11 Large Infrastructure

Agriculture, technology and infrastructure have facilitated human development throughout history. The three are intimately connected as early infrastructure often consisted of efforts to manage water resources for agricultural purposes around the cradles of humanity, which, in turn, led to further infrastructure development such as roads to allow for trade through which the products of increased productivity could be bartered. [1DS Rothman, MT Irfan, E Margolese-Malin, BB Hughes and JD Moyer, Building Global Infrastructure: Forecasting the Next 50 Years, Patterns of Potential Human Progress, Vol. 4, Boulder: Paradigm, 2014.]

Today the extent and quality of physical infrastructure largely define development, as it allows for goods, people and services to be moved efficiently from one location to another, delivery of reliable energy, access to safe water and sanitation, and the ability to trade. Countries with well-developed and maintained infrastructure can maintain dense populations and cope better with shocks.

The Berlin conference and its aftermath in the late 19th century provided a fragmented framework for Africa’s development. Connecting Africa’s people and promoting regional trade was not of interest to colonial powers. Infrastructure that could serve military purposes, provide access to mineral deposits and connect agriculturally rich areas with the coast were more important. These extractive infrastructure systems were reflected in sub-Saharan Africa’s colonial railroads in that they were built to facilitate the most direct (and cheapest) route to connect the point of extraction with a port to ship cargo to Europe, rather than to connect towns. [2or example, the so-called Lunatic Express, from Kisumu (Lake Victoria) to the port of Mombasa, built between 1886 and 1901, literally bypassed all the highly populated areas.] Only places with significant and permanent white settlement, particularly South Africa, saw any meaningful roll-out of infrastructure designed to improve the welfare of the local population, and then only for the colonist minority. [3R Jedwab, E Kerby and A Moradi, How colonial railroads defined Africa’s economic geography, VOXEU, 2 March 2017.]

After independence, most railroads fell into disuse because they were often not suited to new development priorities owing to conflict, mismanagement and changes in national priorities. Generally, attention shifted from rail to roads. This shift was accompanied by a lack of attention to basic infrastructure such as for sanitation that could facilitate human development or cross-border connecting infrastructure to advance regional integration. With advances in medicine keeping communicable diseases at bay, instead of effective sanitation, water and health infrastructure, urbanisation proceeded in much of Africa with limited additional basic infrastructure.

Yet the impact of colonial railways persisted, with locations along these routes becoming more developed and urbanised than towns not close to rails. In summary, ‘the railroads built during the colonial period strongly predicted the current location of cities.’ [4R Jedwab, E Kerby and A Moradi, How colonial railroads defined Africa’s economic geography, VOXEU, 2 March 2017.] Similarly, many African cities still depend on creaking water, electricity and sanitation infrastructure, which often predate independence half a century ago.

Post-colonial Africa has subsequently also had its fair share of so-called white elephant projects, where a large development (such as a factory or power station) would be constructed as the political pet project of an incumbent leader. This was a particular problem during the 1980s, after the (ultimately overly) ambitious Lagos Plan of Action  was adopted. Projects were often initiated without proper economic analysis, or consideration of potential synergies or regional cooperation, and led to oversupply or inappropriate infrastructure [5See: African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018; An example of a white elephant project is the Southern Paper Mills in Tanzania, which was eventually completed in 1985 at US$600 million (roughly US$4.2 billion today), more than double the initially estimated cost of US$261 million. The mill operated at about half its capacity at best for almost 20 years, at which time it was eventually sold to a private investor for US$1 million — see: E Gurardet, African Journey: A white elephant — symbol of Tanzania's troubled economy, The Christian Science Monitor, 21 December 1985; Staff writer, Tanzania’s Mufindi Paper Mills in full production, Lesprom, 8 August 2008. ] and saddling governments with unsustainable debt levels.

The situation eventually led to the International Monetary Fund (IMF) and the World Bank imposing various structural adjustment programmes in the 1980s, which sought to adjust a country’s economic structure, improve international competitiveness, and restore its balance of payments. The latter intention inevitably discouraged government expenditure, including on infrastructure, with the result that Africa actually regressed from already low rates of access on key indicators (such to water, sanitation and hygiene).

Africa’s general low population density has, until quite recently, largely precluded the development of economies of scale. Infrastructure development was also primarily considered and planned on a project-by-project basis and so has generally lacked the integrated, systemic approach evident in many more developed regions. [6S Schindler and J Kanai, How mega infrastructure projects in Africa, Asia and Latin America are reshaping development, The Conversation, 31 October 2019.]

Spending on infrastructure began rising again with the commodity boom in the first decade of the 2000s, [7African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] with many of Africa’s development ambitions consisting of grandiose urban projects driven by local politicians and global investors. The visions typically reflect images of Dubai, Singapore or Shanghai, with glass skyscrapers and landscaped freeways that suggest fashionable smart cities. For example, the Nairobi 2030 Metro Strategy, [8Government of the Republic of Kenya, Ministry of Nairobi Metropolitan Development, Nairobi Metro 2030: A world class African metropolis, 2018.] which was unveiled by the Kenyan government in 2008, aimed to make Nairobi ‘a world-class African metropolis’. Another is Hope City in Ghana, a US$10 billion IT hub to be built outside Accra. Launched by President John Mahama in 2013, the project proposed to build Africa’s tallest building within three years. [9Staff writer, Ghana’s John Mahama launches Hope City project, BBC, 4 March 2013.]

Recently, infrastructure development has also been driven by Chinese interest in Africa, as examined in the themes on Free Trade  and Financial Flows , culminating in the so-called ‘Belt and Road’ initiative. As a result, China has become Africa’s single biggest trade partner, investor and lender, and is driving the expansion of trade-catalysing infrastructure such as ports and railways, particularly on the eastern seaboard. In the process, Chinese state lending practices closely resemble that of Western private banks, with punitive conditionalities and secrecy compared, ironically, given their bad reputation in Africa, to the concessional terms that Africans can obtain from the (Western) international financial institutions such as the World Bank and International Monetary Fund. [10E Olander, New Trends in Chinese Overseas Development Finance, China in Africa podcast, 25 March 2022.]

