The lack of reliable infrastructure in Africa

11 May 2016

The lack of reliable infrastructure in Africa will be one of the key issues discussed at WEF Africa 2016.

The gap in infrastructure has also been consistently raised as one of the leading impediments to doing business in Africa.  A 2009 study by the World Bank indicated that in excess of US$90 billion was required annually in sub-Saharan Africa alone to address the lack of infrastructure. The World Bank further estimates that the infrastructure deficit in Africa has negative impact of 40% on productivity and that economic growth would improve by over 2% should the required infrastructure be in place.

Despite the lack of infrastructure, foreign direct investment (FDI) into Africa and growth rates on the continent remained strong following the global economic crisis during 2009. The growth rates and FDI were supported to a large extent by investment in the oil & gas and resources sectors on the back of strong commodity prices. The high commodity prices and attractiveness of the mineral resources in Africa compensated investors for the additional costs related to operating in challenging business environments and the requirement to develop infrastructure as part of new projects.

The growth rates and FDI were supported to a large extent by investment in the oil & gas and resources sectors on the back of strong commodity prices.

Following the recent declines in commodity prices and the unlikely recovery of such prices over the medium-term, potential projects in Africa and the rest of the world have become uneconomical. In order for Africa to continue attracting a larger portion of global FDI, the continent is required to address challenges which increase the cost of doing business, including addressing the infrastructure gap.