Africa’s Infrastructure: An Agenda for Transformative Actionpercent in 2010. Because the main driver of Africa’s growth is the global economy, the continued recovery in advanced

Background Paper for UN MDG Summit Side Event, September 21, 2010

Africa’s Infrastructure:

An Agenda

for Transformative Action

In this paper the symbol $ indicates the U.S. dollar.

The word ―tonne‖ denotes a metric ton (1,000 kilograms).

Executive summary

Addressing Africa’s infrastructure deficit is

critical for achieving the Millennium

Development Goals (MDGs) and creating the

economic stimulus needed for longer-term

growth. Africa’s infrastructure lags that of the

rest of the developing world. The gap has

been widening over time and holding back

economic growth by as much as 2 percentage

points each year. Infrastructure services in

Africa are twice as expensive as elsewhere and

cut business productivity by 40 percent.

The economic and political landscape is

favorable for addressing the infrastructure

deficit. Africa has experienced a decade of

sustained growth and political stability. The

continent has withstood the global economic

crisis far better than expected and is now

poised for recovery. There is strong political

support in Africa to prioritize the infrastructure

agenda, as shown through the G20 process

and recent summits of African heads of state

organized by the African Union. Regional

integration—through infrastructure—has been

a dominant theme of recent political

statements.

Africa’s physical infrastructure needs are great.

Some 30 Sub-Saharan countries face a crisis in

power supply. The region needs to double

installed capacity within a decade to keep

pace with demand. In a region with limited

participation in global trade, road freight

moves no faster than a horse-drawn cart, while

major ports are choked for lack of capacity. In

a region facing low agricultural productivity,

food insecurity, and vulnerability to climate

change, less than 5 percent of agricultural land

is irrigated, and only one in three rural

dwellers has access to an all-season road.

Neither is Africa on track to meet the MDGs

for water and sanitation. Addressing all of

these needs would take sustained spending of

$93 billion annually over a decade.

Finance for African infrastructure, though

buoyant in recent years, remains inadequate.

Investment from all sources—government

budgets, external donors, and the private

sector—doubled from $17 billion in 2001 to

$35 billion in 2009. Nonetheless, it continues

to fall woefully short of the levels needed to

cure the continent’s infrastructure deficit within

any reasonable time frame. Much of the

annual funding gap of $31 billion is associated

with the power sector. While there are

significant prospects of increasing private

finance in some areas, notably

Africa’s Infrastructure: An Agenda for Transformative Action

2

telecommunications, a substantial share of

investment needs are in sectors (water supply,

power transmission, rural roads) or countries

(fragile states) that are unlikely candidates for

private finance.

Policy reforms are needed to leverage the

effects of increased finance. Some $17 billion

of resources that are lost each year to

inefficiency could be recaptured by policy

measures aimed at raising operational

performance, increasing cost recovery, and

improving budgetary processes. Such policy

reforms need to go hand in hand with efforts

to step up finance to ensure that new

resources are effectively used and to create

the environment to attract further funding.

Regional infrastructure is of strategic

significance to Africa. Numerous missing links

in the continent’s infrastructure backbones

prevent Africa from harnessing scale

economies, stymie development of landlocked

countries, and prevent optimal use of common

hydrological resources. Completing these

critical regional networks would take about $7

billion annually—less than 10 percent of total

requirements. However, the multinational

nature of these projects complicates the

funding picture. Substantial regulatory and

administrative harmonization is needed to

ensure that regional networks will function

seamlessly once they are in place.

Business as usual is no longer acceptable.

There is now a real opportunity to transform

the delivery of infrastructure in Africa,

unleashing the growth potential of the

continent and accelerating the achievement of

the MDGs. However, it will take a lot more

than business as usual to get there. Efforts by

all parties will need to be stepped up. It is

therefore proposed that:

All financiers should sustain and scale up

funding for Africa’s infrastructure. The

significant recent increase in funding

continues to fall far short of what the

continent requires.

African stakeholders should increase the

pace of economic and institutional reforms

required to realize the efficiency gains

needed to make domestic resources go

farther and to create a more favorable

environment for private investment.

G20 governments, the private sector, and

development partners should support

African stakeholders as they make the

changes necessary to close the

infrastructure gap, with special emphasis

on cross-border projects; key policy

reforms; and institutional changes required


3

to leverage resources for infrastructure,

project preparation, and risk mitigation.

The African Union should convene an

Africa Infrastructure Investment Forum on

the continent in 2011. The participants

should include the G20 governments, the

private sector, and other financiers

promoting priority projects and

investments to help close the

infrastructure gap in Africa.

Why infrastructure? Why now?

“Addressing Africa’s infrastructure deficit is critical to achieving the Millennium Development

Goals (MDGs) while providing the economic stimulus needed to sustain growth over the long

term.”

Infrastructure is a prerequisite for achieving

many of the MDGs, even if it is not explicitly

present as a goal (with the notable exception

of MDG 7 on access to water and sanitation

access. In particular, infrastructure is an

important ingredient in the economic growth

that is needed to reduce poverty. Furthermore,

infrastructure contributes to human

development by improving household welfare

and enhancing the effectiveness and

accessibility of health and education services.

Africa’s infrastructure lags behind that of the

rest of the developing world, and the lag has

been growing. The comparison with South

Asia—a region with a similar per capita

income—is particularly striking. In 1970, Sub-

Saharan Africa had almost three times the

electrical generating capacity of South Asia on

a per capita basis. By 2000, South Asia had left

Africa far behind—it now has almost twice the

per capita generating capacity. Similarly, in

1970 Africa had twice the mainline telephone

density of South Asia, but by 2000 South Asia

had drawn even. With respect to road density

and piped water coverage, Africa is even

further behind South Asia than it was a few

decades ago.