Initially, Chinese-funded projects led to the displacement of local communities in Zambia and elsewhere, and many of the jobs created by these projects went to imported Chinese nationals over the local people. However, China has adapted and recent practices do not differ substantially from those of other countries. [11K Ernske, The dragon’s neocolonial white elephant development: China’s urban infrastructure in Lusaka, Zambia, senior thesis, Trinity College, Hartford, 2020.]

With mistrust of foreign investors and international institutions being high, and the historic record of coordination of regional projects between African nations being poor, Africa now looks to, among other institutions, the African Union Development Agency (AUDA-NEPAD) to coordinate and catalyse major, regionally integrated infrastructure projects. Its Programme for Infrastructure Development in Africa (PIDA) intends to pull in foreign state and private funding while centring pan-African interests. PIDA has already facilitated hundreds of projects across the continent, although it remains to be seen whether Africa has turned the corner on its growing infrastructure deficit.

Rapid population growth in Africa increases the demand for more infrastructure such as railways and ports while the continent simultaneously also faces major expenditure requirements in education and health. The challenge is less serious in North Africa, which boasts the best infrastructure in terms of both quantity and quality on the continent, followed by Southern Africa. Central Africa has the least infrastructure.

Wagner’s Law (the law of increasing state spending) posits that as countries develop, governments require more revenue (as a share of GDP) to invest in the provision of services such as health, education and infrastructure. [12BB Hughes, D Joshi, J Moyer, T Sisk and J Solorzano, Patterns of Potential Human Progress: Strengthening Governance Globally, Vol. 5, Boulder: Paradigm, 2014, 28.] As a result, state spending steadily increases as a portion of GDP (along with higher GDP per capita) and outpaces improvements in average income, suggesting a strong relationship between governance capacity and levels of income. The relationship is also evident in Africa, where government expenditure in Africa’s 23 low-income countries is, on average, 19% of GDP, compared with 26% in lower middle-income countries and 49% in upper middle-income countries.

Major transformations in improving infrastructure often consisted of layering new or additional systems over existing ones. In wealthy countries, this layering has occurred over successive centuries and reduces the costs of improvements. In much of Africa, the infrastructure challenge is, however, to build from scratch in mere decades what more developed countries built and refined over much longer periods.

Chart 1 compares spending on infrastructure (all types and including maintenance) in Africa with that in South America and South Asia, the two regions used in our analyses as being most comparable with Africa. Africa spends significantly more on infrastructure than South America (using the portion of GDP as yardstick), but much less than South Asia (this gap will largely close by 2043, as South Asia’s spending diminishes). Spending on infrastructure is also set to remain quite robust across the forecast horizon, despite a slight reduction over time. However, because of rapid population growth, Africa needs to spend significantly more on infrastructure than other regions, now and into the future.

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Chart 2 provides a snapshot of Africa’s infrastructure backlog in a comparative context. Although Africa is set to improve substantially over the next few decades, the continent trailed in all four categories in 2019 compared with South Asia and South America and will continue to do so by 2043. This is also not simply a case of watching Africa catch up, as Africa’s stock of infrastructure is much smaller than that of China and India when they were at similar levels of development. [13African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.]

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Electricity infrastructure is particularly lacking in Africa, with approximately 53% of its population with access in 2019. Only five African countries — Algeria, Tunisia, Morocco, Egypt, Libya and Seychelles — have universal access. The situation in rural areas is much worse. Only 19% of low-income Africans in rural areas had access to electricity in 2019, only 51% in lower middle-income Africa, and 77% in rural upper middle-income Africa. Fifteen African countries have less than 10% rural electricity access and some, such as the DR Congo, do not even reach 2%.

In the Current Path forecast, rates of access will increase, but progress will likely be slow. In fact, the absolute number of Africans without access to electricity in low- and lower middle-income countries will either remain static or increase modestly beyond 2030 as investment in infrastructure lags behind rapid population growth.

By 2043, electricity consumption in Africa (810 kWh per capita) will also be lower than in South America and South Asia (see Chart 3). So, instead of catching up, Africa is falling further behind.

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It is not only that access to electricity in Africa is low; electricity is also much more expensive than in other regions, largely driven by the lack of investment in generation capacity and in the associated distribution networks. The irony is that a number of African countries export significant amounts of energy, mostly coal and unrefined oil and gas, and then subsequently import refined fuels while also having to rely on generators to supplement power supply during frequent outages, particularly in sub-Saharan Africa. [14African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.]

There is no shortage of demand for electricity in Africa, which is expected to be four times higher in 2040 than it was in 2010, [15K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020.] making improving supply and distribution of energy infrastructure a priority. This is despite Africa’s electricity generation potential being not only immense but also green. Africa has abundant sites for generating wind, solar and hydro power and currently uses less than 10% of its hydroelectric capacity. [16African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] As Africa seeks both to grow and to industrialise, green energy should enable it to leapfrog  past a heavy and environmentally catastrophic dependence on fossil fuels and into a future of renewable energy.

ICT infrastructure is becoming easier and cheaper to expand across the continent, which explains why the roll-out of mobile broadband is accelerating, even on the Current Path. Even low-income Africa is expected to have at least one mobile broadband subscription per person by 2034, with lower middle-income and upper middle-income Africa set to achieve this milestone in 2030 and 2028, respectively. Seychelles, Africa’s only high-income country, reached this goal in 2021.

However, fixed broadband subscriptions lag far behind. Upper middle-income Africa in particular seems to be underperforming on this measure, despite its relative wealth, and is poised to be left behind by South Asia, which was at similar levels of access as recently as 2015.

Chart 4 presents a forecast for mobile broadband access per 100 people for North and sub-Saharan Africa, compared with South Asia and South America. The forecast is aggressive throughout, with progress in Central and East Africa being least rapid. North Africa will catch up with rates in South America by 2035 and will remain above the forecast for South Asia beyond 2040.

