Why infrastructure development is critical

Submitted by admin on Mon, 12/28/2015 - 13:43

The story of Africa’s development is changing. Six of the world’s fastest-growing economies are in Africa.

Democratic governance has been strengthened over the last five decades, enabling a platform for stable growth and prosperity in most parts of the continent.

The New Partnership for Africa’s Development (Nepad) is happy to be part of this upward transformation process, through the implementation of its Programmes.

But while we boast of having some of the fastest growing economies, what we do not generally say is that we also have seven of the 10 most unequal economies.

If we look at the GINI coefficients (an index which measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution) Africa is the most unequal continent in the world.

Added to that specifi city is the fact that 75% of Africa’s population is under 25 years old. Th is growing youth population, most of which has access to modern and rapid communications systems, and requires instant results, could impact adversely on the African nation-state, if social inequality and the current systems of government are not revised.

Inclusive policies are an absolute prerequisite for political stability. By “inclusive” I mean creating jobs for the youth and facilitating access to public services.

Th e equation of the most unequal yet youngest continent is one that could result in an explosive situation. Tunisia is an interesting

model that failed. The North African country was praised for its good transport system, highest penetration of IT on the continent, good ports, relatively good airports, fairly good agricultural production, the highest literacy rate of girls… but the country

imploded.

Fundamentally, the majority of the population did not perceive the level of inclusion of the youth as satisfactory.

This is why whatever we do in agriculture, infrastructure, ICT, if we do not resolve the key issue of inclusiveness, we are carrying very fragile systems that at one moment or another will implode. So, inclusiveness is really fundamental.

But for real development in every sphere to happen, we need to improve our infrastructure.

At Nepad, we believe that infrastructural development is the turn-key to all aspects of social and economic transformation.

Antonio Estache and Grégoire Garsous, both experts in infrastructure investment in Africa, state in their paper.

The impact of infrastructure on growth in developing countries that there is, indeed, a plethora of anecdotal and more technical evidence that better quantity and quality of infrastructure can directly raise the productivity of human and physical capital and hence growth.

Despite the gains registered in improving regional infrastructure connectivity across the continent since the establishment of the African Union along with Nepad, Africa still faces serious infrastructure both in terms of access and quality.

For instance, only 38% of the African population has access to electricity; the penetration rate for the internet is less than 10% while only a quarter of Africa’s road network is paved. Studies have shown that poor road, rail and port facilities add 30% to 40% to the cost of goods traded among African countries, thus shortcomings across all sectors,  adversely affecting the privatesector development and the flow of Foreign Direct Investment (FDI).

Furthermore, a recent World Bank study found that the poor state of infrastructure in many parts of Africa reduced national economic growth by two percentage points every year and cut business productivity by as much as 40%, making Africa –  in spite of its enormous mineral and other natural resources – the region with the lowest productivity levels in the world.

In order to boost intra- African trade, we need to improve infrastructure. That is why Nepad designed PIDA – the Programme for Infrastructure Development in Africa, a 30-year strategy by Nepad, the African Union and African Development Bank (AfDB), focusing on regional transboundary projects. The good thing about PIDA is that it was designed from the bottom up.

The priorities are consensual. Given our global context, some of the minimal conditions for structural economic transformation require a less topdown approach in our planning processes. The 4,500km highway from Algiers to Lagos, for example, would not have been possible without the political and technical support of each of the affected countries. Ten years ago, a private sector operator who wanted to discuss a regional project with two governments would be lacking a rational framework. PIDA is that rational framework.

Jointly coordinated by the African Union Commission (AUC), the Nepad Agency, Regional Economic Communities (RECs) and the AfDB, PIDA provides the strategic framework for priority projects to transform Africa, through the construction of modern infrastructure, into an interconnected and integrated continent that is competitive domestically and in the global economy.

PIDA also forms the basis for the Dakar Financing Summit for Africa’s Infrastructure (DFS), which will take place in Senegal next month.

To be hosted by Senegal’s President Macky Sall, who is also the chair of the Nepad Heads of State and Government Orientation Committee (HSGOC), the Summit aims to accelerate the mobilisation of both domestic and international financial support for the implementation of high-impact regional infrastructure projects in Africa.

We have picked 16 out of 51 largely programme-based PIDA projects to be discussed at the Summit. The objective of this Summit is to create a dialogue between policy makers, heads of government and private sector operators. Financing will develop from public-private partnerships.

The 51 projects require an estimated $68 billion for their implementation up until 2020 whilst an additional $300 billion is envisaged as a requirement for the PIDA projects to be implemented through to 2040.

With such quantum resource requirements in the long term, there exists a huge financing gap, which needs to be addressed for the successful realisation of PIDA projects.

When high-level politicians, business entrepreneurs, industry experts and researchers meet in Dakar, it will not be just another “talking shop” on Africa’s development. The DFS is about producing results in terms of new approaches to project preparation, that will lead to an increased level of funding being directed to PIDA projects within a shorter time-frame.

The Dakar Summit highlights the need to scale up Africa’s domestic financial resource mobilisation and will provide a unique highlevel platform to convene and engage African decisionmakers on specific aspects that have hampered the roll-out of transformative regional projects across the continent.

Working closely with the private sector, the DFS will produce tangible outputs that will, over time, contribute to regional transformation. The DFS marks the beginning of a strong collaboration between public and private capital, based on effective project risk mitigation and project structuring to match different investor groups with a range of investment securities.

The expected significant outcomes will be an opportunity for Nepad to be a key point for investment in Africa. The DFS will be a new approach to tackling the changing landscape of Africa’s shifting development paradigm.

Click here to download the article in the Africa Renewal Magazine