Infrastructure services are several times more

expensive in Africa than elsewhere in the

developing world, making them unaffordable

for large segments of the population and

holding back the competitiveness of

production.

The cost of moving road freight on the

continent is $0.05 to $0.13 per tonne-

kilometer in Africa, compared with $0.01 to

$0.04 per tonne-kilometer elsewhere in the

developing world.

The average price of power is $0.14 per

kilowatt-hour in Africa compared with

$0.05 to $0.10 elsewhere in the developing

world.

The median price of a monthly basket of

mobile telephony is $12 in Africa,

compared with $8 elsewhere in the

developing world.


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Africa’s inadequate and expensive

infrastructure is taking its toll on growth and

slowing poverty reduction. Redressing the

region’s infrastructure deficit would yield an

annual growth dividend estimated at 2.2

percentage points of GDP per capita. The ICT

revolution of the last decade—responsible for

boosting per capita growth by a full

percentage point—has already demonstrated

what is possible. But deficiencies in other areas

of infrastructure—notably power—continue to

hold growth back.

Africa’s infrastructure deficit also checks

competitiveness and thus limits employment.

Particularly in the lower-income countries,

infrastructure is a major constraint to doing

business, depressing firm productivity by

about 40 percent. In many countries, the

negative effect of deficient infrastructure is at

least as large as that of crime, red tape,

corruption, and lack of finance.

Deficient infrastructure takes an important toll

on household welfare. Africa is not on track to

meet the MDG targets for water and

sanitation. Expansion of other critical

household services has been similarly slow.

Only one in four African households has

access to electricity, and if present trends

continue universal access will not be achieved

for more than half a century.

The infrastructure situation in North Africa is

substantially better than in Sub-Saharan Africa

across a wide range of indicators. Typically,

infrastructure indicators in North Africa are

several times higher than those found in Sub-

Saharan Africa (table 1). Even where Sub-

Saharan Africa appears not far behind,

appearances can be deceiving. In the case of

transport, road density in the two regions

looks similar, but only a quarter of Sub-

Saharan roads are paved, compared with

about half of those in North Africa.

Table 1. Basic infrastructure indicators for Sub-Saharan Africa and North Africa

Sub-Saharan Africa North Africa

Electricity access (% population) 26 96

Generation capacity (MW per million population) 90 350

Fixed telephone lines (per 100 population) 2 12

Mobile telephone subscribers (per 100 population) 33 71

Internet users (per 100 population) 7 20

Improved water (% population) 60 92

Improved sanitation (% population) 31 89


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Source: Electricity access and generation capacity data are from International Energy Agency, 2006. Telephone and internet

data are from World Development Indicators, 2008. Water and sanitation data are from WHO-UNICEF Joint Monitoring

Program, 2008.

A favorable regional context for infrastructure development

“Business as usual is no longer an option.”

Africa’s macroeconomic performance during

the last decade was strong. With an average

growth of 5.6 percent a year between 2001

and 2008, Africa was among the world’s

fastest-growing regions. More macroeconomic

and structural reforms, less conflict, an

improved political climate, high commodity

prices, and foreign investors’ search for high-

yield markets contributed to generate the

continent’s highest growth in decades. The

buoyant growth was accompanied by large

inflows of foreign direct investment (FDI), a

growing share of which came from emerging

Asia (China and India). All in all, FDI stocks

more than tripled between 2001 and 2008.

While the commodity boom played a role,

domestic policy factors such as improved

macroeconomic management, structural

reforms, and improvements in the business

climate underpinned the impressive growth.

The continent has weathered the global

economic crisis better than expected. Even

though Africa was hit hard by the global

crisis—with growth slowing sharply in 2009 (to

2.5 percent)—the continent avoided recession.

Countries with built-up reserves implemented

stimulus packages, with most measures aimed

at easing supply-side bottlenecks (through, for

example, increased infrastructure). In several

countries (in East Africa, for example), these

steps were accompanied by improvements to

the business climate to boost investor

confidence and strengthen the potential for

growth. Moreover, African policymakers have

so far resisted the protectionist tendencies

that often accompany a crisis of this

magnitude. Some countries with limited fiscal

space, such as Ghana, have taken steps to

lower their fiscal deficit. In summary, most

African countries have maintained a prudent

macroeconomic stance during the crisis,

steered clear of protectionist measures, and in

some cases accelerated reforms to create a

favorable investment climate.

Growth is already recovering. The African

Development Bank forecasts real GDP growth

of 4.5 percent in 2010 and 5.2 percent in 2011,

in line with the global recovery. These rates


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are below the precrisis ones, but the recovery

is broad-based, with more than 15 countries

projected to grow at rates of more than 5

percent in 2010. Because the main driver of

Africa’s growth is the global economy, the

continued recovery in advanced economies is

a precondition for Africa’s revival. Africa’s

closer trade and investment links with China

and India should speed its recovery. Even so,

with fiscal pressures in the advanced

economies and the attendant uncertainty

surrounding official aid, African countries need

to further strengthen their business and

economic climates to attract stable flows of

FDI and portfolio investment over the medium

term.

The evolving political landscape provides new

opportunities to transform the way Africa does

business. The emergence of the G20—with its

focus on infrastructure investment and

measures to encourage private investment,

trade, and growth—reinforces African

ambitions to close the infrastructure deficit

and achieve the MDGs. The international

community has come a long way since the

creation of the New Partnership for Africa’s

Development (NEPAD) in 2001 and the 2005

Gleneagles Summit on scaling up financing

commitments for African infrastructure.

Subsequent summits of African heads of state;

joint statements by the African Development

Bank (AfDB), World Bank, and the European

Union; and events such as the Joining Up

Africa Conference in March 2010 have cast a

spotlight on the roles of regional integration

and infrastructure in protecting and promoting

growth and in achieving the MDGs in Africa by

the target date of 2015.