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Although access to mobile broadband is improving, data remains prohibitively expensive for most. In Africa, 1 GB of data costs nearly 18% of average income, whereas the same amount of data costs only 3% of average income in Asia. [17African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] The gap in ICT infrastructure and the potential to catch up is discussed in the theme  on Leapfrogging.

Transport infrastructure is a major bottleneck for development across much of Africa, reflected in the low rates of access to roads in rural areas, as shown in Chart 2. Poorly constructed roads that wash away during rainy seasons can make rural areas inaccessible and travel dangerous. Yet rural transport is an essential facilitator for achieving the sustainable development goals. [18J Cook, C Huizenga, R Petts, C Visser and A Yiu, The contribution of rural transport to achieve the Sustainable Development Goals, 2017.]

Improvement in low-income and lower middle-income Africa is slow and likely to reach only 51% and 68% of the rural population, respectively, by 2043. Poor road infrastructure contributes to traumatic injuries through avoidable road accidents, further stressing Africa’s health system, already overburdened by its high communicable disease and an increasing non-communicable disease burdens.

There is also a significant shortage of deep-water ports able to handle large vessels, which increases transport costs and leaves some regions deprived of the benefits of trade. [19African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] However, considerable investment in ports and associated infrastructure has been seen over the past few years (e.g. Tanger-Med in Morocco, Port Said in Egypt, Durban in South Africa, Djen Djen in Algeria, Mombasa in Kenya, and Lagos in Nigeria), but sustained and substantial investment will be required to clear the deficit.

Chart 5 shows the relationship between new investments and maintenance of existing infrastructure as a portion of GDP globally across country income groups, based on data for 2019 and a forecast for 2043. A general decline in spending both on new construction and for maintenance is apparent. The high levels of government consumption in rich countries reflects the shifts in government spending towards healthcare on non-communicable diseases, which are generally more expensive to treat, and to provide social protection.

Chart 5 also shows that both low-income countries and lower middle-income countries (of which the majority are in Africa) invest heavily in building new infrastructure while at the same time spending large amounts on maintenance.

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According to the African Development Bank (AfDB), it will cost US$130–US$170 billion a year to eventually eliminate Africa’s infrastructure gap (Chart 6). [20African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018] Although considerable funding is flowing into Africa to address this need, the group estimates that a shortfall of between US$68 and US$108 billion remains annually. [21African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] This gap is due mostly to a backlog in water and sanitation infrastructure (approximately 41% of the gap), followed by electricity supply and transport access (about 28% each). ICT infrastructure makes up the remainder. [22I Mayaki, Why proper structure of major infrastructure projects in Africa is priority, AUDA-NEPAD, 24 January 2020.]

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Expenditure on infrastructure differs according to how it is calculated and compared. According to IFs, Africa spent 5.8% of GDP on all aspects of infrastructure (core and maintenance, public and private) in 2019, compared with 4.4% in South America and 9.1% in South Asia.

Closing the infrastructure gap in Africa is not a simple task and requires governments to overcome major obstacles, such as financing, government capacity and corruption. Given limited domestic sources of revenue, Africa generally looks to financial institutions such as the World Bank and the AfDB or state-backed lending from a country with deep pockets, such as China, to fund its infrastructure deficit. [23In 2017, China provided 23.8% of Africa’s infrastructure commitment. See: C Prinsloo, The pitfalls of private sector investment in infrastructure financing, South African Institute of International Affairs, 25 June 2019.]

China’s building large infrastructure projects in Africa is also advantageous because it largely operates on a government-to-government basis (instead of private sector entities dealing with each other). China also has significant finances to invest because of its consistent positive balance of trade since 1990, and it has a massive overcapacity and substantial domestic experience in building infrastructure. None of these advantages are readily available from the US or Europe, and the result is that China dominates in building African infrastructure, although some smaller countries, such as Turkey, are also gaining a foothold.

Elasticities of investment to GDP (that is, the proportional impact on GDP following a 1% increase in investment in infrastructure) range from as low as 0.08 to 1.6, as major infrastructure projects impact entire communities and potentially affect national economies even if cause and effect are often unclear. [24A Estache and G Garsous, The impact of infrastructure on growth in developing countries, IFC Economics Notes, April 2012.]

There is evidence that higher levels of development are associated with lower returns from infrastructure. [25A Estache and G Garsous, The impact of infrastructure on growth in developing countries, IFC Economics Notes, April 2012.] A village without a road connecting it to the capital city may benefit greatly from the first single-lane paved road making such a connection, whereas a major city such as Cairo or Johannesburg could add many kilometres of additional road with a barely measurable impact on the fortunes of the city. This is true not only for cities but for entire economies, and indeed it has been found that infrastructure spending is far more potent, dollar for dollar, in less developed economies. [26O Kodongo and K Ojah, Does Infrastructure Really Explain Economic Growth in Sub-Saharan Africa, Review of Development Finance 6:2, January 2017, 105.] Accordingly, increasing infrastructure when stocks are low (such as in low-income Africa) will likely have a greater impact on economic development than the same proportional increase in an upper middle-income country that has a much larger stock of infrastructure. [27African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.]

ICT and energy infrastructure tend to show the greatest impacts on development indicators across many studies, but ultimately, the prioritisation of infrastructure depends greatly on country-specific bottlenecks and opportunities. [28A Estache and G Garsous, The impact of infrastructure on growth in developing countries, IFC Economics Notes, April 2012.]

An IMF study of infrastructure spending in several countries from 1985 to 2014 found that an unanticipated 1% increase in public infrastructure boosted GDP by 0.4% the following year, but by 1.5% four years later. [29International Monetary Fund, Is it time for an infrastructure push? The macroeconomic effects of public investment, in World Economic Outlook (WEO) Legacies, Clouds, Uncertainties. Washington, DC: IMF, October 2014, 75–114.] The Economic Policy Institute agrees, noting in a 2014 report that ‘infrastructure investments can boost even private sector productivity growth.’ [30J Bivens, The short- and long-term impact of infrastructure investments on employment and economic activity in the U.S. Economy, Washington, DC: Economic Policy Institute, 2014.]

