Challenges

Why More and Better Infrastructure?

Reliable access to water, energy, transport and communications are the essential building blocks of economic progress. If Africa is ever to eradicate extreme poverty and to develop sufficiently to be fully integrated into the global economy, the continent’s infrastructure needs must be met – and quickly.

Inadequate infrastructure is holding back Africa’s economic growth per capita by 2% each year, and reducing firms’ productivity by as much as 40 percent. In order for Africa to become competitive, or realise its productive potential, massive improvements in infrastructure are needed.

The economic integration process in Africa is hampered by a lack of sound infrastructure. For example:

• Poor infrastructure has blocked the quick movement of goods and people in the continent and increased transport costs. Africa’s transport costs, local, national and international, are around twice as high as those for a typical Asian country;
• Only one in four Africans has access to electricity.  Some 30 African countries are experiencing regular blackouts due to power shortages. Firms struggle to cope by installing their own back-up generators, which cost three to four times as much as the cost of grid electricity;
• On current trends, Africa will not meet the Millennium Development Goals for water and sanitation. Households struggle to cope by walking long distances to collect water or paying three times as much as the cost of piped water to purchase small quantities from vendors.

Africa trails other developing regions of the world, and this suppresses growth and productivity. Good infrastructure has always played a leading role in economic development and is a precondition for, and an enabler of, growth for private sector development and for trade:

• Building and maintaining roads and railways boosts output and jobs;
• Countries with reliable energy and electricity services and low transport costs find it easier to trade and therefore achieve faster growth;
• Clean water and sanitation are essential for health which in turn is needed for labour productivity.

Financing Needs

Until late 2009, the most referenced estimates of Africa’s infrastructure financing needs were in the report of the Commission for Africa in 2005, which estimated the continent’s needs, above existing spending, at US$20 billion a year.

The more recent Africa Infrastructure Country Diagnostic (AICD) study (www.infrastructureafrica.org) estimates that US$93 billion is needed annually over the next decade – see below. The new estimate amounts to roughly 15 percent of the continent’s gross domestic product (GDP). The study found that existing spending on African infrastructure totals US$45 billion a year, giving a financing gap of US$48 billion a year - well over twice the US$20 billion given in the Commission for Africa report in 2005.