Actions to close the infrastructure deficit in

Africa must be complementary and add value

to existing processes and structures. The

African Union, with the support of the African

Development Bank, is working to reform

institutional coordination of Infrastructure in

Africa, to provide robust mechanisms for the

formulation of regional and continental

infrastructure strategy, and to improve

financing prospects through the Programme

for Infrastructure Development in Africa (PIDA).

The summit of the AU heads of states in

Kampala in July 2010 ended with a

commitment to provide high-level political

leadership to champion infrastructure

development, with a particular focus on cross-

border projects. The Infrastructure Consortium

for Africa (ICA) is also scaling up its efforts to

enhance collaboration and mobilize resources

to close the infrastructure gap in Africa, with

particular focus also on regional infrastructure.

Future work should avoid duplication and


8

focus on areas where African stakeholders,


development financing institutions can add

value to transform infrastructure delivery in

support of the MDGs.

Infrastructure gaps, by the numbers

The overall picture

“Africa’s needs for physical infrastructure are immense.”

The extent of Africa’s infrastructure gaps is

readily apparent when one compares existing

asset stocks with those that would be needed

to meet economic and social demands for

infrastructure on the continent. An overview of

the gaps revealed by such a comparison is

provided below (table 2).

Table 2. Overview of illustrative 10-year targets to close Africa’s infrastructure gaps

10-year target Required infrastructure

ICT Provide universal access to GSM and WIMAX signals

Reduce costs of internet access

Extend service to areas that are not commercially

viable

Add 13,000 kilometers of fiber optic network

Irrigation Safeguard food security in the face of climate change Add 6 million new hectares of irrigation

Power Restore balance of supply and demand

Reduce cost of power through regional trade

Increase electrification by 1 percentage point annually

Add 70 GW of power generation capacity

Add 64 GW of cross-border transmission

Electrify the homes of 300 million people

Ports Address critical capacity constraints Add berth and terminal capacity at 10 ports

Railways Rehabilitate critical sections of the rail network Refurbish 9,000 kilometers of rails

Roads Achieve regional and national connectivity

Provide market access for 80% of agricultural land

Improve mobility in urban areas

Improve, upgrade and maintain

100,000 kilometers of regional roads,

140,000 kilometers of national roads,

360,000 kilometers of rural roads

Improve public transport systems in major cities

WSS Meet MDG for water and sanitation Provide safe water to 308 million people

Provide safe sanitation to 409 million people

Source: Adapted from Foster and Briceño-Garmendia, 2009.

Power. With more than 30 countries facing

chronic power shortages, Africa is unable to

meet existing demand for power. That demand

is projected to increase at around 6 percent

annually over the next decade, as economies

grow and electrification expands. In order to

meet anticipated demand, an additional 70 to

80 gigawatts of power generation capacity will

be needed, more than double today’s meager

base of around 50 gigawatts. That means

bringing some 7 gigawatts of new generation

capacity on-stream each year—about seven

times the rate that was achieved during the

last decade. To produce this power cost-

effectively, about half of the required new

generation capacity (30 to 40 gigawatts) will

have to take the form of hydropower schemes,

with the remainder coming from a

combination of coal- and gas-fired generation.

In addition, simply to keep electrification rates

increasing by one percentage point annually

will require some 6 million new household

connections to be made each year, reaching

some 30 million people.

Roads. To achieve adequate regional

connectivity between capital cities, land

frontiers, and deep sea ports, a road network

of 100,000 kilometers is needed. A further

140,000 kilometers of road network are

needed to achieve national connectivity within

countries, providing adequate links between

capital cities and provincial centers. As of

today, only about 60 percent of these main

regional and national roads are in good or fair

condition. Some 360,000 kilometers of rural

roads are needed to provide connectivity to

the most significant tracts of arable land—that

is, those producing up to 80 percent of the

region’s agricultural output by value. As of

today, only 50 percent of existing rural roads

are in good or fair condition. In addition,

urban transportation is also a pressing

concern, with African cities having

exceptionally low densities of paved roads and

dysfunctional public transport systems that

seriously constrain mobility.

Railways. Africa has some 56,000 kilometers of

operational railway lines. Most of that network

has fallen into neglect, leading to significant

restrictions in the speed of operation and the

overall quality of service. Many of these

railway lines are lightly used, with less than a

million net tonnes of freight per year,

comparable to a moderately used branch line

elsewhere in the world. Relatively low volumes

of traffic, and intense inter-modal competition

from road freight, make it difficult to justify

major investments in many cases.

Nevertheless, as a minimum, 9,000 kilometers

of rail track will need to be upgraded to good


10

condition if the continent’s infrastructure

targets are to be met.

Ports. General cargo and container traffic

through African ports has been growing at

around 10 percent annually over the last

decade. As a result, many of Africa’s key ports

(including Abidjan, Cotonou, Dar es Salaam,

Douala, Durban, Lomé, Luanda, Mombasa, and

Tema) are operating at or above design

capacity, leading to congestion and costly

delays that become a bottleneck for

international trade. Ports delays account for

roughly half the time taken to transport goods

to landlocked countries and typically constitute

one-third of the total costs of such goods.

Redressing this situation will require the

development of additional berths and

associated terminal capacity, as well as

removing bottlenecks and improving links

between ports and surface transportation

networks.

ICT. More than 60 percent of Africa’s

population lived within reach of a mobile

telephone signal in 2009—and the mobile

footprint is expanding steadily. Broadband

access, on the other hand, remains minimal

and confined to larger cities. While GSM

coverage and limited-performance WIMAX

broadband coverage look to be commercially

viable for at least 90 percent of the

population, there is a small segment of the

market that will be served only if public

subsidies are made available.

