Credit: brookings

The infrastructural needs of Africa continue to show. A new report by the African Development Bank provides details on the need for infrastructural investments in the content and its advantages for the global GDP.

The Africa Economic Outlook Report for 2018 contains new estimates by the bank which suggest that the continents infrastructure needs amount to $130–170billion a year, with a financing gap in the range of $68–$108 billion. The figures are far higher than previous estimates of $93billion in annual needs and annual financing gaps of $31billion.

Africa needs infrastructure funding in the areas of power generation, water supply and sanitation, ICT, Road and other transport sectors. Of these, water supply and sanitation needs the most investment, estimated at about $55-$66billion annually. Even though the continent has been struggling to finance its development needs, the report asserts that African countries as part of the global community, are not short of options.

The report points to the instance where global institutional investors such as insurance companies, pension funds, and sovereign wealth funds have a colossus of more than $100 trillion in assets under management globally. That is mountain of resources compare to what Africa needs. A small fraction of the excess global savings and low-yield resources would be enough to plug Africa’s financing gap and finance productive and profitable infrastructure in the developing world.

Meanwhile the recurrent lack of adequate infrastructure in Africa has its own downside. The economic costs of Africa’s insufficient stock and poor quality of infrastructure are just about the potential positive impacts of resolving the problem. An example is the fact that poor quality infrastructure services can increase the input material costs of consumer goods by up to 200 percent in certain African countries.

Africa has an estimated infrastructure gap up to $107.5 billion a year, and urgent needs in health, education, administrative capacity, and security hence the need to attract private capital to accelerate the building of critical infrastructure needed to unleash its potential.

The key is for African countries to accelerate their investments in infrastructure, but in a smarter way. And they need to find new mechanisms and instruments to fund their most urgent needs in addition to infrastructure.

Purposely, the focus on infrastructure affects productivity and output directly as part of GDP formation and as an input to the production function of other sectors like the need to generate employment for 12 million youths annually.

The case for accelerating infrastructure development in Africa is a compelling one, underpinned by the fact that African economies are still relatively small reliant on trade as the main engine of growth for the foreseeable future. The African growth story is just taking shape.