African infrastructure: a review of issues

Introduction

This paper is a follow up to the one last year in which I made a case for an improvement in the physical, governance, educational and regional trade and investment infrastructure on the continent. This paper reiterates the importance of the infrastructure and gives a historical perspective, a case study of the two largest economies, concerns and policy implications.

Why is the infrastructure so pivotal?

The underperformance of African economies is directly related to poor infrastructure, causing low and highly variable economic growth and failure to move up from commodity exports into processing and manufacturing for both the domestic and export markets. The continent is failing to attract foreign direct investment (FDI) or make maximum use of domestic capital. Investors are deterred because of the poor state of the physical infrastructure which makes production costs prohibitively high and the marketing of goods and services difficult and costly. Producers and distributors are often faced with poor governance infrastructure in the form of corruption and inadequate and/or inconsistent bureaucratic support. The educational system fails to provide the skills required and trade between neighbouring countries is stymied by a myriad of restrictions and uncertainty.

The benefit/cost ratios are very favourable, with high returns for investment in infrastructure projects. The continent is failing to harness major assets like electricity from rivers and abundant sunshine and poor infrastructure makes it difficult to realise the enormous potential in agriculture, mining, tourism, manufacturing and processing and, most of all, its people. The riches locked away in these sectors because of poor and inadequate infrastructure are the envy of many regions and countries which are flocking into the continent. Often because of the lack of infrastructure investors from outside the continent insist on very usurious terms and take the riches out with little benefit to the economies and people of Africa.

Historical perspective

To understand the current situation one has to look at the history. When most African countries gained independence there were very few university graduates and many leaders lacked the vision. Most of them had been kept out of management during colonialism and so lacked management experience. Policy makers had to grapple with the concept of nation states in the face of often fractious ethnic rivalries and the dominant political theme in much of the 1960’s and 1970s, was socialism and state control which in the absence of a fully developed nation state concept was a serious problem. Policy makers were obsessed, partly because most parties had socialist leanings, with gaining control of the levers of economic power. Unfortunately, the concept of the nation state had yet to develop which meant that ethnic qualifications rather than merit were the decisive factors. There was little focus on developing or maintaining the infrastructure and in many cases countries got rid of certain elements such as railroads. High recurrent budgets, spent largely on salaries, meant that there were no funds for new physical infrastructure or maintenance. Little emphasis was placed on governance infrastructure, the educational sector failed to deliver functional education in the form of technical and vocational skills and only lip service was paid to developing infrastructure to facilitate trade and investment with neighbours.

The blame cannot be blamed entirely on Africa, much of it must be placed on former colonial masters and other western and communist partners. In addition to not giving the training and experience to the officials and politicians that took over from them, policies taken by former colonial masters and the west in general contributed to the problem. Aid was in the form of food or goods, often to get rid of surpluses derived from subsidies to their farmers and manufacturers. Endless studies were undertaken by consultants on the most basic issues, which meant that overpaid consultants ended up taking the bulk of funds that in theory had been “given” to African countries. The cold war exacerbated this situation as often when infrastructure projects were undertaken, they were more to make a statement than to build the productive capacities of recipient countries. This lack of joined up approach meant that on paper huge inflows took place but without effective capital formation from a commercial perspective and little attention was paid to the issue of maintenance. White elephants, support for military campaigns and keeping dictators happy, so long as they were on the “right side”, meant that infrastructure projects and sustainable development issues were of low priority. President Mobutu of Zaire (Democratic Republic of Congo) epitomized this tendency, receiving huge support from the west which completely ignored the infrastructure of that country. Communist countries were no better,emphasising “the struggle” rather than seeking dialogue, devastating the infrastructure of countries involved and their neighbours. The end of the cold war and the demise of communist countries in Eastern Europe was crunch time, as the west could no longer countenance the profligacy of their client states. Austerity and retrenchments was the order of the day, often resulting in the dismantling of albatrosses such as national airlines, but also crucial support such as agricultural extension services.

