For decades Sub-Saharan Africa (SSA)’s abysmal infrastructure has stifled its competitiveness and held back standards of living. Now a number of positive trends are beginning to transform this picture reports the Economist Intelligence Unit
China’s expanding footprint in Africa
They include rapidly rising private investment, China’s expanding footprint in Africa, high commodity prices, and stronger political will among governments to co-operate on infrastructure serving multiple countries. Despite these trends, however, Africa is likely to continue to lag behind other regions in developing the infrastructure needed to support business.
Infrastructure deficiencies on many fronts
African economies suffer from infrastructure deficiencies on many fronts. Power, in particular, is a major constraint, with 30 of the 48 countries in the region—including SSA’s largest oil producer, Nigeria—facing regular power cuts. The infrastructure deficit largely reflects years of underinvestment and neglect, but difficult economic geography is also to blame: 15 countries in the region are landlocked, population densities are low and people are widely dispersed. Budget constraints—especially during the structural adjustment programmes of the 1990s—have also contributed to the underinvestment in infrastructure. The lack of money has been exacerbated by large leakages due to corruption, mismanagement, inefficient parastatals and weak logistics.
A gradual transformation
While this assessment is undeniably quite bleak, a number of positive trends are emerging. China has emerged as a key financier and developer of infrastructure projects in Africa. China’s involvement has three notable benefits—Chinese companies are often willing to undertake projects that many Western firms consider uneconomic; Chinese loans and technical assistance are disbursed very quickly; and Chinese companies are typically able to deliver projects at a lower cost (in part because of their access to cheap loans from the Chinese government, which allow them to operate on profit margins of less than 10% as against 15-20% for most other firms).
Tags: Africa, development