Irrigation. Africa’s agricultural productivity is

the lowest of any region in the world. The lack

of irrigation is a key factor. Less than 5

percent of Africa’s agricultural land is irrigated,

yet that irrigated land (concentrated in just a

handful of countries) provides 20 percent of

agricultural production value. If a further 12

million hectares of irrigation could be added

by 2050, tripling Africa’s existing levels, food

supply would increase markedly, offsetting the

negative impacts of climate change and

reducing the number of malnourished children

by 2 million.

Water and sanitation. Sub-Saharan Africa as a

whole is not on track to meet the MDG

targets for water and sanitation. In the case of

water, five countries have already met the

targets (Burkina Faso, Ghana, Malawi, Namibia,

and South Africa) and a further 12 have

reasonable prospects of doing so. In the case

of sanitation, the target has not yet been met

by any country, and there are only a handful

of countries that may be capable of doing so.

To meet the MDG targets, a further 308

million people would have to be provided with

safe water and 409 million people with safe

sanitation. Since 1990, access to improved


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water has grown by less than one percent of

the population annually; this pace would need

to rise to 2 percent of the population each

year if the target is to be reached.

Missing links in regional infrastructure networks

“Regional infrastructure has special strategic significance.”

An important subset of Africa’s infrastructure

gaps pertain to regional links of particular

strategic importance. These missing links—

shown on maps 1, 2, and 3—prevent Africa’s

transport, power, and ICT networks from

functioning as an integrated whole. Until they

are closed, Africa will not reap economies of

scale in the provision of infrastructure, nor will

it adequately harness the benefits of the

regional commons in water and transport.

The ongoing PIDA process is conducting

robust analysis and will build political

consensus around a road map of priority

regional-integration projects in energy,

transport, ICT, and transboundary water

resources. PIDA will also establish a clear

institutional and financing framework as well

as an action plan for delivery. Under PIDA’s

auspices, a series of sectoral workshops,

regional workshops, and high-level meetings

during 2011 will bring together [[define >>]]

AUC, the New Partnership for Africa’s

Development (NEPAD), the continent’s

regional economic communities, specialized

institutions, development partners, national

governments, private firms, and civil society

organizations.

Pending the completion of PIDA, the following

figures derived from the African Infrastructure

Country Diagnostic provide an indicative sense

of regional infrastructure needs (table 3).

Table 3. Missing links for physical integration of the African continent

Large

hydropower

(MW)

Power

transmission

(MW)

Road upgrades

(kms)

Fiber optic links

(kms)

Central 1,383 1,662 3,700 2,257

East 10,968 27,755 2,524 3,565

Southern 8,912 23,839 11,100 5,158

Western 3,758 11,250 5,804 1,905

Total 25,021 64,506 23,129 12,885


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Source: Derived from Africa Infrastructure Country Diagnostic, 2009.

Regional power trade. Some 21 African

countries are simply too small to generate

power cost-effectively. While Africa is well-

endowed with cost-effective energy resources,

these tend to be located far from major

centers of demand in countries too poor to

raise the billions of dollars needed to develop

them. Regional power trade could save Africa

$2 billion annually in power costs and reduce

the overall long-run marginal cost of power by

$0.01 per kilowatt-hour overall (and by up to

20 to 40 percent for some countries). [[can

you express that in cents for consistency?]]

At the same time, regional trade would reduce

carbon emissions by 70 million tonnes

annually. To realize these gains, more than 64

gigawatts of cross-border transmission

capacity will have to be put in place, and 10

GW of additional large scale hydropower

projects implemented. Many of the required

hydropower projects are very large, both in

absolute terms and relative to the size of the

economies in which they are located. Returns

to investment in regional power

interconnectors have been estimated at

between 20 to 30 percent for most power

pools, and at more than 100 percent in the

case of the Southern African Power Pool. For a

number of countries, investments in regional

interconnectors could potentially pay for

themselves in less than a year.

Regional transport corridors. The cost of

moving goods along Africa’s key trading

corridors is exceptionally high, at $100–300

per tonne, and the delays exceptionally long

(up to 40 days in some cases). In part, this

reflects inadequate road infrastructure with

important sections of the regional network

requiring upgrades of various kinds. Even

more significant, however, are regulatory and

institutional issues. Cartelization of the

trucking industry, particularly in West and

Central Africa, leads to high profit margins and

poor service. Congestion at ports, delays at

borders, and a range of formal and informal

checkpoints greatly retard the movement of

freight and inflate the cost of transportation.

Regional telecommunications. Many African

countries still lack a connection to

intercontinental submarine cables that provide

cost-effective access to the Internet. A number

of new privately led submarine cable projects

are underway that will complete the

intercontinental connections. However, a

further 13,000 kilometers of terrestrial fiber

optic backbone will need to be laid to ensure

that all African countries benefit fully from this


13

infrastructure and are able to communicate cost-effectively among themselves.


14

Map 1. Status of Africa’s regional ICT network


15

Map 2. Status of Africa’s regional power network


16

Map 3. Status of Africa’s regional transport network


17

Raising finance to close the infrastructure gap

Overall spending needs

“A substantial increase in infrastructure investment is needed.”

Closing the infrastructure deficit in Sub-

Saharan Africa will require sustained capital

and operating spending of around $93 billion

annually over a decade, about twice what has

historically been spent (table 4). Of the total

annual requirement, some $60 billion is

needed in investment funding alone. About 40

percent of total spending needs are associated

with the power sector, and a further 20

percent each with the transport and WSS

sectors.