In general, the positive relationship between infrastructure and development is uncontroversial but the benefits of investment in different types of infrastructure over shorter horizons are heavily debated in academic and policy literature. The type of infrastructure, how it is financed and how quickly it is rolled out, together with levels of development, all matter: [31I Mayaki, Why infrastructure development in Africa matters, Africa Renewal, 13 July 2014; A Estache and G Garsous, The impact of infrastructure on growth in developing countries, IFC Economics Notes, April 2012.]

• In the short term (i.e. during the construction phase), goods and services are consumed in building the infrastructure and additional workers are hired. This temporary fiscal stimulus precedes a more lasting improvement in productivity, as completed roads and rail open new markets and make product delivery and worker commutes more efficient, and power plants produce more energy more cheaply, which, in turn, support power-heavy secondary industries.
• Long-term benefits depend substantially on the kind of infrastructure. Core infrastructure such as roads, utilities and ports have the largest economic effects as they unlock more economic activity than other investment. The productivity impact of the new infrastructure improves the competitiveness of firms, which allows them to expand and increase employment.

Provided that the poor are not priced out of access, expanding basic infrastructure such as roads, ICT, electricity access and water and sanitation can reduce inequality by improving equal access to essential services. [32African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018; C Calderón and L Servén, The effects of infrastructure development on growth and income distribution, Washington, DC: World Bank, 2004.] The impact of freight rail, port and airport developments may be more indirect, reducing inequality through raising employment, for example. However, such investments may also disproportionately benefit wealthy holders of capital, raising inequality and poverty in the short term.

Chart 7 shows the AUDA-NEPAD forecast for job creation through implementing PIDA. The forecast distinguishes between direct, indirect, induced and secondary job years.

• Direct jobs are created in the construction, maintenance and operation of a project.
• Indirect jobs are created through the suppliers of goods and services needed for a project.
• Induced jobs are created by the multiplier effect associated with the spending of income acquired through direct and indirect employment.
• Secondary jobs are created by the improved infrastructure itself (such as new businesses and factories opening in response to cheaper, more reliable electricity, or better road access to an underdeveloped district).

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Infrastructure development can, of course, have short-lived negative effects, particularly for local communities, if implemented without careful consultation and good planning. For example, a freeway could cut through a poor community who still largely walk or cycle everywhere and thus reduce people’s mobility. Infrastructure developments could lead to increased conflict over land as projects increase land value around them or detracts from value. In many poor African countries, large, prestigious projects such as railways and airports have distracted from potentially more helpful but unglamorous projects such as investing in rural roads, water and sanitation infrastructure. [33T Goodfellow, Africa’s big infrastructure projects are often a win for international investors not for Africans, Quartz Africa, 19 March 2020.]

Both the amount and quality of infrastructure are positively correlated with growth in income, although not equally so; the impact depends on the relative development stage of the country and the period over which impact is assessed. [34A Estache and G Garsous, The impact of infrastructure on growth in developing countries, IFC Economics Notes, April 2012.]

A World Bank study showed that in Africa the amount of infrastructure contributed almost nine times as much to per capita income growth as quality. However, this effect is region specific, with the potency of increasing quantity over quality appearing to be particularly strong for sub-Saharan Africa. In contrast, in North Africa, where the infrastructure deficit is smaller, improving the quality of infrastructure, specifically roads, had the greatest potential impact on income. [35C Calderón, Infrastructure and growth in Africa, Washington, DC: World Bank, 2009.]

Although increasing the amount of infrastructure in sub-Saharan Africa remains the most decisive factor in infrastructure development in the region, a commensurate increase in quality would make the impact of infrastructure on economic growth far more potent. [36C Chakamera and P Alagidede, The Nexus between Infrastructure (Quantity and Quality) and Economic Growth in Sub Saharan Africa, International Review of Applied Economics, 32:5, 2018, 641–72.]

The demand for infrastructure in Africa is rising as its population continues to grow and become increasingly more urban, putting immense pressure on existing networks. Africa’s dependence on trade is also large, with a disproportionate reliance on commodity exports. Yet poor logistical infrastructure makes trade expensive or difficult, undercutting Africa’s ability to engage and compete in global markets. Non-tariff barriers such as inaccessibility to markets are a significant hindrance. [37African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.] Better rail, road and port infrastructure would allow Africa to better tap into global markets and maximise growth. [38S Schindler and J Kanai, How mega infrastructure projects in Africa, Asia and Latin America are reshaping development, The Conversation, 31 October 2019.] 

Major infrastructure projects are expensive and often unaffordable for Africa’s many low-income countries. Even upper middle-income and high-income countries can rarely pay for an infrastructure project directly from an annual budget and often face high debt-to-GDP ratios, which make lending for such projects unaffordable and unwise. [39K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020.] The estimated infrastructure financing gap of US$68–108 billion per year for the continent cannot be solved by governments alone. However, a key problem with funding projects via private capital is finding bankable (commercially viable) projects in an environment where perceived risk requires large returns on investment. [40K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020; The Economist, Is an infrastructure boom in the works?, 2 January 2021.]

Analysts estimate that several hundred billion dollars’ worth of financing is available through institutional investors, such as major pension funds, investment corporations and government agencies seeking better returns in the context of historically low interest rates in the developed world. [41See: I Mayaki, Why proper structure of major infrastructure projects in Africa is priority, AUDA-NEPAD, 24 January 2020; The Economist, Is an infrastructure boom in the works?, 2 January 2021; K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020.]

Africa is not short of ambition for infrastructure. There are up to US$2.5 trillion worth of infrastructure projects in the pipeline by 2025, but a large number of these projects are likely to fail: 50% of them are in the feasibility phase, and only 10% of projects at this phase ever make it to financial close. Half of these projects are found in only six African countries, with 17% in Nigeria alone, [42K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020.] suggesting that while some countries are pulling ahead, others are falling behind.

