Road interchange in Ghana

Unlocking Africa’s Potential: The Imperative of Infrastructure Investment

September 27, 2023

As the rest of the world experiences a sharp decline in young workers, Africa will be the only continent experiencing population growth and by 2040 will account for 98 percent of the net labor-force growth in the world. A critical avenue for fostering economic prosperity and unleashing Africa’s market potential lies in substantial investments in infrastructure.

Closing the infrastructure deficit on the continent can help create resilient supply chains that facilitate intra-African trade, bridge the divide in quality of life between rural and urban areas and harness the power of a young workforce to create more value on the continent. Investments in infrastructure can help achieve these development objectives, strengthen production capabilities and expand exports—all pivotal in maximizing Africa’s future success. Establishing public-private partnerships will be vital in closing the deficit. While private investors can provide needed capital, governments must undergo structural and institutional reforms to foster a stable business environment, safeguard investments and promote both inter-continental and international trade to maximize private investment.

Infrastructure Development

The African Development Bank states that infrastructure developments already account for over half of the economic development on the continent. Currently, there are major discrepancies in quality of life between rural and urban areas. Connecting these regions through infrastructure investment will help facilitate an exchange of goods, services and knowledge that integrates rural areas on the continent with the rest of the world. A more interconnected Africa can significantly improve the quality of life in rural regions and stimulate economic activity on the continent. Investments will not only promote intra-African trade but help attract additional foreign direct investment. Private partners can play a significant role in infrastructure investments by suppling the capital to connect communities, thereby boosting intra-African trade and circulating goods and services within the continent-wide economy.

The African Development Bank Group (AfDB), a multilateral development bank, works with private international sponsors to invest in infrastructure in Africa. Since 2016, the AfDB has invested over $44 billion in infrastructure including roads, airports and seaports to promote regional trade. The AfDB and partners invested one billion dollars on a road that connections Addis, Ethiopia to Nairobi, Kenya. According to AfDB, the highway expands Ethiopian exports by 20 percent to Kenya and increases trade between the nations by 400 percent. Other investments include the Nacala Corridor, which connects Mozambique to Malawi and Zambia, reducing the cost of trade by up to 20 percent. Infrastructure not only expands markets and reduces the cost of trade, but also allows for more efficient movement of goods. For example, the Kazungula Bridge cut the transit time between Botswana to Zambia over the Zambezi River from 14 days to one hour.

Any improvements in infrastructure will be void if structural and institutional reforms are not enacted. Currently, the laws that govern the movement of people and goods are too restrictive and vary across countries, inhibiting intra-continental trade. For infrastructure investments to genuinely facilitate intra-African and international trade, nations across the continent need to streamline customs and reduce trade barriers to simplify the import and export processes. Investors can contribute by responding to local communities’ needs to expand production and export capabilities to unlock economic potential, rather than perpetuating a cycle of dependence on foreign aid.

Effective trade policies require strong institutions for enforcement. Investors should collaborate with governments to strengthen institutions and support local economies by supporting the development of road, rail, digital and energy infrastructure. New policies will help address traditional structural barriers to trade and open local economies up to the global market.

Moving Forward

To sustain future global growth, the international community must focus on promoting special economic zones, education, infrastructure and international competitiveness. A holistic approach to infrastructure development is critical to tap into Africa’s market potential. While Africa remains an underutilized market, adopting more sustainable trade policies ensures economic prosperity and unleashes market potential.

Investing in resilient infrastructure not only facilitates intra-African trade, but also has the potential to connect Africa to the rest of the world and establish it as a major economic and trading hub. As the world begins to turn towards Africa for more resources and talent, Africa needs to invest in quality infrastructure to open value-added production capabilities to meet the capacity of a growing young workforce in rural and urban areas. Investments in infrastructure will not only connect the continent to the rest of the world, but expand the African market, shorten the trade time frame and spur economic growth.

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