Table 4. Overall infrastructure spending needs for Sub-Saharan Africa, 2006–15

$ billions annually

Capital

expenditure

Operations and

maintenance Total needs

ICT 7.0 2.0 9.0

Irrigation 2.9 0.6 3.4

Power 26.7 14.1 40.8

Transport 8.8 9.4 18.2

WSS 14.9 7.0 21.9

Total 60.4 33.0 93.3

Sources: Authors’ calculations based on Banerjee and others 2008; Carruthers, Krishnamani, and Murray 2008; Mayer and others

2008; Rosnes and Vennemo 2008.

Note: ICT = information and communication technology; WSS = water supply and sanitation. Row totals may not add exactly

because of rounding errors.

Despite recent surges in funding, financing

flows still fall woefully short of what is needed,

highlighting the need for a change from

business as usual.

Power. Investment funding for Africa’s power

sector surged from a low point of $3.4 billion

in 2002 to an estimated $9.9 billion in 2009

(figure 4a). This growth has come about

thanks to a surge in official sources (both

OECD and non-OECD), with the private sector


18

contributing relatively little to the upswing.

Non-OECD funding has been particularly

significant for hydropower generation. Despite

this encouraging progress, investment funding

has yet to reach half of the estimated

requirements of $22.6 billion a year.

WSS. Funding for water and sanitation in

Africa has also enjoyed significant growth—

from around $2 billion in 2002 to $4 billion in

2007/08 (figure 4b). Sustained increases in

official assistance from OECD donors (toward

the $2 billion mark annually) have been the

main driver of this improvement. Once again,

however, current funding falls substantially

short of the estimated $11 billion annual

requirement to meet the MDGs. Increased

reliance on lower-cost technologies for water

supply and sanitation could bring down the

cost of meeting investment needs by about

one-third, but this would still be about double

what the sector has been receiving.

Transport. Investment finance for Africa’s

transport infrastructure has likewise surged

from around $6 billion in 2002 to around $12

billion since 2005 (figure 4c). Sustained

increases in official assistance from OECD

members have helped to bring this about,

together with important contributions from

non-OECD financiers and the private sector.

Domestic public investment in transport has

also been systematically higher than for the

other infrastructure sectors, but the picture

was to some extent distorted by exceptional

efforts to upgrade South Africa’s transport

network in preparation for the FIFA World

Cup. Overall, funding flows to the sector

appear to be broadly commensurate with the

estimated requirements of approximately $11.4

billion.

The potential sources of funding for

investment vary considerably according to

both the type of infrastructure asset concerned

and the circumstances of the country or

countries in which the investment would take

place. Unfortunately, a high share of unmet

investment needs is associated with types of

assets or classes of countries for which it

difficult to raise private finance.

Assets with strong revenue flows are stronger

prospects for private finance, whereas those

with the characteristics of public goods will

likely require public finance (figure 5a). A more

detailed look at the investment needs shows

that the kinds of infrastructure with a good

record of attracting private finances—such as

ICT, thermal power generation, and ports—

represent less than 10 percent of the total

investment requirements. The bulk of the

requirements lie in areas that are more difficult

to fund, such as water supply, power


19

transmission and distribution, hydropower, and

medium to low traffic roads. So while private

finance will undoubtedly need to increase if

Africa is to meet its infrastructure targets, an

even more significant increase in public

funding will be needed.

Assets located in countries with a good

investment climate have a better chance of

attracting private finance than those with a

poor investment climate, which must rely more

heavily on public finance (figure 5b). A more

detailed look at the geographical distribution

of investment needs indicates that about 20

percent of the total is associated with middle-

income countries and a further 20 percent

with advanced low-income countries that

boast relatively good investment climates. At

the other extreme, some 25 percent of the

spending needs are associated with fragile

states or other countries where institutional

performance is conspicuously weak. So, while

private finance could make a sizeable

contribution toward meeting the overall need

for investment, the bulk of the financing

requirements are in country environments

where public funding is likely to be the only

realistic source of finance.


20

Figure 4a. Historic financing trends against investment needs for power

Figure 4b. Historic financing trends against investment needs for water

Figure 4c. Historic financing trends against investment needs for transport

0

5000

10000

15000

20000

25000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Public ODA PPI Non-OECD Total

0

2000

4000

6000

8000

10000

12000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Public ODA PPI Non-OECD Total

0

2000

4000

6000

8000

10000

12000

14000

16000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Public ODA PPI Non-OECD


21

Figure 5a. Total annual investment needs by type of infrastructure asset

Figure 5b. Total annual investment needs by type of country and CPIA score

Note: CPIA is [[explain CPIA in note]]

A shortage of bankable projects remains a key

bottleneck preventing the advancement of

major infrastructure projects. Large

infrastructure projects have long gestation

periods and often require complex feasibility

studies. As a rule of thumb, the costs of

preparing large-scale infrastructure projects

amount to between 5 and 10 percent of the

project’s final investment costs. So to invest

$60 billion in infrastructure projects each year,

11

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22

some $3–6 billion a year must be spent on

project preparation.

Preparation of bankable regional infrastructure

projects is particularly challenging. Regional

projects involve multiple countries, multiple

stakeholders, and often differing legal,

financial, and regulatory environments. Given

the scale of the investment required, regional

projects also inevitably involve multiple

financiers who have varied information needs

at different points in the project preparation

process, a situation that calls for careful

coordination to ensure that transactions are

efficient and effective. To deliver regional

projects requires capable stakeholders that can

undertake this work.

Hence the importance of specialized project

preparation facilities. The NEPAD Infrastructure

Project Preparation Fund (IPPF), housed in the

AfDB, is designed to assist African countries,

regional economic communities, and their

specialized institutions to prepare viable, high-

quality regional infrastructure projects, as well

as to develop consensus and broker

partnerships for the implementation of those

projects using public and private sources of

finance. To date IPPF has prepared regional

infrastructure projects worth about $4.7 billion,

a sum that has a huge leveraging potential.