AUDA-NEPAD emphasises the importance of corridor-type infrastructure projects in Africa, which are often multi-country projects (e.g. the Lamu Port and Lamu-Southern Sudan-Ethiopia Transport corridor) that incorporate road, rail and ICT links to facilitate regional integration. Such an approach brings hope of fewer non-tariff barriers to trade, greater economic linkages between African nations and integrated approaches to cross-border issues such as water management. [43I Mayaki and B Markussen, CBN Virtual Breakfast, a panel discussion as part of the ‘6th PIDA Week’ virtual event, 2021.]

PIDA is spearheading this regional integration through its Priority Action Plans (PAP), which is a kind of infrastructure master plan for Africa. Although it regurgitates many previous ambitions, some of which date from colonial times, it has seen some implementation. [44African Union, PIDA Implementation through good governance – Realizing smart infrastructure for Africa’s integration, 26–28 November 2018.] The PIDA-PAP portfolio from 2012 to 2020 included 51 cross-border programmes in transport (235 projects), energy (54 projects), ICT (113 projects) and trans-boundary water resources management (9 projects).

The concept note for a recent (November 2018) PIDA-PAP workshop at Victoria Falls revealed that the capital cost of delivering the plan was estimated at US$68 billion requiring expenditure of US$7.5 billion annually [45Concept note for the Second Ordinary Session of the African Union, Specialized Committee on Transport, Transcontinental and Interregional Infrastructure, Energy and Tourism, Cairo, Egypt, 14–18 April 2019.] — a relatively modest ambition compared with the infrastructure funding gap calculated by the AfDB. Of the more than 400 projects, the conference heard, 26% were moving from concept to pre-feasibility or feasibility phases; 16% were being structured for tendering; and 32% were either under construction or already operational, reflecting steady progress.

A map of PIDA projects across the continent (Chart 8) shows the prioritisation of regional integration in infrastructure development, as corridor projects crisscross the continent, and port and border investments dot the perimeters.

Chart 8: PIDA projects across Africa

Source: Source: Virtual PIDA Information Centre, 2021, www.au-pida.org/pida-projects/

PIDA currently oversees and facilitates 409 projects across the continent, with the following major focuses:

• Transport sector: 237 projects related to airport, sea port, border post, rail and road infrastructure. [46Airports: 13; border post upgrades: 38; bridges: 5; port-related projects: 45; rail lines: 23; road projects: 113.]
• ICT: 114 projects, of which most (71) relate to cross-country and cross-border fibre optic links.
• Energy: 54 projects, including some (but very few) focused on renewable energy generation; [47Although eight of these projects are major hydroelectric dams, PIDA does not oversee any solar, wind or other renewable energy projects.] the rest relate to cross-border power connections and gas or petroleum pipelines.
• Water management: 9 projects, including reservoirs and regional river basin and aquifer management programmes, particularly in the Sahara in North Africa and the Kalahari Desert in the south.

Chart 9 shows the relative contribution to infrastructure finance in Africa from 2012 to 2016. Historically, national governments provided the lion’s share of funds, with donors from the Infrastructure Consortium for Africa and China the next two biggest sources of finance. Private-sector investment contributed little, with only 8.3% of infrastructure commitments in Africa coming from the private sector in this period (in 2016, it was even lower at only 4.2%).

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However, by 2020, private-sector commitments for infrastructure had increased to 12%, with government spending covering 37% of commitments. The rest came from public-sector investors from abroad, including 25% from China alone in 2020.[48I Mayaki, Why proper structure of major infrastructure projects in Africa is priority, AUDA-NEPAD, 24 January 2020.]

Given Africa’s rising debt levels (also see Current Path ), together with China’s declining appetite for additional loans, it is likely that government financing (using taxpayers’ money) for infrastructure will necessarily expand in much of Africa, particularly for projects that have a larger economic than social role.

So-called public–private partnerships (PPP) will likely also become more common in the future, with a country granting concessions to a company using a Build-Operate-Transfer (BOT) model. PPP projects are relatively new in Africa but could allow access to more private-sector finance, based on a ‘user pays’ principle. A port, for example, is funded by charging berthing and storage fees and a road can be funded by charging toll fees (although larger toll roads are currently limited to South Africa, Morocco and Senegal). However, the challenge is to prevent the usage fee from prohibiting access by the poor, and the wisdom of embarking on large projects that have little chance of becoming commercially viable or that require considerable profits to be guaranteed to attract investment has been questioned.

Some projects serve as examples of concerns:

• The Chinese-held loans for the US$3.6 billion Mombasa–Nairobi Standard Gauge Railway (SGR), originally intended to run from Mombasa to Nairobi and then on to Naivasha and Uganda’s capital, Kampala, were granted at commercial rather than concessional rates (in 2014) and secrecy surrounded the associated agreements. The project has put Kenya massively in debt to China and construction was halted at Naivasha, despite repeated pleas for better terms and the continuation of the project. Much of the construction was also undertaken by Chinese contractors.
• The Nairobi Expressway is a six-lane 27 km highway that cuts through the heart of Kenya’s notoriously congested capital city.[49I Einashe, Letter from Africa: How the Nairobi Expressway is changing Kenya’s capital, BBC, 13 February 2021; Also: The future of Chinese-financed infrastructure in Kenya, China in Africa podcast, 17 February 2021.] The expressway connects Jomo Kenyatta International Airport in the east of the city to the Nairobi-Nakuru highway in the west. Although a substantial portion of the work was undertaken by local companies using local labour, some of the associated arrangements have raised eyebrows. The project grants the China Road and Bridge Corporation, which is building and will operate the highway in a 27-year concession, a guaranteed US$988 million in profit by charging toll fees (US$2–US$3 per vehicle), implying that many poor Kenyans will be precluded from usage.

Major obstacles to infrastructure development, not unique to Africa, are the corruption and politics often associated with large projects. [50The Economist, How to get infrastructure right, 2 January 2021.]

