Infrastructure and Economic Development in Africa: An Overview

Abstract

Evidence abounds to support the view that economy of sub-Saharan Africa (SSA) has been growing in recent times, but there is considerable concern that the growth has not been accompanied by economic transformation. The lack of economic transformation is traceable to low level of investment in transformation activities especially raw material processing industries occasioned, at least in part, by the fact that sub-Saharan Africa has the highest cost of doing business in the world with cost of infrastructure services making up a disproportionately large part of production and trade costs. This is a reflection of serious deficit in the three dimensions of infrastructure, namely quality, quantity and access. Against this background, it was considered topical to devote the plenary session of December 2007 to the issue of infrastructure and economic development in Africa. This volume, therefore, contains the three papers presented at that plenary session. The first paper by Cesar Calderon and Luis Serven on infrastructure and economic development in SSA focused on analysing the linkages between infrastructure and economic development pointing out that the literature on effects of infrastructure on economic development is inconclusive. Noting that physical infrastructures are rarely homogenous and analysing a large panel data for 136 countries, they found that infrastructure development is associated with both higher growth and lower inequality. They also found that while infrastructure made a large contribution to reducing inequality in East and South Asia, the impact was relatively modest in SSA due to poor quality of infrastructure. They concluded that corruption adversely affect impact of infrastructure on productivity and growth stressing, among other things, the importance of independent regulation agencies in offsetting some of the consequences of corruption on infrastructural services. Kennedy K. Mbekeani, in the second paper, presented a review of international experience in infrastructure, trade expansion and regional integration and lessons for Africa. Delving into the relationships between trade, infrastructure and regional expansion, he asserted that improvements in productivity lead to increased trade and can foster regional integration through improved intra-regional trade and industrial relocation. There is persuasive evidence that adequate infrastructure provision is a key requirement for trade liberalisation to achieve its intended objective of efficient resource reallocation and export growth. The paper concluded by providing a summary of some Africa's infrastructure programmes that have the potential to lead to trade expansion and regional integration. Finally, the paper by Mthuli Ncube on financing and managing infrastructure in Africa presents arguments on the relationship between infrastructure investments and economic growth in Africa. Infrastructure encompasses transport, telecommunications, water and sanitation, power and gas, and major water works, and also focuses on quantity versus quality of infrastructure. Ncube also found that, in the literature, the causal nexus between infrastructure capital and economic growth and development, in general, has been ambiguous. However, it does seem one thing is clear, namely that sustainable high economic growth often occurs in an environment where there is a meaningful infrastructure development, although it is not obvious which leads the other. The paper presents the various financing strategies, around Public--Private partnerships (PPPs) and examples of PPP-type arrangements in Africa. Ncube concluded the paper by exploring policy implications of the state of infrastructure and economic growth in Africa. Copyright The author 2010. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.