Inside Africa’s Infrastructure Development Challenges

Date:

Private capital can boost investment in Africa’s infrastructure enough to remove one of the main obstacles to the region’s enormous growth potential.

The shortcomings of the continent’s infrastructure are well known, and the spending to address them is woefully inadequate.

Up to $170-billion is required every year, while the money invested now amounts to about $45-billion, according to the African Development Bank.

Put another way, to sustain annual economic growth rates of between three and 3.5%, spending on basic infrastructure such as power, water and road networks along with education, health and logistics should stand at between five and six percent of gross domestic product (GDP). The current average is just two percent.

Public transport infrastructure

How then do we not only remove what’s clearly a major obstacle to Africa’s growth, but also make the pace of expansion both more sustainable and inclusive? Rand Merchant Bank (RMB), in a report released earlier this year, has a firm point of view on the way forward.

“Structural change is essentially the only hope for sustainable growth in Africa,” says RMB Africa analyst Celeste Fauconnier in the bank’s <Where To Invest In Africa> report for 2019. “Closing the infrastructure gap in Africa is a mammoth task, but it must be taken on.”

Getting The Private Sector On  Board

The public sector accounts for about 90% of the money being invested now, which is worrying because government budgets are under pressure from rising borrowing costs.

The pace of growth on the continent is widely expected to accelerate this year, with the International Monetary Fund forecasting the region’s economy will expand by 3.5%, up from 2.9% in 2018. But that still lags well behind its expected average growth rate of 4.5% for emerging economies globally.

The World Bank points out that the lack of efficient growth in Africa shaves off 2.6% off the region’s average per capita growth rate – which is GDP divided by population – putting significant strain on human development.

Prioritising Infrastructure

Fauconnier says the main challenges to infrastructure development are weak legal, regulatory and institutional frameworks; weak infrastructure planning and project preparation; ineffective governance; and corruption. All of these are impediments to private sector investment.

Electricity infrastructure in Africa

Nevertheless, she believes that in the coming decade, African governments will emphasise structural change, making their countries more attractive investment destinations. “It’s vital for both public and private players to have mechanisms to ensure that their investments provide the best returns possible.”

At present, the lion’s share of public funding is concentrated on transport and energy, while private funding goes towards construction (which is less capital-intensive, and less risky). “We need that split to change,” she says.

Looking To The Future

There is reason for optimism, however, with the RMB report showing that private sector investment is starting to pick up already in response to more innovative areas of financing through pension funds, project financing and infrastructure bonds.

It ranks the investment appeal of all 54 countries by focusing on their growth potential, market size and operating environment. North African, southern African and island economies were ranked the best for quality infrastructure because they were the most developed, with stronger institutions and policies in place.

Egypt was ranked the highest overall, followed by South Africa, Morocco, Ethiopia, Kenya and Rwanda. In terms of operating environments, the top five performers were Mauritius, Rwanda, Botswana, South Africa and the Seychelles.

Words by Mariam Isa

spot_img

Share post:

spot_imgspot_img

Popular

More like this
Related

The scoop on the world’s most unique ice cream

As we approach Ice Cream Day on 21 July,...

A cruise for every generation

Think the modern cruise ship promises nothing more than...

The Connected Traveller: Wandering in Windhoek 

Get trendy while travelling with the new Osmo Pocket...

An essential guide to Abidjan

Planning a trip to Abidjan, the bustling economic capital...