Resetting Africa Includes Bridging the Infrastructural gaps – by Absa
For instance, infrastructural development is a strong factor in determining the categorization of countries as developed, developing, or underdeveloped. The United States, Germany, France, the United Kingdom, Japan amongst others, have done quite well in achieving an appreciable standard of infrastructure development which account currently for their favourable global positions.
As democracy in Africa strengthens, the infrastructure development level on the continent is also gaining traction, which is positive in terms of aligning the productivity rate across the continent with the standards obtained in the developed parts of the world.
The COVID-19 pandemic, however, halted the inspiring pivot to infrastructure development on the African continent. Funds previously voted for infrastructure projects were hurriedly redeployed to cater to pending national needs to avert deep public health and humanitarian crisis.
The brief, unplanned fiscal interruption left huge gaps in the socioeconomic growth agenda of the major economies in Africa. The thriving youth demography is hailed as the ‘sweetener’ in the continent’s attractive market proposition. Foreign direct investment appeal had their dreams of increased access to efficient IT infrastructure, lasting electricity supply, faster transport system and supportive municipals placed on hold as the governments hurried to feed an inactive population, source for vaccines to maintain a robust active segment amid a historic decline in the revenues derived from the commodity markets which provide a larger chunk of the funds that power the economy.
Infrastructure development is a key driver of progress in a nation’s pursuit of outright economic prosperity vis-a-vis quality existence for its citizenries. This is because Infrastructure development enables wider productivity which engenders sustainable economic growth.
The African Development Bank (AfDB) captured the sagging infrastructure development landscape occasioned by the pandemic. It reported recently: “Constraining factors arising from the Covid-19 pandemic that may curb infrastructure development going forward include: heightened investor risk aversion, which has spurred unprecedented capital outflows from the region; significantly increased government debt burdens due to the need to focus on the health crisis and to instigate policies to mitigate short-term economic damage to the economy; weaker external demand particularly for oil, which is the backbone of economies such as Nigeria; as well as a dramatic fall in global and inter-regional travel and tourism receipts”.
Navigating the disruptive effects of the health crisis on the African infrastructure development agenda is key to rejuvenating the economy in the long run.
Infrastructure development is key to all levels of social and economic transformation. Think about the impact of Silicon Valley and the strategic investment drilled into such a focused environment to generate valuable service and product, innovation inputs that keep channeling revenue back to America from every continent awash by the seven seas. Think about the stimulating influence of London, the strength of Beijing, the impactful links across Stockholm, and many other cities strategically developed to support the productivity level of their citizens. Africa will have to strategically revive or scale its pre-COVID-19 infrastructure development spending to put the continent on the path to achieve any meaningful growth within the next two decades.
The Nigeria government’s Infrastructure Fund which focuses on strategically unlocking private participation in executing development projects that have a wider impact on the national economy, is a suitable example of how the continent should approach infrastructure development programmes in this era.
In July 2021 the Federal Government of Nigeria picked four asset managers to oversee a $37 billion Infrastructure Fund aimed at driving development in road networks, railways, and power projects in the nation. The scaled interest in investment in infrastructure development in Africa’s largest economy is not unattached to the realisation of the grim position of the country’s and the continent’s infrastructure chain.
That grim infrastructure development position was explored by Ibrahim Mayaki, who wrote a piece for the United Nations. Ibrahim revealed the sordid infrastructure gaps across Africa. He explained that “Only 38% of the African population has access to electricity, the penetration rate for internet is less than 10% while only a quarter of Africa Road network is paved.”
His piece opined that poor road, rail, and port facilities add 30% to 40% to the costs of goods traded among African countries, thus adversely affecting the private sector development and the flow of foreign direct investment (FDI). The poor state of infrastructure development in Africa sets the continent back by 2% every year and occasion a sharp decline in business productivity by at least 40%.
Going forward, while the African governments’ fiscal capacity is still below its pre-COVID-19 level, developing an effective public-private infrastructure development framework that will encourage wider investment participation in bridging the infrastructure gaps on the continent is necessary to effectively smoothen the growth trajectory on the continent.
Absa, a leading financial services provider on the African continent, believes that private participation in Africa infrastructure development, as being modelled by the Nigerian government through the recently launched Infrastructure Fund, will offset the impact of the worsening government fiscal position while catalyzing the continent’s economy.
Sadiq Abu, CEO Nigeria at Absa said, “The Nigerian government proposed infrastructure fund has set the tone for the adoption of a partnership framework that is suitable for revamping the continent’s ailing infrastructure.
“Nodoubt, encouraging private sector participation in infrastructure development will provide the robust funding necessary to renew and revive hailing state assets while rejuvenating maintenance culture which has been lacking across the major economies on the continent. As well, infrastructure spending will reboot the economy leading to faster recovery from the COVID-19 disruptions”, he added.
He explained further that Absa is committed to supporting African governments’ pursuit of public-private investment (PPI) and Public-Private Partnership (PPP) efforts to build back stronger and help the continent take advantage of its attractive market position, the strong youth population, and their inspiring entrepreneurial drive.