In South Africa, the Medupi and Kusile projects [51D Ayemba, Medupi Power Project timeline and what you need to know, 26 August 2021; D Ayemba, Kusile power station project timeline and what you need to know, 14 August 2021.] involved the construction of two 4.8 GW coal-fired, direct dry-cooled power stations. When the contracts were signed in 2007, with a completion date at the end of 2015, the estimated costs for Medupi were R80 billion. By 2018, it had increased threefold and completion was repeatedly delayed. Some of the primary reasons for the cost escalation included a fluctuating rand exchange rate affecting imports of components, substantial redesigns having to be done midway through the project, labour disputes and standing time. A week after Medupi was eventually finished, in August 2021, one of its units exploded, with a repair bill estimated at R1.5 billion required over the next two years.

Construction of the equally large Kusile Power Station started in 2008 and was supposed to have been finished by 2014. The initial budget of around R81 billion had doubled by 2020, with completion now expected in 2024/25.

Both projects have been mired in controversy and corruption, particularly in the manipulation of the associated contracts to provide coal at excessive costs, and have landed the public electricity company, Eskom, with an unsustainable debt burden. In 2001, Eskom was named power company of the year at the Financial Times Global Energy Awards in New York. South Africa had cheap surplus electricity; 15 years later South Africa was experiencing continued intermittent blackouts owing to insufficient electricity supply. In addition to self-enrichment by members of the governing party, the African National Congress, decisions on the procurement of additional electricity supply had been delayed for several years while, in the run-up and during the hosting of the Soccer World Cup in 2010, South Africa literally ran its power stations into the ground in an effort to keep the lights on. It delayed maintenance and without additional generation coming onto the grid, the country was, by 2015, experiencing shortages leading to blackouts every third day of the year, projected to last until 2023.

Even disregarding the seemingly ever present disease of corruption, gearing infrastructure projects to the private sector is no easy task. Project development at the preparatory stages can amount to 5%–12% of the project’s total value and take up to seven years to complete. For large projects (involving millions or billions of dollars), this is a substantial cost, particularly if the result could conclude that the project is not commercially viable. Even when project preparation is done, the quality of the preparation and planning is often low, representing a large and expensive risk for private-sector investors. [52I Mayaki, Why proper structure of major infrastructure projects in Africa is priority, AUDA-NEPAD, 24 January 2020; African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018; K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020; also see: The Economist, Is an infrastructure boom in the works?, 2 January 2021.]

Up to 90% of infrastructure projects in Africa fail at the preparatory stages and before financial close; 80% of projects fail at the feasibility stage, when preliminary studies determine that the project is not financially or practically viable. [53K Lakmeeharan, Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020.]

Closely connected to project preparation are the institutions and legal frameworks that should support these processes. Legal frameworks for PPPs are poorly developed in much of Africa, and major potential institutional investors, such as pension funds, are often barred from investment in the sector owing to the high risk associated with countries that are considered below investment grade. [54African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.]

Financial feasibility can also be undermined by inefficient usage or the inability to collect revenues. Poor delivery infrastructure for utilities such as electricity and water can lead up to 50% of wastage, while illegal connections to these utilities can also contribute to costs without contributing revenue. Furthermore, 70%–90% of bills for utilities go uncollected across Africa, representing a major loss of expected revenues. These inefficiencies can turn potential profit-making enterprises into loss-making assets, scaring off potential funders. [55African Development Bank, African Economic Outlook 2018 – EN Chapter 3, 2018.]

Many of these challenges are reflected in the ambitions for the Grand Inga hydroelectric scheme in the DR Congo. [56This section on the DR Congo is taken from K Yeboua, J Cilliers and S Kwasi, Waking the sleeping giant: Development pathways for the Democratic Republic of the Congo to 2050, Institute for Security Studies, 26 March 2021.] Electricity supply in rural parts of the country is almost non-existent, with an average rate at around 1% compared with 42% in urban areas, with the power supply being unstable and characterised by recurring outages even in urban areas. For example, it is estimated that in Kinshasa about 21% of those who have access to electricity receive less than four hours of power per day, and on average, electricity shortages occur 10 days per month in the country. Owing to this unreliable electricity supply, about 60% of firms in the DR Congo have back-up generators, compared with 43%, on average, in sub-Saharan Africa. These frequent electricity shortages penalise the productive sectors of the economy and hamper productivity and growth.

In addition, the state power utility, Société Nationale d'Électricité (SNEL) is highly inefficient. Almost half of the electricity produced is lost during transmission and distribution owing to equipment being outdated or not maintained. [57There are some mini-grids, albeit very limited. For example, Synoki, Hydroforce and Virunga operate mini-grid hydroelectric projects and their market share of the electricity sector is estimated at 6%. Only 3.66 MW of solar photovoltaics had been installed by the end of 2017.]

Of the country’s 100 GW hydroelectric potential, less than 2.7 GW has been installed, and only 1,100 GW is being exploited. This power is mainly generated by the Inga I and Inga II dams, which operate at around 50% of their capacity owing to lack of maintenance. The World Bank has been leading efforts to rehabilitate turbines at Inga I and II, but the project is not yet complete.

Against this backdrop, the Grand Inga hydroelectric scheme has an expected capacity of 44 GW of electricity and could meet the entire need of the country and export large amounts elsewhere. The project is estimated to cost US$80 billion.

Inga III, which is estimated to cost US$14 billion, will generate 4.8 GW of electricity, and its entry into service was initially scheduled for 2024 or 2025. However, the implementation of the project, which has been on the cards for several decades, was recently again significantly delayed. In 2016, the World Bank suspended its funding because the then president, Joseph Kabila, decided to bring the project oversight committee into his presidency, and it, therefore, lacked transparency. The project is still ongoing, albeit at a very slow pace. The Inga III project is now estimated to come on-stream in 2030 at the earliest, dependent on a partnership with South Africa.