The situation was not all gloomy and there were some positive developments that Africa can learn from and build on. In the 1950s and 1960s Liberia achieved one of the highest economic growth rates because it developed its physical and educational infrastructure. Nkrumah made a good start with the Akosombo dam that still provides the bulk of that country’s power supply. The country also made impressive gains in developing vocational education and establishing a science and technology university. The rapid economic growth in Ivory Coast was due to its impressive development of the physical infrastructure. Jerry Rawlins saved Ghana from the downward spiral not only to establish that country’s democratic credentials, but also achieved great strides in its governance, and physical infrastructure, albeit using rather draconian methods to root out corruption. The star performer though is Rwanda. Rising from the ashes of a devastating genocide, with few natural resources, that country has achieved phenomenal progress in its physical, governance and educational infrastructure. It is reaping huge benefits from this effort in terms of very impressive economic growth and investment.

Case study: Africa’s largest economies, Nigeria and South Africa

A review of the situation in the two largest economies in Africa gives some interesting pointers as well as having ripples throughout the continent as developments in both have repercussions way beyond their borders. It shows how Africa is losing out in a big way.

Nigeria has recently been declared as the largest economy on the continent and for that it must be proud. However its pole position masks huge flaws. This is a country with enormous potential with regards to natural resources and resourceful people and yet it languishes largely because of self inflicted wounds. Despite having enormous oil, gas, hydroelectric and solar power resources it has very low power generation, with one of the lowest per capita consumption of power on the continent. It still exports a very high proportion of oil in crude form and imports petrol and other finished products from abroad. This, for a country that has been producing oil for sixty years is very sad. It has the market (population0 and natural resources to support industrialization and yet imports most manufactured products from abroad. Despite having scores of universities, an incident a few years ago showed how dysfunctional the educational infrastructure is. A number of oil workers were kidnapped and it was revealing that many of them were low level technicians from Asia and Europe which showed that it cannot produce even low level technical staff to man its most important sector.

South Africa, another country with enormous resources is failing to maximize its potential. It has 25% unemployment while there are severe shortages in skilled labour placing severe constraints on its economic growth which is the lowest among countries with its level of development. The rate of growth of salaries of highly skilled personnel has trebled since 2000. The poor educational infrastructure is not delivering the skills the economy requires. A few years ago a major industrial complex was relocated to China despite the fact that the country has the raw materials, because power supplies and a skilled labour force could not be guaranteed. The country has failed to invest in power generation even though it is among the seven largest coal producers and one of the top five coal exporters in the world.

Concerns and issues

The major issues relating to the infrastructure in Africa are cost, maintenance, ownership, control and management. Infrastructure projects are typically very expensive and beyond the financial resources of many countries. The maintenance culture has yet to be developed, with many infrastructure projects becoming dilapidated or running far below installed capacity. The ownership issue has been a source of concern. One of the recent issues on the continent is land ownership as countries have sold vast tracts to foreigners. Management of the infrastructure has also proved to be an issue as the educational system of many countries has failed to produce the cadre of managers to manage projects.

Policy implications

The current interest in the infrastructure in Africa is a good thing and suggests a rethink of the economic development model. Since the wave of independence fifty/ sixty years ago there have been significant changes in the world, in general, there has been a shift from a position where the state was seen as the provider and administrator of the infrastructure to one where it is often a policymaker. To be fair to the continent, it has been a tough call, trying to develop the nation state concept and manage infrastructure projects for which they had deliberately being denied education and management experience was always going to be difficult. Africa, rich countries and new players like China need to review the approach to developing the infrastructure.

