The biggest quest

The African continent is increasingly becoming the global common hub for doing business. A continent which not long ago was described as a 'hopeless continent' have risen above all odds to actually show the potential that it possess. Not only is Africa attracting the world and depicting that it is capable to contain them, but increasingly from operators in Africa itself. Africa's economic structural reforms have shown a strong resilient following the global economic crisis in 2008 by rebounding back very quickly since the last decade and going forward, looking more robust.

The world has therefore identified Africa as the next best destination to do business. However, this enthusiasm is hindered by Africa’s poor infrastructure stature. This Economic efficiency is therefore not harmonized due to difficulty in accessing African markets.

Energy, water, sanitation, telecoms and transport have long being identified as the major infrastructure setback to the continent. Energy supply continues to be Africa's largest infrastructure challenge with 30 countries experiencing frequent power outages with just over a third of Africa's population having access to electricity. Road constitute 90% of Africa’s urban transportation. Poor infrastructure is costing each member country's growth to reduce by 2percentage point each year and cut productivity by as much as 40%.

According to the World Bank, about $93 billion is needed annually to be able to fund Africa's infrastructure for the next 10 years. Which is about 15 percent of the region's GDP. About $60 billion of this would go to funding of new projects and the rest would go into the maintenance of the existing ones. Given the substantial amount involved, governments will need to be innovative in the search for sustainable approaches to infrastructure development as well as financing. The private sector will need to play an increasingly important role. Governments will do well to create conditions where private-sector engagement is encouraged, probably through public-private partnerships (PPPs).

The infrastructure challenge facing the African continent is seen manifested in various forms ranging from region to region. According to a development research brief, by the African Development Bank (AfDB), in 2009, less than 10% (in 10 countries) and less than 50% (in 33 countries) of roads in Africa are paved, 40% of the population lacks access to safe water; 60% of the population lacks basic sanitation. Only 30% of the rural population in Sub-Saharan Africa has access to all-season roads. Transport costs in Africa are among the highest in the world; only 30 percent of African population has access to electricity; Africa has the lowest telephone penetration – 14% (the world average is 52%). Africa has the lowest Internet penetration – 3% (the world average is 14%).

To release the potential of Africa therefore, requires the need to reduce the cost of doing business across borders. This means major investments in transport infrastructure including roads, ports, internal container depots, inland water ways and railways are needed as well as increase in energy production capacity. The strides being made by national governments, regional and continental bodies in transforming Africa to a modern and growth-induced economy will be a positive step for global prosperity.

Infrastructure plays a pointed, often decisive role in determining the overall productivity and development of a country's economy, as well as the quality of life of its citizens. Infrastructure development supports various kinds of economic activity, including as an input into production and also raises the marginal product of other capital used in the production process.

In fact, high cost of transport, energy and internet access is a major economic growth deflator and is partly associated with Africa's continued economic marginalization. 154 Evidence collected by the World Bank’s Africa Infrastructure Country Diagnostic, for example, has shown that improvements in transport, energy and communications infrastructure have contributed substantially more to African per capita growth over the past decade than structural policies

In terms of access to water and sanitation improvements, there is a global goal of halving the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015. Whiles this may be met, at current rates, Africa will achieve the targets only in 2040 with some of the poorer countries not meeting them before 2050. Only 60 per cent of Africans have access to improved sources of drinking water and more than half still do not have access to improved sanitation facilities [APR Report 2010].

For Africa to achieve the possibility of ensuring efficient trade among countries and for it to run smoothly, viable infrastructures should be in place, such as transportation system and means of communication. Infrastructure that is sufficient and works properly is crucial for Africa’s economic integration. African economies can begin the process of deep integration if infrastructure networks are designed in such a way as to link production centers and distribution hubs across the continent, as the networks of developed economies do.

Lack of adequate infrastructure has raised the transaction costs of business in most African economies. Today African countries exhibit the lowest levels of productivity and are among the least competitive economies in the world. Empirical research has shown that there is a positive relationship between infrastructure investment and economic growth. Productivity growth—and thus increasing competitiveness—is higher in countries with an adequate supply of infrastructure services. With adequate infrastructure, African firms could achieve productivity gains of up to 40 percent. There is therefore the need for strategic partnerships for development of infrastructure to help raise capital, accelerate project delivery, reduce operating costs and improve maintenance. Such infrastructure will enable Africa to compete effectively, tap into regional markets, and benefit from globalization through investment and trade.

Infrastructure is also important for the promotion of inclusive and sustainable growth especially rural infrastructure—notably feeder roads that connect rural communities to national markets—enable individuals, households, communities, and small businesses to embark on income-generating activities.

ABOUT THE AUTHOR

Paul Frimpong

Chartered Economist (ACCE-Global) writes on the macro-economy and global affairs. He is also an African Affairs Analyst and Emerging Markets Strategist.

Tel: +233 -241 229 548 Email: py.frimpong@yahoo.com/py.frimpong90@gmail.com