Slow Infrastructure funding grips Sub-Saharan Africa

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One of the issues that remains a perpetual bugbear in Africa, is slow infrastructure spending to unlock the continent’s economic growth potential. One of the issues that remains a perpetual bugbear in Africa, is slow infrastructure spending to unlock the continent’s economic growth potential.

One of the issues that remains a perpetual bugbear in Africa, is slow infrastructure spending to unlock the continent’s economic growth potential, research shows

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Sub-Saharan Africa needs solid legal frameworks, increased private-sector involvement and better fiscal incentives to plug its annual infrastructure funding gap of about $100bn, Boston Consulting Group and Africa Finance Corp said.

The region’s governments have insufficient strategic foresight, political will, and policy certainty, and numbers of adequately skilled people to improve delivery, the organizations said in a report released on Tuesday in Nigeria’s capital, Abuja.

Financial systems need upgrading to be sound enough for projects, and nations must develop local capital and debt markets that provide lower financing costs, it said.

Implementing projects takes "twice as long as in other regions", they said. "Private investors often must act as project developers, adding 10-15% to the project costs and lengthening the project life cycle." The region’s nations "lose as much as 2.1% of GDP annually to inadequate infrastructure," they said.

Two-thirds of Africans lack access to power and the road access rate is 34% compared with 50% elsewhere.

The International Monetary Fund said last week that the region’s growth outlook was subdued, and forecast expansion of 2.6% in 2017 from a two-decade low of 1.4% in 2016.

Governments are trying to address deficiencies that limit investment, with 42 of the region’s 49 countries enacting laws to provide a regulatory framework for private investment in infrastructure, the report showed.

Besides these laws, countries should establish sector-specific standards and regulations, have fiscal incentives and provisions that promote dispute settlement and licensing.

Basic infrastructure that’s difficult to make economically profitable should be the responsibility of governments and development partners, while infrastructure that’s financially viable with appropriate tariffs should fall under private investment via concessions or public-private partnerships.

World Bank Positive Report

Despite this sluggish investment, telecommunications coverage and access to clean water have accelerated a good 15% since 1990, according to World Bank Research.

On the positive side, Sub-Saharan Africa has made great progress in telecommunications coverage in the past 25 years, expanding at a fast pace across both low- and middle-income countries in the continent. Access to safe water has also increased, from 51% of the population in 1990 to 77% in 2015.

But the challenges that remain are vast and deeply ingrained. For example, little progress has been made in per capita electricity-generating capacity in over two decades.  Only 35% of the population has access to electricity, with rural access rates less than one-third urban ones. Transport infrastructure is likewise lagging with Sub-Saharan Africa being the only region in the world where road density has declined over the past 20 years.

The growth effects of narrowing Sub-Saharan Africa’s infrastructure quantity and quality gap are potentially large. For instance, the growth of GDP per capita for the region would increase by an estimated 1.7 percentage points per year if it were to close the gap with the median of the rest of the developing world.

Closing the infrastructure quantity and quality gap relative to the best performers in the world could increase the growth of GDP per capita by 2.6% per year. The largest potential growth benefits would come from closing the gap in electricity-generating capacity. 

In a nutshell, governments should insist on transparency, enforce anticorruption standards and strengthen anti-waste capabilities.There is huge appetite globally to invest in African infrastructure, Nigerian finance minister Kemi Adeosun said on Tuesday at a conference in Abuja. "We need to properly package and showcase the opportunities."

Read more on:

Infrastructure  |  World Bank  |  International Monetary Fund (IMF)

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