Thursday, June 3, 2010

Africa’s Infrastructure Challenge

Sub-Saharan Africa has perhaps the world’s least sufficient infrastructure. In addition to being sparse, it is much more expensive that other regions of the world. However, investment, including that from the continent itself, may change this picture significantly over the next few years.

Less than 30% of African roads are paved. In fact, according to the World Bank, in 1992 approximately 17% of sub-Saharan African roads were paved, but by 1998, the percentage had dropped to 12%. At about that time, Africa below the Sahara desert (with the exception of South Africa) had 18% less paved roads than Poland.

There is great concern over the decline in Africa’s share of world exports, and while World Bank studies cite non-competitive prices as responsible for approximately a quarter of the decline, the rest is due to non-price factors such as poor infrastructure and information services. Those studies also show that a 10% decrease in transportation costs could mean as much as a 25% increase in total African trade.

In her assessment of African infrastructure, World Bank Vice President for Sustainable Development Katherine Sierra told the 4th annual U.S.-Africa Infrastructure Conference in April that:

• Every US$1 of delayed road maintenance costs US$4 to restore the existing road.
• Only 20% of Africa’s population has access to electricity or modern forms of energy, compared to 50% in South Asia and 80% in Latin America.
• The entire capacity for electric power in sub-Saharan Africa’s 48 countries with more than 800 million people is no more than Spain with about 40 million people.
• The cost of infrastructure services in sub-Saharan Africa are at least double those in South Asia and in some areas is five times as high because of a lack of large-scale economies, the high cost of electrical power and a lack of competition.
• Railways in sub-Saharan Africa have declined in significance partly because of poor maintenance and other adverse economic and infrastructural factors.
• The volume of cargo in African ports has tripled in the past decade, normally a hopeful sign of expanding economies, but such hope is frustrated by the low incidence of containerization and weak transportation linkages.

The World Bank assessment of African infrastructure is not all gloom and doom, however. Sierra noted the great progress made in telecommunications. She said only 5% of Africa’s population lived within range of a mobile phone signal in 1999, but today, that percentage is 60% and could rise to 90% soon if there is deregulation and greater competition. Increased access to information about prices and markets already has boosted the prospects of African producers.

More good news is that African countries are responding to the infrastructure challenges they face. In light of statistics indicating that passengers flying in Africa are 75 times more likely to die in a crash than fliers in North America, African countries are joining regionally to establish common aviation regulation bodies, such as the Banjul Accord Group in West Africa. Better coordination of safety efforts should reduce risk and increase efficiency significantly.

The ZIZABONA project, involving Zimbabwe, Zambia, Botswana and Namibia, is creating new power transmission lines to link the four neighboring countries, making it easier for them to trade power with one another. Another regional power project will make Zambia a strategic power linkage between the five nations of the East African Community and the Southern African Development Community.

Given the dearth of international development funding due largely to the current global economic downturn (as well as donor nations failing to fulfill promises of development funding), the key to financing African infrastructure projects will be attracting private funds for infrastructure development. This will include multinational corporate investment, but also local companies and the growing possibilities for remittances. Alhaji Bamanga Tukur, Chairman of the NEPAD Business Group, said the African private sector has tremendous capacity to develop infrastructure “if there is a transparent and supportive policy environment.”

The same is true for non-African investors. The public-private partnerships necessary for this to succeed will only work if there is accountability, transparency and some guarantee for return on investment. This is being accomplished now in some parts of the continent where public-private boards for road development, often including road users, are subject to external audits on the money raised from vehicle licenses and user fees. Jobs are contracted out to private developers rather than parceled out to government cronies or phantom workers.

The African Diaspora can get in on the potential enhancement of African infrastructure and even earn profits from their efforts. Doing well by doing good is more than a motto. It is a reality that can be realized by those willing to take a calculated risk for the greater good. It’s also called putting your money where your mouth is.

Any takers?

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