A 2020 study by McKinsey [58K Lakmeeharan. Q Manji, R Nyairo and H Poeltner, Solving Africa’s infrastructure paradox, 6 March 2020; also see: The Economist, Is an infrastructure boom in the works?, 2 January 2021.] proposes a number of solutions to make infrastructure projects less risky, and thus more attractive to private capital. According to the authors, governments, international financial institutions and private investors can all play a part:

• Governments should reduce regulatory, currency and political risk for investors, ensuring their investments will not be easily expropriated or rendered unprofitable by capricious decision making or delays in necessary regulatory approvals. (A tax system that incentivises investment but is also fair to local citizens may be difficult to achieve but is an important objective nevertheless).
• International financial institutions should offer risk-sharing instruments to private investors, such as guarantees.
• Private investors should invest more in early feasibility studies (with the assistance of international financial institutions as necessary).

Perhaps unsurprisingly, the study recommends that governments take on low-return projects, such as basic water and sanitation and transport projects, and set aside high-return projects for the private sector. This is an important caveat, as the primary goal of governments in their infrastructure strategy is to develop the economy and improve citizen well-being. This goal must be balanced by the need to attract private investment in the sector. [59S Schindler and J Kanai, How mega infrastructure projects in Africa, Asia and Latin America are reshaping development, The Conversation, 31 October 2019.]

AUDA-NEPAD is attempting to address some of these concerns by providing greater financing and technical assistance for feasibility studies, implementing the PIDA quality label (for projects that perform well during feasibility assessment) as a measure of bankability for infrastructure projects, and providing risk-sharing arrangements such as the African Infrastructure Guarantee Facility. [60I Mayaki, Why proper structure of major infrastructure projects in Africa is priority, AUDA-NEPAD, 24 January 2020.] However, much work remains to be done, and these facilities require development and fine tuning. A great deal more cooperation between national governments, international financial institutions (and even among the various organs of these institutions) and the private sector will be needed to make financing of major infrastructure projects more efficient. [61I Mayaki and B Markussen, CBN Virtual Breakfast, a panel discussion as part of the ‘6th PIDA Week’ virtual event, 2021.]

Although several of the preceding scenarios in this website include some aspect of infrastructure relevant to the specific focus of intervention in them, the current scenario looks at infrastructure investment more comprehensively.

IFs distinguishes between traditional infrastructure (water, roads, electricity, sanitation and wastewater), ICT infrastructure (mobile phones, fixed broadband and mobile broadband) and a residual called ‘other infrastructure’, which caters for facilities such as ports, airports, railways and the like. Rather than focusing on a specific type of infrastructure (e.g. for water and sanitation or education), the Infrastructure scenario increases investments and allows the algorithms in the forecasting platform to ‘allocate’ the additional spend to forecast the associated impact. [62The allocation is to: paved roads; unpaved roads; electricity generation; rural and urban electricity access; irrigation; safe water for households; improved water access; household sanitation; improved sanitation; wastewater; telephones; mobile; broadband and fixed broadband.] IFs considers both public and private spending on core infrastructure and public spending on other infrastructure, but does not provide for infrastructure that is explicitly funded through PPPs (one could argue that is captured through domestic and foreign direct investment in the economy). It also models and forecasts the construction and maintenance of public and private infrastructure. [63See: Infrastructure.]

The scenario described here uses spending on core and other infrastructure as the key variable. In general, the intervention pushes harder on investments in core infrastructure in lower-income countries than in higher-income countries, with the inverse applying in the case of advanced or ‘other’ infrastructure.

It is important to note the difference in the approach of the Infrastructure scenario, pushing on input (more spending on core and other infrastructure), compared with infrastructure components in other themes, such as in the Health/WaSH  theme, where we push directly on outputs such as levels of safe water, improved sanitation and treated wastewater. [64The Health/WaSH scenario in Theme 3 also included improvements in health outcomes, such as reduced rates of mortality from malaria, AIDS and other communicable and non-communicable diseases and leaves IFs to calculate the associated investment requirements in infrastructure and health.]

The interventions for the Infrastructure scenario are presented in Chart 10. Greater investments in core and ‘other’ infrastructure lead to improvements in physical capital and subsequently improve the contribution of multifactor productivity (MFP) to economic growth. In addition to physical capital, MFP in IFs consists of contributions from human, social and knowledge capital.

Chart 10: Modelling the Infrastructure scenario

Click to enlarge

The Infrastructure scenario models a gradual increase in core and other infrastructure spending (including for construction and maintenance), such that infrastructure spending in Africa increases to 6.8% of GDP in 2033, instead of 5.7% forecast for 2043 on the Current Path. In this scenario, Africa is expected to spend US$89 billion more on infrastructure by 2043 than on its Current Path, a difference of 21% (see Chart 11). Cumulatively, the difference amounts to an additional spend of US$1 024 billion from 2024 to 2043. The largest increase in spending is in Africa’s lower middle-income countries. 

Click for interactive version

The Infrastructure scenario results in total spending on infrastructure in low-income Africa rising by 20% in 2033, 17% in lower middle-income Africa, and 25% in upper middle-income Africa. Investments in advanced infrastructure drop marginally in low-income Africa by 2033, but rise by 32% in lower middle-income Africa, 45% in upper middle-income Africa and 79% in high-income Africa. This follows the logic that lower-income countries should focus on basic infrastructure (even at the expense of more prestigious projects), while higher-income countries should be looking to invest in more advanced infrastructure as their economies become more complex.

The additional cumulative spending per country from 2023 (the first year of the intervention) to 2043 is presented in Chart 12.

Click for interactive version

The Infrastructure scenario makes a significant dent in the World Bank’s estimation of Africa’s infrastructure shortfall. As other scenarios increase rates of economic growth, the impact increases as rates of economic growth accelerate, without which it detracts from other government spending priorities such as education and health, leading to perverse results. This demonstrates the importance of other measures to increase rates of economic growth, such as through more regional trade and through the intensification of agriculture examined in the Combined Agenda 2063 scenario.

The Infrastructure scenario results in substantial improvements in the provision of physical infrastructure across the continent.

Chart 13 revisits the data originally presented in Chart 2 , but includes a column for the impact of the Infrastructure scenario in 2043 for each of the four infrastructure categories.

