Harihuko Knoda, former President of the Asian Development Bank, said, “Without appropriate infrastructure, countless millions of people will lack access to jobs, markets, hospitals and schools.” Weak infrastructure costs Africa an estimated two per cent of gross domestic product (GDP) annually, while hindering intra-regional trade and foreign direct investment (FDI).
According to global consultancy firm Deloitte a dollar of infrastructure investment can raise GDP by 20 cents over the long term by boosting productivity.
The World Bank also estimated that a one per cent hike in capital stock increases the nation’s GDP by one per cent.
Tackling the infrastructure deficit Growth-enhancing public capital expenditure is Africa’s top priority, as its regional rating on global infrastructure development index lags behind peer developing regions.
But regional investment in four main sectors, transport, energy, water and ITC, in 2016 totalled US$62.5bn – down from US$78.9bn in 2015 (ICA data).
China remains by far the single largest investor in African infrastructure projects – spending US$12bn/year over 2011-16 (ICA data).
(Image source: Infrastructure financing in Africa 2016 The African Development Bank (AfDB) projections underpin the urgency for increased investments to cope with strong demographic trends in the coming decades.
Yet investing in African capital projects can be profitable with an average return on investment (ROI) estimated by Deloitte at 19-22 per cent – exceeding the 8-12 per cent offered in developed markets.
Most countries must look at developing basic infrastructure, and financing it.
To end on a positive note: infrastructure spending in Africa as a percentage of total emerging market capital spending is expected to increase from 2.1 per cent in 2000-15 to 3.4 per cent between 2016 and 2030, according to Deloitte.