Africa needs to realise that developing the infrastructure is pivotal in the development process. It is the only way that it can avoid being aid junkies and ensure that it is attractive enough to investors, domestic and foreign, to make use of its vast potential. African leaders need to articulate visions and implement policies and action plans to develop their infrastructure. They should make use of private capital to build and manage projects. Concerns about ownership, control and management can be addressed by ensuring that citizens are given the opportunities, at preferential rates, with equal access for all citizens, to buy into these companies. Tax policies and subsidies over a period of time for training must be used to encourage companies to engage locals. After a certain period, punitive measures must be put into place if locals are not in management position. One touchy area for many Africans, the sale of land for agriculture should be seen as an opportunity. It can boost production as well as develop support infrastructure such as markets for farmers and inputs. All investors must have out-grower schemes as part of their contracts. Measures must be taken to ensure that governance infrastructure is in place by rooting out corruption and ensuring that civil servants actually work for their salaries. Functional educational systems must be implemented to provide workers with the appropriate technical skills. Effective measures must be taken to develop regional trading and investment. Two points must be borne in mind. Rather than spend a lot of time and effort with a multitude of studies, governments should review history and make use of what has worked in countries as noted above such as Rwanda. The other point is that they must realise that it is not railings at colonialists/neo-colonialists or constantly putting out the begging bowl that will do the job, what matters is an efficient and effective infrastructure. Investors are not primarily drawn in by the exhortations of their governments but are enticed by the continent’s abundant resources and infrastructure. One has to just look at China, after decades of being lambasted by the west, with famines, minimal growth and investment, when it opened its doors and demonstrated that it had the physical, governance and educational infrastructure investors flooded in.

The West must help with a shift of aid from budget support, numerous studies on basic issues and “political” projects to support for infrastructure projects and apply tax policies to encourage companies to invest in such projects. Support in the form of capital and encouragement must be given to regional trade and investment initiatives. China must move away from doing everything in building infrastructure projects to getting locals involved at all levels. It must encourage its companies to take stakes in such projects and not just pack up and go after completion.

Investment in the continent’s infrastructure is a win-win situation for all stakeholders. African countries can develop their resources to benefit their people and become more engaged in the commercial world. The West and China can minimize aid flows and benefit from commercial activities, with the dwindling of the world’s natural resources, there is much that the continent can offer.

It is encouraging to note that since my infrastructure paper last year there has been a marked interest in the infrastructure in Africa. This interest suggests a major shift in the economic model, rather than an emphasis on aid for individual sectors, a big picture approach is needed. This is looking at the entire environment under which all the sectors operate. Improved physical, governance, education and regional trade and investment infrastructure make the country and continent as a whole attractive for local and foreign investors, giving them the opportunity to unlock the immense potential of the natural resources and people of the continent. And leaders need to note that it gives them the opportunity to build legacies, legitimacy and popularity. Finally, strong and sustained economic growth which this will usher is an antidote to insurgency and conflicts ravaging some parts of the continent. When people have rising incomes and jobs they are less likely to take up arms and will be very much inclined to work with governments to quell such revolts.

J Boima Rogers is Principal Consultant at Media and Event Management Oxford (MEMO). www.oxfordmemo.co.uk. The author’s work has straddled continents and sectors. In the 1980s he worked with eminent academics, namely, Professors Luther Tweeten and James Trapp of Oklahoma State University, to produce a series of papers and books on food security issues, arguing that food security is not synonymous with food self-sufficiency, rather it is secured by maximizing a country’s comparative advantages. He went on to work on a food security model at Oxford University, helping develop a rapid response system that maximizes food security while minimizing the cost of doing so. In the 1990s he played a role in the reform of the EU’s Common Agricultural Policy (CAP) and negotiations with the US. He was the lead author of the NFU’s response to the European Commission’s proposal on the reform of the EU fruit and vegetable regime; the British government accepted and adopted most of the NFU’s proposals. Subsequently, as European correspondent for ProFarmer America, his analysis of the dynamics of the CAP, discussions on the reform of the regime within the EU and the impact of Eastern European countries who were in the process of joining the EU, provided crucial information to US policy makers who were having trade negotiations with the EU. In 2004, two of his reports of conferences on development issues were used as reference documents in negotiations between the EU and African, Caribbean and Pacific countries. His paper on smart city in 2012 and the workshop he organised in 2013 have no doubt had an impact on smart policies and initiatives of local councils, many of which did not have such policies before his initiatives. He has also added a fun element, with his work in the performing arts, initiating and organising the first food and music festival in the UK, the Bournemouth World Food and Music Festival.