Africa’s infrastructure: closing the 'efficiency gap'

African countries lag behind their developing country counterparts on infrastructure, and the gaps are only widening over time. One of today’s keynote panels took a deep look at ways to close that gap.

Instead of defaulting to a call for more money, panelists talked about what’s impeding effective use of funds, both public and private, that are made available for infrastructure development on the continent.

To put the conversation into context, here are a few key stats:

• Africa needs $93 billion a year to catch up with its huge infrastructure backlog over the next decade—an amount that represents more than 35 percent of GDP for fragile states.
• Current spending on African infrastructure is higher than previously thought, at $45 billion.
• An estimated cost savings of $17 billion—the so-called “efficiency gap”—could be achieved if existing resources were used more efficiently.

 
The panel, moderated by Saugato Datta with The Economist, was a Who’s Who of senior policy makers from across Africa and their development partners. Anchoring the stage was World Bank Vice President for Africa, Obiageli Ezekwesili, joined by public and private sector officials from Senegal, Ethiopia, South Africa, and Kenya, as well as the global anti-corruption group Transparency International (TI).

Kicking off the discussion, Bank VP Ezekwesili said that even after taking the potential for efficiency gains into account, a substantial infrastructure funding gap of $31 billion a year remains.

“Closing this gap will undoubtedly entail significant efforts to increase funding from all sources, though this will be challenging in today’s global financial environment,” she said. “But without reforms, it will be difficult to raise new resources until reforms are underway to eliminate inefficiencies in the existing system.”

Power, many participants agreed, is the region’s most important development challenge. Ibrahima Diong, Adviser to the President of Senegal, said: “Without it, we cannot be industrialized. The lack of electricity is in fact reducing growth in Africa.”

South African Director-General of the National Treasury, Lesetja Kganyago, said that for African countries, the lack of infrastructure is inhibiting the region’s ability to trade, and noted that the inefficiencies in the power sector also stem from the sector’s fragmented production, distribution, and transmission networks. (South African Minister of Finance, Pravin Gordhan, was originally scheduled to speak.)

The issues of corruption, role of the private and public sectors, and political risk mitigation were common themes of the talk. Subsidizing infrastructure while “pricing right”—that is, making the investment sustainable for the private sector while affordable for people—was another recurring theme.

“The gaps that need to be funded are quite enormous,” said Christiaan Poortman, a former World Bank Director and current Director of Global Programs at TI. “But the demand side needs to be looked at, as well as efficiency.”

“Corruption, as you know, is a global phenomenon,” he said, pointing to the need for regulatory and licensing oversight, including built-in monitoring and evaluation of infrastructure projects.

Wrapping up, Bank VP Ezekwesili said: “Inefficiencies are not the full picture. We know we need to do much more to get the private sector to show up.”

“In whatever way we can limit inefficiencies that stem from corruption, the better we can tackle poverty,” concluded Ezekwesili.