African Infrastructure Shortages Responsible for Lack of Growth

As Africa continues to develop, one of the main challenges it still faces, is its shortage of completed infrastructure projects. In many cases public funding alone cannot provide the resources needed to develop African countries’ infrastructure. Public budgets are spread too thin due to the need to develop other aspects of these countries as well as build roads and bridges. According to a 2010 report issued by the World Bank, the continent’s inadequate transportation, power, and communication systems are causing sub-Saharan African economic growth to decrease by two percentage points each year. In addition to the growth decrease, poor infrastructure can decrease business productivity by 40 percent annually. Elizabeth Uwaifo, the Director of Africa Agribusiness Knowledge Centers and a Partner at international business law firm Fasken Martineau, is calling for the use of Public Private Partnerships (PPP) to bridge the funding gaps in sub-Saharan Africa and improve the continent’s physical infrastructure.

According to the 2009 World Bank Africa Infrastructure Country Diagnostic, the infrastructure needs of sub-Saharan Africa will exceed $93 billion US annually over the next 10 years. The African Development Bank has stated that less than half of this amount is being provided. African development institutions and governments are beginning to realize that funding infrastructure projects can have far-reaching positive economic effects. However, government officials acknowledge that public sources cannot provide the necessary funds for these projects. Completing infrastructure projects on a small budget does not allow countries to complete projects at the speed or scale that is required to achieve economic growth. Sub-Saharan Africa is currently looking into various initiatives that are designed to increase private sector investors in infrastructure.

Elizabeth Uwaifo would like Africa to study the UK and Canada, for examples of how Public Private Partnerships can be used to benefit everyone involved in Africa.  Uwaifo believes that PPPs will work well for Africa due to the amount of projects needed, that are socially desirable, but not financially viable for private investment. In these cases, public funds would be used to offset some of the project costs, that in turn would allow private companies to lower their risk and increase profits.  Uwaifo warns that the framework for PPP in each country should provide value for money for the public sector. 

The Canadian PPP model has been deemed one of the more successful of the PPP frameworks in the world.  Unlike European countries, Canada uses a negotiated PPP path that allows public entities to give a design to potential bidders and ask for a price estimate for the project. Many European countries allow for a competitive dialogue procedure that allows the public entity to discuss various aspects of the project with private companies before requesting bids. This process can be beneficial on large, complicated projects but can also waste time and money for smaller projects. Canada has adopted a PPP first attitude towards infrastructure projects that has seen the number of PPP projects rise over the last six years. One of the major challenges, though, of implementing PPP models in sub-Saharan Africa is the amount of countries in the region. The 48 countries of sub-Saharan Africa each have their own laws and regulatory systems that would make completing international projects difficult.

It is currently estimated that African Infrastructure is worth $200 billion US in annual revenue to private companies. Recent power projects in the region have earned investors returns of up to 25 percent. Uwaifo would like African countries to develop policies that will increase private infrastructure investments.  She notes that, “There is no "one size fits all” solution, and the road map to sustainable infrastructure development must be unique for each African country.”