Projects under implementation are helping to

close the infrastructure gap in Africa. This in

turn is enhancing the competitiveness of

African economies and supporting regional

economic integration and trade. The demand

for IPPF resources is growing, with at least 53

project requests in the pipeline for 2011 to

2013.

A shortage of funding for project preparation

activities is limiting the work that can be done

by such specialized facilities. IPPF and other

project preparation facilities have a critical role

to ensure a good supply of bankable projects

is available to meet the demand from private

financiers, African governments, and external

donors. They also play a critical role in

enhancing the institutional capacity of partners

to advance project preparation on the

requisite scale. But a lack of funding is proving

to be a key bottleneck in advancing with the

implementation of such an investment

program. Thus, in addition to raising the funds

needed for investment, earmarked resources

are needed to support the preparation phase

of the project pipeline.

Regional spending needs

“Funding key regional projects poses particular challenges.”

An important subset of Africa’s spending

needs relates to regional projects that will

strengthen the key transport, power, and ICT

backbones of the region. Of the estimated $93

billion annual spending needs, just over $7.1

billion per year is associated with regional

projects (table 5). Valued at some $5.3 billion

per year in all, most of these regional projects

are related to the power sector. Examples are

the cross-border transmission projects needed

to integrate the four regional power pools, as

well as large-scale, export-oriented

hydropower projects of regional significance.

Table 5. Basic funding needs for regional integration

Subset of total

Total needs

($ millions per

year)

By category By sector

Capex Opex Transport Power ICT

Eastern 2,870 2,451 418 304 2,555 10

Central 680 469 113 265 311 6

Southern 2,095 1,685 410 728 1,352 15

Western 1,464 1,006 458 375 1,082 7

Total 7,109 5,611 1,399 1,672 5,300 38

Regional power projects present the most

significant implementation challenges. The

difficulty of implementing regional

infrastructure projects differs significantly

across sectors. Some of those differences are

highlighted below. But there are also common

challenges, such as the capacity to manage

multinational operations and cost sharing.

Those challenges are especially acute for

countries with small budgets and for those

involved in multiple regional projects.

Regional ICT projects have benefited from

substantial private investment. However,

despite this success, several challenges remain.

First, ensuring that open access and


24

competition are built into deals arranged by

the private sector has so far proven difficult.

Project preparation facilities such as IPPF have

played a key role in early engagement to build

access and competition (and other desirable

features) into transactions such as the EASSy

project. (Had EASSy been a purely private deal

it is questionable that open access would have

been so prominent.) Second, the cost of

extending regional backbones into Africa

remains high and will require some element of

public subsidy as a precondition for private

sector investment. The costs of excavation to

install the cables represents a significant share

of the cost of this penetration. The African

Union, AfDB, and World Bank are now

exploring synergies with road and power

transmission projects to ensure that these are

designed to allow for low-cost incorporation

of cables.

Regional transport projects generally form part

of the national network and can be funded

through the usual channels. However, this

raises significant challenges. First, the

maximum benefits from individual national

investments will be realized only if each

country invests as agreed and on time.

Second, harmonization of legal and regulatory

standards—such as axle weights, customs

documents, and other trade facilitation

measures—is critical if the full benefits of the

road are to be realized. Third, attracting

private sector investments for multinational

roads has proved particularly difficult. Private

investors have focused more on heavily

travelled sections of transnational highways.

This raises questions about operation and

maintenance costs for the whole network and

issues of benefit sharing among countries.

Regional power projects, however, are by far

the most complex to implement. This is so for

several reasons. First, the size of the

investments needed is particularly large and

often goes well beyond what would be

developed to supply domestic power demands

alone. As illustrated below, export-oriented

hydropower projects frequently have capital

costs in excess of 5 percent of GDP, making

them difficult to fund on the balance sheet of

the host country alone. Second, the number of

countries involved in regional power projects

can be quite large. A generation project in one

country can serve market demand well beyond

that country’s immediate neighbors, and, as a

result, transmission lines may have to run

through transit countries, which are neither the

main importer nor exporter. Third, the

creditworthiness of ―offtakers‖ remains a

significant challenge. Many of the national

utilities that make up the building blocks of


25

the regional power pools lack the necessary

credit rating required to underwrite the

investment, along with the necessary power

purchase agreements and legal and regulatory

environments. This third point is particularly

critical if more private sector investment is to

be drawn to the power provision markets.

Figure 6. Investment cost of illustrative regional hydropower projects as percentage host country GDP

Capturing the efficiency dividend

Domestic policy measures

“Increased funding and policy reform leverage each other.”

Policy reforms can stretch available investment

funding and make it easier to attract more

funds. Raising more funds to redress Africa’s

infrastructure deficit is critically important.

However, supporting policy measures are also

needed to stem existing waste and ensure that

new resources are effectively used. The overall

value of resources lost to inefficiency in

Africa’s infrastructure sectors has been

estimated at $17 billion annually. Figure 7

identifies some of the largest sources of

inefficiency.

Several key policy measures need to be part of

the action plan.

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26

Adopting institutional reforms to improve

the performance of power and water

utilities. Some $3.4 billion in resources is

wasted annually due to the inefficiency of

Africa’s power utilities and a further $1

billion due to the inefficiency of water

utilities. These inefficiencies take the form

of abnormally high distribution losses and

unacceptably low revenue collection. These

inefficiencies can be reduced through

governance and management reforms and

through greater private sector involvement

in service provision.

Raising power and water tariffs toward

cost-recovery levels. About $2.3 billion a

year is lost to underpricing of electric

power and a further $1.8 billion a year to

the underpricing of water. While

subsidized tariffs can be justified on the

grounds of affordability, in most African

countries electricity and piped water

services reach only the higher-income

groups in society, groups that could afford

to pay the full cost of the service. By

undermining the financial health of

utilities, subsidized tariffs hold back the

expansion of services to poorer

households, which often pay much higher

prices for alternative services.

