With a population exceeding 1 billion people, Africa is well placed as an emerging market. According to Goldman Sachs projections, Africa is the fastest growing part of the world where GDP growth is most likely to accelerate. The percentage of Africans living in extreme poverty, according to the World Bank, fell below 50 percent for the first time ever in 2012. Consulting firm McKinsey forecasts Africa will have a larger middle class than India starting next year.
While infrastructure has been responsible for more than half of Africa’s recent improved growth performance, the need for infrastructure development in this emerging market is critical. In most African countries infrastructure emerges as a major constraint as greater economic activity, enhanced efficiency and increased competitiveness are hampered by inadequate transport, communication, water and power infrastructure. The world is eager to do business with Africa, but finds it difficult to access African markets. According to the World Bank, the cost of addressing Africa’s infrastructure needs is around $93 billion a year, two-thirds of which would be for construction and rehabilitation and one-third for maintenance.
As the world’s attention shifts to Africa, the question weighing on most minds is the capability of the continent to develop adequate infrastructure to meet the growing demands of its inhabitants and realize its full potential. This report examines the challenges and opportunities associated with Africa’s infrastructure needs which encompass, power generation, transmission lines, road and rail networks, water and sanitation and broadband access and others.
1. Population Growth
It is predicted that Africa’s population will more than double within the next 40 years. The rapid population rise is often viewed as both a blessing and a curse. On one hand, Africa is a young continent with 70% of its inhabitants under the age of 25 years. This will eventually lead to a vibrant labor force bigger than anywhere in the world, drawing the attention of emerging markets and global leaders. On the other hand, Africa’s urban population is expected to double by 2030. The chaotic expansion of urban spaces has led to the inability of local governments to provide basic social infrastructure such as health, education, water, and sewage disposal facilities.
2. Political Instability
Recurrent political unrest in resource rich countries within the African continent has repeatedly hampered efforts to build and improve basic infrastructure. As a result of serious conflict, the Democratic Republic of Congo faces one of the most daunting infrastructure challenges in the African continent. Networks have been seriously damaged or left to deteriorate, with about half of existing infrastructure assets in need of rehabilitation. South Sudan has only 110 kilometers of tarmac road in its capital after decades of a long civil war.
3. Lack of Skilled Engineers
IBM launched a search for skilled engineers in the US for its Nairobi research lab— the only IBM research lab in Africa. There is a shortage of skilled engineers in Africa as most engineering courses are often outdated, too theoretical and irrelevant to current local needs. Furthermore, low-level public investment in engineering projects often means there is inconsistent demand for engineers, limiting the opportunities to gain valuable, hands-on experience. The few opportunities that arise are poorly paid engineering jobs in rural areas. As a result, engineers often migrate to other countries with better working conditions or search for employment in other fields. With the demand for infrastructure shooting up rapidly, governments are faced with the challenge to find skilled labor to carry out their projects.
Most African countries rely on the public sector to finance dominant infrastructure projects such as water, energy and transport. Public investment is largely tax financed and executed through central government budgets, whereas the operating and maintenance expenditure is largely financed from user charges and executed through state-owned enterprises. Due to limited fiscal resources, governments alone cannot build the infrastructure that Africa needs. There is a strong need to diversify the available sources of funding by developing domestic and regional capital and debt capital markets and boosting public-private partnerships (PPPs).
5. Economic Geography
Africa has several landlocked countries that depend on their neighbors for access to global markets. Some of these countries have very small populations and a GDP of less than $5 billion. This makes it difficult for governments to fund large scale projects and has led some to partner with other countries to balance off these costs. The LAPPSET (Lamu Port and South Sudan Ethiopia Transport) corridor is such an example that saw three governments collaborate to build a transport system that would pass through Kenya, Ethiopia to South Sudan. The $24 billion project is expected to foster transport linkage and economic development for the three countries.
1. The Rise of Innovative Engineering Programs
The International Institute for Water and Environmental Engineering in Burkina Faso (2iE) is a higher educational institute with an innovative engineering–entrepreneurship curriculum model. It exposes students to the highest quality training in water, sanitation and environmental engineering to build the right skills and competencies as well as learning experiences that enable all of its graduates to create new possibilities. Students come in from all over the continent – Mali, Congo, Cameroon, Gabon, Niger, Togo and increasingly from France and Canada as well. It is the only African higher education institution to offer internationally accredited degrees and 98% of its graduates remain in Africa. There are other programs on the rise as well such as the motorized Basic Utility Vehicle (BUV) micro-factory in Bangang, Cameroon that serves as a manufacturing and training center for all of Central Africa, a partnership between Purdue’s Global Engineering Program and the African Centre for Renewable Energy & Sustainable Technology (ACREST).
Biomimicry is a design discipline that seeks sustainable solutions by emulating nature’s time-tested patterns and strategies. The East Gate Centre in Zimbabwe is the country’s largest office and shopping complex, as well as a world-wide marvel that uses the same cooling and heating principles as a termite mound. This unique sustainable architecture building has no conventional air-conditioning or heating, yet stays regulated year round. Using less than 10% of the energy of a conventional building its size, Eastgate’s owners have saved $3.5 million alone because of an air-conditioning system that did not have to be implemented. The project cost 20 percent less than a neighboring air-conditioned building built at the same time. Such innovative developments would help Africa build sustainable infrastructure at a minimal cost.
3. Strategic Partnerships
Speculations have been rife over the Sino-African ties however, there is no doubt that Africa has benefited significantly from this cooperation. Not only is China willingly financing a great deal of infrastructure projects, it also brings in its own companies and workers, saving countries the hassle of finding skilled labor to complete the projects in good time. India-based Overseas Infrastructure Alliance (OIA) has infrastructure projects worth more than $1billion under implementation in Africa. Such collaborations lift the burden of local governments financing infrastructure.
4. Change In Policies and Regulations
Tackling corruption and increasing transparency with investors is seen as a key motivator in reducing the risk of investing in infrastructure. Governments are taking control to ensure that policy and regulatory frameworks are not only strong but consistent and efficient. Increasingly, Africa is leveraging resources for infrastructure development. Gabon is cooperating with Olam International to build roads and other infrastructure. Olam agreed to invest US$1.3 billion in Gabon in exchange for developing a urea plant there. The deal in turn allows the company to win contracts with the government in other areas specific to Olam’s business.
5. New Technologies
New technologies have allowed Africa to access services without relying on infrastructure entirely. The telecommunications industry has boomed with mobile phone subscriptions rising to 475 million from 90 million in sub-Saharan Africa within a span of seven years. It is anticipated that by 2020 every African will own a mobile device. Africa is currently the fastest growing and second-largest market for mobile phones in the world. Communication has become more accessible as users are even able to access internet services from their mobile devices. The speed with which the continent has built telephony networks and embraced mobile has taught the rest of the world much about Africa’s potential. Furthermore, services like mobile banking and educational platforms have been introduced, eliminating the need for traditional infrastructure to provide some basic services.
Though there has been marked improvement in infrastructure projects across the continent, skeptics are wary of the continent’s ability to achieve its ambitious goals. After all, this will not be the first time Africa has gone into a frenzy over development. After independence, several governments penned similar ambitious plans only to have them disintegrate into the hands of corruption, poor planning and ineffective economic policies. Infrastructure is the key to unleashing economic growth within the region. Leaders will have to enforce viable infrastructure projects and strategies that will allow them to utilize effectively the workforce and natural resources that lay idle. Transforming Africa to a modern and growth-induced economy will be a positive step for global prosperity.