Upgraded links crucial to growth in Africa

Improving its infrastructure can help Africa lift its economic performance. Published in MEED, 22 April 2013

You do not have to drive far in Africa before you encounter unsealed roads. According to the World Bank, just 19 per cent of sub-Saharan Africa’s roads are paved. While moving around the rest of the continent, you are often at the mercy of bad weather. This makes it difficult to move goods and people, but Africa’s infrastructure problems are not confined to the quality of its roads. It lags behind other regions of the world in most aspects of infrastructure.

According to the Swiss non-profit organisation World Economic Forum, the continent’s ports are badly run. Measured on a scale from 1-7, from extremely inefficient to extremely efficient, it gives Africa a score of just 3.8. Customs procedures are barely better, with a score of 3.9. The situation is similarly bad among other transport sectors. Rail networks are thin on the ground and air links between capitals and other major cities are often scarce or non-existent.

Inadequate telecoms

Telecoms connections are another gap, although the vibrant mobile phone market is at least starting to close the divide with other regions of the world. There are just 12 million phone lines in Africa, according to the Switzerland-based International Telecommunication Union (ITU). That is equivalent to about 1.4 lines for every 100 people, by far the lowest in the world. About 3 million people also have a fixed-line broadband internet connection, a penetration rate of 0.3 for every 100 people, which again ranks as the world’s lowest.

The key to telecoms and communications in Africa is the mobile phone. There are 545 million mobile phone subscriptions, easily outnumbering the number of fixed-line connections. Even so, that still only means a penetration rate of 63.5 per cent, which is below the global average of 96.2 per cent, according to the ITU. Mobile phones also provide a better, cheaper internet link for many people, with 93 million mobile broadband subscribers.

Additionally, mobile phone and laptop batteries need to be recharged on a regular basis. Yet, the Washington-based World Bank estimates that only a third of the population has access to electricity in sub-Saharan Africa, against a global average of 74 per cent. Access to other utilities is better, although often still inadequate. Only 65 per cent of the urban population and 38 per cent of the rural population has access to improved water and sanitation networks, according to the UN Economic Commission for Africa (ECA).

All this helps to explain why the World Bank ranks African countries far down the list in terms of the ease of doing business. In its latest Doing Business report, which compares 185 economies around the world, the best-ranked country in the region is Mauritius in 19th place, followed by South Africa in 39th and Rwanda in 52nd. Most of the continent languishes in the lower reaches of the table, where 30 of the 50 lowest-ranked countries are African.

This clearly has an impact on the continent’s economy. According to the African Development Bank (AfDB), poor infrastructure reduces business productivity in Africa by about 40 per cent and amounts to a tax of 2 per cent on annual economic growth.

“There is a lot that needs to be done,” says a senior international development official. “Some of the challenges of doing business in Africa are that infrastructure is very weak. The total [power] generating capacity of Africa is something like the size of Spain. Only 32 per cent of people in Africa have access to electricity. Just 19 per cent of the roads are paved. There is a major infrastructure challenge and bureaucracy is still a big issue.”

Investment crucial

Solving these problems requires massive investment. A widely quoted 2010 report by Vivien Foster and Cecilia Briceno-Garmendia for the World Bank and Agence Francaise de Developpement estimates that $93bn a year is needed over the next decade just to bring Africa’s infrastructure up to the level of other developing regions. Actual spending is about $45bn a year.

AfDB has been doing its bit to try and close the gap. The bank is involved in at least 95 transport projects that are approved or already under way. The vast majority are road projects, although there are some airport, rail and port schemes as well. In 2011, AfDB approved $2.36bn in loans and grants for infrastructure, including transport projects and water supply and sanitation, energy, and information, and communications technology (ICT) programmes.

Within the transport sector, the ongoing projects include two major bridges: the Gambia bridge linking Gambia and Senegal, and the Kazungula bridge linking Botswana and Zambia. A loan has also been approved for the construction of the Lome Container Terminal in Togo to provide a gateway to the landlocked countries of Mali, Niger, and Burkina Faso.

Many AfDB projects contain an element of finance from outside the continent. International involvement is clearly needed, to provide both funding and expertise. The country most closely associated with developing Africa’s infrastructure is China. According to the ECA, from 2001 to 2009, Chinese infrastructure financing commitments in Africa reached $14bn. About half of this was channelled towards power projects and the rest into transport and ICT schemes. In 2008, among the top 225 international contractors working in Africa, Chinese firms controlled 42 per cent of the market.

Air links

GCC countries have a far smaller footprint in Africa, but they have been working to address the poor infrastructure, particularly by providing vital air transport links to connect Africa with the rest of the world. The route networks of Qatar Airways, Abu Dhabi’s Etihad and Dubai’s Emirates now reach right across Africa, linking the continent’s cities to Asia and Europe via their Gulf hubs. Emirates has the most extensive network, serving 16 cities in 14 sub-Saharan Africa states from Dubai. Etihad serves four cities, while Qatar Airways flies to 10.

Such route networks mean that, for some international companies, the Gulf can be used as a regional headquarters for Africa. Dubai is the most well-established GCC location for this, with the likes of US hotel group Hilton Worldwide, Dutch electronics giant Philips and US polling firm Gallup using it as their base for the Middle East and Africa region.

In other areas of transport, Dubai-based ports operator DP World operates terminals in Senegal, Djibouti and Mozambique, and Saudi Binladin Group is currently building the Blaise Diagne International airport in Senegal.

Gulf countries also play a key role in the continent’s telecoms industry. Until recently, Kuwait’s Zain Group was operating in 17 countries across the continent. Although it sold most of its operations in Africa in 2010 to India’s Bharti Airtel for $9bn, it still operates in South Sudan, Sudan and Morocco. The UAE’s Etisalat is active in eight countries around Africa, mostly through its holding in Moov, which is based in Ivory Coast but is also active in Togo, Benin, Niger and elsewhere.

In March this year, Kuwait-headquartered Gulf Investment Corporation, which is owned by the six GCC governments, said it would invest $50m in Virgin Mobile Middle East & Africa, a UK/UAE mobile telecoms firm with operations in South Africa, Oman, Jordan and Saudi Arabia.

Other suggested deals, however, have not been completed. In 2008, Qatar was reported to be in talks with the government of Kenya to build a deepwater port on the island of Lamu in return for a long-term lease of 40,000 hectares of African farmland. Those talks appear to have gone nowhere and no work has yet started on the port, which is part of a wider transport scheme including overland rail links to South Sudan and Ethiopia.

The investments that do go ahead, however, are vital for the future of the African continent. Improving the region’s infrastructure offers one of the best chances of being able to lift its overall economic performance, and the quality of life of its citizens as well.