Click for interactive version

Low-income Africa generally benefits considerably with regard to basic infrastructure. The impact of these interventions, while still potent, drops off proportionally for lower middle-income Africa and then again for upper middle-income Africa, with the exception of electricity generation capacity and paved roads (not shown), where upper middle-income Africa sees improvements proportionally greater than lower middle-income Africa, though still lower than low-income Africa.

The scenario is most potent with respect to improving access to fixed ICT broadband subscriptions, followed by improvements to improved sanitation, improvements to access to improved water infrastructure, and then with respect to electricity access and generation. The aggressive spending on basic infrastructure would in fact see low-income Africa reaching near-universal access to improved water and improved sanitation by 2043.

The Infrastructure scenario leads to an increase of US$399 billion (2.5%) in the continent’s economic size (aggregate GDP at market exchange rates) by 2043 compared with the Current Path forecast for that year. Ethiopia does the best: its 2043 GDP is US$47.5 billion larger than in the Current Path forecast for that year, followed by Nigeria and Angola. Egypt and Uganda also do well.

The scenario further leads to significant improvements in GDP per capita, captured in Chart 14. On average, GDP per capita for Africa increases by US$178 by 2043 compared with the Current Path forecast for that year. The five countries that gain the most from the Infrastructure scenario using GDP per capita are Eswatini (US$610 increase), Angola, Seychelles, Côte d'Ivoire and Zambia (US$398 increase). The five countries that gain the least are the DR Congo (US$64), Chad, Somalia, the Central African Republic (CAR) and Burundi (US$12). The impact demonstrates the potency of core infrastructure investments for low-income Africa on the one hand, and the potency of investments of more advanced infrastructure for high-income Africa on the other.

Click for interactive version

The positive economic impacts of these interventions may, in fact, be underestimated. In pushing this kind of spending, the IFs model takes funding from other priorities, including key sectors such as education and health. As such, the results on GDP and GDP per capita capture the impact not only of increased spending on infrastructure but also of slightly reduced spending on other key priorities. This may explain why some particularly poor countries, such as Burundi and the CAR, show limited improvements: their budgets are so small that there simply is not enough available to push on infrastructure without cutting a significant portion of some other portfolio. If African countries, with the assistance of initiatives such AUDA-NEPAD, can increase this spending without drawing from other portfolios (particularly by mobilising private-sector funding), the economic benefits may be greatly improved. This would also likely lead to better results on poverty.

As a result of the Infrastructure scenario, extreme poverty is almost one percentage point lower in 2043 than in the Current Path forecast — a difference equivalent to more than 20 million people. The DR Congo benefits most, with extreme poverty set to decline by 3.4 million people in 2043 compared with the Current Path forecast for that year. The second largest decline is in Madagascar, followed by Nigeria.

Because of improved basic infrastructure such as for providing clean water and better sanitation, infant mortality in Africa’s low-income countries declines by more than 2.2 deaths per 1 000 live births by 2043 and by 2 in 1 000 in lower middle-income countries. The change in upper middle-income countries, where the focus of our interventions is on advanced infrastructure such as ports, is a modest 0.3. With more children surviving, births start to decline, such that Africa would have 433 000 fewer children born in 2043 than in the Current Path forecast, although more children would ultimately survive and make it to productive adulthood. However, as improved infrastructure modestly increases life expectancy, the impact on total population size is negligible.

Much of Africa’s current infrastructure endowment reflects the patterns first established under colonialism. Low levels of investment and little maintenance mean that major deficits have developed with respect to infrastructure to facilitate human well-being, advanced industrial development and regional integration.

Closing this gap requires more spending on infrastructure, but it must inevitably balance with other priorities such as education and health. The good news is that much of this is happening. Infrastructure investment in Africa has been steadily increasing over the past 15 years, predominantly funded by local governments, although others (China in particular) have an important role. The challenge is to move more projects in the large infrastructure pipeline to financial close. To this end, the international community can play an important role in funding and supporting feasibility studies, providing insurance against risk, reducing the risk premium charged by private banks (based on the negative views through which ratings agencies view the continent) and by assisting African governments in managing and overseeing complex projects. Transforming projects into bankable, sustainable assets requires appropriate procurement and investment reform, including investment in subsidising, and proper capacitation of feasibility studies will be essential to attract this capital.

In some places (particularly the US and Europe), generous fiscal stimulus during the COVID-19 pandemic has unlocked large amounts of capital for additional infrastructure spending, and low interest rates have made borrowing for large projects more affordable than in the past. The shift to remote work by office workers is driving demand for improved ICT infrastructure, while the urgent fight against climate change continues to drive demand for investment in renewable energy. [65The Economist, How to get infrastructure right, 2 January 2021; The Economist, Is an infrastructure boom in the works?, 2 January 2021.]

Mobilising the private sector is clearly part of the solution to Africa’s infrastructure backlog, but government resources will remain essential, particularly for basic infrastructure. Proper prioritisation of projects is key. Although major power plants and highways may indeed be appropriate in many contexts, the resources invested in these high-profile projects are often better spent on the basics. Largely a response to the Belt and Road initiative from China, others such as the European Union have woken up to the challenge and opportunity of infrastructure investment in Africa. The EU-Africa Global Gateway Investment Package offers 150 billion in investment and intends to accelerate a green and digital transition, growth and jobs while strengthening health systems and improving education and training. Financing will be provided by the EU and the EU Member States’ bilateral aid, and both grants and loans. The Investment Package will also attract private funding, targeting investment from both Africa and Europe.[x]

If African governments can properly prioritise projects, and implement the reforms necessary to close the funding gap, infrastructure development across the continent could be transformative. Even a partial closing of the gap, as demonstrated in the scenario presented here, could lead to a significant increase in incomes across the continent. Eventually, the development of proper infrastructure is likely an essential prerequisite for the implementation of other major development programmes, such as those contemplated in our scenarios on industrialisation  and trade  presented elsewhere on this site.