Raising capital budget execution. Every

year some $1.9 billion in infrastructure

capital budgets goes unspent within the

budget cycle, mainly in the roads sector.

Underlying reasons include delays in

project planning, procurement, and

implementation. An overhaul of the public

investment framework is needed to

address this problem.

Performing adequate preventive

maintenance of roads. Neglect of road

maintenance remains a pervasive problem

but represents a false economy, imposing

substantial costs on road users and

leading to higher costs of eventual asset

rehabilitation. It is estimated that about

$1.9 billion a year could be saved through

adequate preventive maintenance of road

networks.

Charging road users. Many African

countries have applied fuel levies as a

basis for funding road maintenance.

However, in many cases, the fuel levies are

set too low to raise the necessary finance.

A further $0.6 billion a year could be

raised for maintenance through correct

alignment of road user fees.

Figure 7. Magnitude of efficiency gains available from various sources ($ billion a year)

Regional policy measures

“Regional infrastructure needs to be complemented by soft measures.”

Without appropriate and harmonized policy

measures, regional infrastructure cannot

function effectively as a seamless network.

Regional integration of infrastructure networks

can bring important economic benefits.

However, in order for these benefits to

materialize, complementary policy reforms are

needed to address the institutional and

administrative barriers that prevent regional

infrastructure from delivering services

effectively.

Harnessing regional power trade. To harness

the benefits of regional power trade, countries

need to align their national power

development plans with those of the regional

power pools and develop harmonized

regulations for trade in power.

Deregulating trucking. Trucking cartels and

restrictive market regulations are largely

responsible for high road freight tariffs in

Africa. Without addressing these regulatory

issues, any improvements in road

infrastructure and transit procedures will

largely be captured as monopoly rents.

Reducing transit delays. Transit delays are

pervasive on Africa’s major regional corridors,

affecting movements of goods through ports,

across land borders, and along roads. These

nonphysical barriers keep the speed of freight

movements down to around 10 kilometers per

3.4

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28

hour, little faster than a horse-drawn cart.

Without addressing these problems,

investments in regional transport infrastructure

will not yield the expected returns.

Liberalizing international gateways. As more

African countries secure access to submarine

cables and a regional fiber optic backbone

develops, there is the potential for Internet

costs to fall by as much as 75 percent.

However, these benefits will be passed on to

the economy only if international gateways are

liberalized; otherwise they will simply be

captured as rents by the incumbent

telecommunications monopoly.

Closing Africa’s infrastructure deficit will take a

large increase in investment finance, a

renewed focus on regional integration, and a

variety of complementary policy measures to

reduce present levels of inefficiency. Once

historic flows and potential efficiency gains are

taken into account, a funding gap of $31

billion a year remains (table 6).

Table 6. Funding and efficiency gaps for Africa’s infrastructure

$ billions annually

Energy ICT Irrigation Transport WSS

Cross-

sector gain Total

Infrastructure spending needs (40.8) (9.0) (3.4) (18.2) (21.9) (93.3)

Spending directed to needs 11.6 9.0 0.9 16.2 7.6 45.3

Gain from eliminating

inefficiencies 6.0 1.3 0.1 3.8 2.9 3.3 17.4

Funding gap (23.2) 1.3 (2.4) 1.9 (11.4) 3.3 (30.6)

Source: Africa Infrastructure Country Diagnostic.

Note: Totals may not add exactly because of rounding errors. ICT = information and communication technology; WSS = water

supply and sanitation. — Not available; Blanks = not applicable.

An agenda for action

There is now a real opportunity to transform

the delivery of infrastructure in Africa,

unleashing the growth potential of the

continent and accelerating the achievement of

the MDGs. However, it will take a lot more

than business as usual to get there. Efforts by

all parties will need to be stepped up. It is

therefore proposed that:

All financiers should sustain and scale up

funding for Africa’s infrastructure. The

significant recent increase in funding


29

continues to fall far short of what the

continent requires.

African stakeholders should increase the

pace of economic and institutional reforms

required to realize the efficiency gains

needed to make domestic resources go

farther and to create a more favorable

environment for private investment.


development partners should support

African stakeholders as they make the

changes necessary to close the

infrastructure gap, with special emphasis

on cross-border projects; key policy

reforms; and institutional changes required

to leverage resources for infrastructure,

project preparation, and risk mitigation.

The African Union should convene an

Africa Infrastructure Investment Forum on

the continent in 2011. The participants

should include the G20 governments, the

private sector, and other financiers

promoting priority projects and

investments to help close the

infrastructure gap in Africa.

References and bibliography

This report draws upon a wide range of papers, databases, models, and maps that were created as

part of the Africa Infrastructure Country Diagnostic. All of these can be downloaded from the project

website: www.infrastructureafrica.org.

For papers go to the document page (http://www.infrastructureafrica.org/aicd/documents), for

databases to the data page (http://www.infrastructureafrica.org/aicd/tools/data), for models to the

models page (http://www.infrastructureafrica.org/aicd/tools/models), and for maps to the map page

(http://www.infrastructureafrica.org/aicd/tools/maps ).

General

Africa’s Infrastructure: A Time for Transformation

(AICD Web site),

http://www.infrastructureafrica.org

Foster, Vivien, and Cecilia Briceño-Garmendia, eds.

2009. Africa’s Infrastructure: A Time for

Transformation. Paris and Washington, DC:

Agence Française de Développement and

World Bank.

Growth

Calderón, César. 2009. ―Infrastructure and Growth in

Africa,‖ Policy Research Working Paper

4914, World Bank, Washington, DC.

