build-up of infrastructure, Africa will be able to sustain its growth prospects.

Shem Simuyemba of the African Development Bank admitted the governments on their own accord cannot fund infrastructure projects. The key is, he said, to form partnerships for sustained progress. This is the first step, he added.

Second step, he said, is bridging the supply demand gap in infrastructure. He noted that US$45 billion of the initial US$100 billion shortfall has been secured, but an unfunded balance US$55 billion remained. He warned of the difference between the supply and demand getting bigger if Africa is not smart about getting the funds needed.

The third step is to see the policies are in step with international norms, he said. While policy can be a major disruptor for infrastructure development, it can be a major catalyst to the transformation of the infrastructure sector if used properly.

The fourth drive is to bridge the “missing middle”. He said that while there is demand for more infrastructure investments and available funding from investors, the required investments are not happening. The reason for this is the “missing middle”, which he explained, is the lack of well-prepared, bankable, investment-ready infrastructure projects which can attract financing. This is due to a major gap in terms of financial resources, capacities and competencies required to provide the range of technical, advisory, legal, transaction services to make projects bankable; further compounded by the fact that infrastructure projects tend to be large and complex requiring a large outlay of preparation support, he said.

Finally, Simuyemba said, what is needed is an innovative approach on investment in infrastructure projects.

China is one of the major investors in Africa’s infrastructure. Vice-President of China Development Institute Dr Qu Jian explained the Chinese Government’s position on investment in Africa’s infrastructure, “The central government seriously studied the subject and advised that an approach would be development of Industrial Parks in Africa. However, new concept must be applied to this new form of industrial parks.”

“Instead of just providing a piece of land for manufacturers, it would take a comprehensive (holistic) approach that incorporates development of infrastructure (highways, rail, sea ports and terminals, energy, airports, water supply and use, etc.), manufacturing and their suppliers’ facilities, accommodation for workers, related institutions, customs, certificate authorities and bodies, etc. Essentially the whole industry chain (supply and demand) must be there. This sets the background of Africa’s infrastructure projects which is part of the whole development strategy”, he stressed.

However, there has been some concern expressed recently about the financial terms imposed on African countries for funding of infrastructure projects, according to sources in the South China Morning Post (SCMP). Former US Secretary of State Rex Tillerson stated that African countries sometimes can lose control over these projects. Sources also suggested some of the roads constructed were of inferior quality and were beginning to fall in a state of disrepair.

China disputed claims of exploitation in Africa, reported SCMP. “No one dominates, and all parties participate on an equal footing,” Foreign Minister Wang Yi said. “There is no secret operation, but an open and transparent operation – no ‘winner-take-all,’ but all see mutual benefits and ‘win-win’ results.”

Original article on FWD.news