Abstract
African economies, through Agenda 2063, recognize that developing infrastructure – transport, electricity, energy, water, and e-connectivity – will be critical for the region to assume a lasting place in the global economic system. As a result, this paper addresses the continent’s infrastructure gap and provides an important insight into the rapidly growing presence of China’s official infrastructure financing in Africa as well as the distinctive character of its involvement. In addition, the paper provides an empirical evaluation of the role of infrastructure in awakening African economies. The generalized-method-of-moments (GMM) estimator for dynamic models of panel data developed by Arellano and Bond (1991), and Arellano and Bover (1995) was employed to estimate an infrastructure-increased growth model.
Highlights
From an economic perspective, an adequate supply of infrastructure services has long been viewed by both academics and policymakers as a key ingredient for economic development
This paper addresses the continent’s infrastructure gap and provides an important insight into the rapidly growing presence of China’s official infrastructure financing in Africa as well as the distinctive character of its involvement
The findings display that indicators such as human capital, inflation, trade openness, terms of trade, and governance have a positive and significant influence in awakening African economies
Summary
An adequate supply of infrastructure services has long been viewed by both academics and policymakers as a key ingredient for economic development. They are necessary to enhance the competitiveness of African firms and facilitate the flow of goods, services, persons and information within and across African economies and regions. The world invests some US$2.5 trillion dollars a year in infrastructure in order to tackle the problem (MGI, 2016) This amount continues to fall short of the world’s ever-expanding needs, which results in lower economic growth and deprives citizens of essential services. If the current trajectory of underinvestment continues, the world will fall short by roughly 11 percent, or $350 billion a year (MGI, 2016)
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