Escribano, Alvaro, J. Luis Guasch, and Jorge Pena.

2010. ―Assessing the Impact of

Infrastructure Quality on Firm Productivity

in Africa.‖ Policy Research Working Paper

5191, World Bank, Washington, DC.

Yepes, Tito, Justin Pierce, and Vivien Foster. 2009.

―Making Sense of Africa’s Infrastructure

Endowment: A Benchmarking Approach.‖

Policy Research Working Paper 4912,

World Bank, Washington, DC.

Financing

Briceño-Garmendia, Cecilia, Karlis Smits, and Vivien

Foster. 2009. ―Financing Public

Infrastructure in Sub-Saharan Africa:

Patterns and Emerging Issues.‖ AICD

Background Paper 15, Africa Region, World

Bank, Washington, DC.

ICT

Ampah, Mavis, Daniel Camos, Cecilia Briceño-

Garmendia, Michael Minges, Maria

Shkaratan, and Mark Williams. 2009.

―Information and Communications

Technology in Sub-Saharan Africa: A Sector

Review.‖ AICD Background Paper 10, Africa

Region, World Bank, Washington, DC.

http://www.infrastructureafrica.org/

http://www.infrastructureafrica.org/aicd/documents

http://www.infrastructureafrica.org/aicd/tools/data

http://www.infrastructureafrica.org/aicd/tools/models

http://www.infrastructureafrica.org/aicd/tools/maps


31

Mayer, Rebecca, Ken Figueredo, Mike Jensen, Tim

Kelly, Richard Green, and Alvaro Federico

Barra. 2009. ―Connecting the Continent:

Costing the Needs for Spending on ICT

Infrastructure in Africa.‖ AICD Background

Paper 3, Africa Region, World Bank,

Washington, DC.

Irrigation

Svendsen, Mark, Mandy Ewing, and Siwa Msangi.

2008. ―Watermarks: Indicators of Irrigation

Sector Performance in Africa.‖ AICD



You, L., C. Ringler, G. Nelson, U. Wood-Sichra, R.

Robertson, S. Wood, G. Zhe, T. Zhu, and Y.

Sun. 2009. ―Torrents and Trickles: Irrigation

Spending Needs in Africa.‖ AICD



Power

Eberhard, Anton, Vivien Foster, Cecilia Briceño-

Garmendia, Fatimata Ouedraogo, Daniel

Camos, and Maria Shkaratan. 2008.

―Underpowered: The State of the Power

Sector in Sub-Saharan Africa.‖ AICD



Foster, Vivien, and Jevgenijs Steinbuks. 2009.

―Paying the Price for Unreliable Power

Supplies: In-House Generation of Electricity

by Firms in Africa.‖ Policy Research

Working Paper 4913, World Bank,

Washington, DC.

Rosnes, Orvika, and Haakon Vennemo. 2009.

―Powering Up: Costing Power Infrastructure

Spending Needs in Sub-Saharan Africa.‖

AICD Background Paper 5, Africa Region,


Transport

Bullock, Richard. 2009. ―Off Track: Sub-Saharan

African Railways.‖ AICD Background Paper

17, Africa Region, World Bank, Washington,

DC.

Carruthers, Robin, Ranga Rajan Krishnamani, and

Siobhan Murray. 2009. ―Improving

Connectivity: Investing in Transport

Infrastructure in Sub-Saharan Africa.‖ AICD



Gwilliam, Ken, Vivien Foster, Rodrigo Archondo-

Callao, Cecilia Briceño-Garmendia, Alberto

Nogales, and Kavita Sethi. 2008. ―The

Burden of Maintenance: Roads in Sub-

Saharan Africa.‖ AICD Background Paper

14, Africa Region, World Bank, Washington,

DC.

Heinrich C. Bofinger. 2009. ―An Unsteady Course:

Growth and Challenges in Africa’s Air

Transport Industry.‖ AICD Background


Washington, DC.


32

Kumar, Ajay, and Fanny Barrett. 2008. ―Stuck in

Traffic: Urban Transport in Africa.‖ AICD



Ocean Shipping Consultants, Inc. 2009. ―Beyond the

Bottlenecks: Ports in Africa.‖ AICD



Water supply and sanitation

Banerjee, Sudeshna, Vivien Foster, Yvonne Ying,

Heather Skilling, and Quentin Wodon.

―Cost Recovery, Equity, and Efficiency in

Water Tariffs: Evidence from African

Utilities.‖ AICD Working Paper 7, World


Banerjee, Sudeshna, Heather Skilling, Vivien Foster,

Cecilia Briceño-Garmendia, Elvira Morella,

and Tarik Chfadi. 2008. ―Ebbing Water,

Surging Deficits: Urban Water Supply in

Sub-Saharan Africa.‖ AICD Background


Washington, DC.

Gulyani, Sumila, Debabrata Talukdar, and Darby

Jack. 2009. ―Poverty, Living Conditions, and

Infrastructure Access: A Comparison of

Slums in Dakar, Johannesburg, and

Nairobi.‖ AICD Working Paper 10, World


Keener, Sarah, Manuel Luengo, and Sudeshna

Banerjee. 2009. ―Provision of Water to the

Poor in Africa: Experience with Water

Standposts and the Informal Water Sector.‖

AICD Working Paper 13, World Bank,

Washington, DC.

Morella, Elvira, Vivien Foster, and Sudeshna Ghosh

Banerjee. 2008. ―Climbing the Ladder: The

State of Sanitation in Sub-Saharan Africa.‖

AICD Background Paper 13, Africa Region,


Documents

Africa’s Infrastructure: An Agenda for Transformative Actionpercent in 2010. Because the main driver of Africa’s growth is the global economy, the continued recovery in advanced