HomeInfrastructureWhite paper focuses on African infrastructure deficit, opportunities

White paper focuses on African infrastructure deficit, opportunities

South AfricaTrafigura, the multinational commodity trading company, launched “Foundations for Growth: Infrastructure Investment in Emerging Markets”, the latest in its series of white papers at the Gordon Institute of Business Science, last week.

The white paper, written by independent economists Llewellyn Consulting, looks at how investment in infrastructure is of vital importance for the global economy, and in particular for developing nations.

The report finds that, globally, infrastructure outlays equivalent to some 3.5 % of global gross domestic product (GDP) per year are required to 2030. This deficit extends to all the major infrastructure categories – energy, water and sanitation, telecommunications, and transport – and it is in the most under-developed areas of the world, many of which are in Africa, that the greatest transformation is required.

African infrastructure need

“In Africa, where existing infrastructure networks are particularly sparse and underdeveloped, the deficit exceeds $90-billion per year over the coming decade, or a 15% of the region’s GDP per year. In some of the more fragile states, the infrastructure gap amounts to an even more startling 25% of GDP per year,” said the report’s co-author Llewellyn Consulting partner Russell Jones.

The infrastructure needs of the emerging markets, with Africa being a particular focus, represent an absolute requirement for developing countries’ future competitiveness – a key consideration of the paper.

There is unanimous agreement that cost-effective and efficiently-executed and managed infrastructure investment is unambiguously a ‘good thing’; and that there is today a chronic shortage of it, especially in the case of the world’s poorer countries, and in particular those in Africa.

White paper considerations

The paper’s striking points and considerations for Africa centre on negotiating the tensions between construction and operation; job creation and infrastructure investment; whether to implement major, prestige, or arguably more high impact minor projects; new infrastructure versus maintaining existing assets; and public versus private funding.

“Nearly 70% of the population in developing countries has no access to electricity; road links – particularly paved road links – are minimal, especially in rural areas; and nearly 800 million people are without access to an adequate, safe water source. The sanitation situation is even worse, with 2.5 billion people lacking access to adequate facilities,” Jones argues.

Many African countries have also systematically under-invested in repair and maintenance in recent decades, leading to poorly-performing, inadequate infrastructure assets.

According to the African Development Bank, the low quality of infrastructure constrains economic growth by around two percentage points every year, and has reduced business productivity by as much as 40%.

“Africa is a continent of difficult topography, landlocked countries, low population density, small-scale and dispersed production, unevenly distributed natural resources, small economies, marginal competitiveness and numerous institutional shortcomings. But therein is the opportunity. A combination of innovation in financing and collaboration is key to solving the African infrastructure deficit,” Jones added.

Practical solutions

The final section of the study suggests some practical solutions, one in particular: if the developing world’s cavernous infrastructure gap is to be ‘bridged’, then the public and private sectors and international institutions will necessarily have to come together to pool their financial resources, experience, and expertise, in a mutually reinforcing manner.

“It is wise to tap into the knowledge of a multinational corporate sector that has long demonstrated capability in resource development and exportation,” says Jones.

“Infrastructure alone is no panacea for sustained economic development, but without decent and well-maintained infrastructure, development may prove impossible. There is something for all the potential stakeholders in infrastructure. But the real benefits will be reaped by future generations.”

Trafigura itself established competence in trading and transportation of commodities, evidenced in its work in Africa, and is also aware of global citizenship responsibilities that go some way beyond those owed to its immediate shareholders. It stands to be at the leading edge of the future expansion of global infrastructure which supports trade.

Trafigura Metals and Minerals Trading head Simon Collins says the company is positive about opportunities in infrastructure in Africa, as a route to unlocking trade barriers and improving the lives of communities.

“Our core business is trading vital commodities – oil products, metals and minerals – but increasingly we invest in infrastructure given its centrality to delivering the logistical and trading services we provide.

“Essentially we build and develop new logistics and infrastructure where required to ensure that supply meets demand, connecting new producers to global markets and ensuring reliable supply to meet the world’s increasing demand for energy and industrial raw materials,” Collins says.

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Chantelle Kotze
Chantelle Kotze is a Johannesburg-based media professional. She is a contributor at Mining Review Africa (Clarion Events - Africa) and has created content for the media brand over the past 6 years.