Half of Africa's improved growth from ICT
But serious gaps in infrastructure still exists in countries surveyed by the World Bank
November 13, 2009
By Ethel Hazelhurst
Market liberalisation has encouraged massive private investment in Africa's cellular networks, according to a report released yesterday by the World Bank.
The result was a major revolution in information and communications technology (ICT), which helped boost economic growth to an annual 4 percent between 2001 and 2005, the report on Africa's infrastructure by the World Bank said.
"About half of Africa's improved growth performance in the early 2000s was attributable to this wireless revolution: one extra percentage point of growth per person per year."
However, it identifies serious infrastructure gaps in the power, water and transport sectors, which reduced national economic growth by 2 percentage points every year, and cut business productivity by as much as 40 percent.
Research was conducted in 24 African countries, including South Africa, which between them account for 85 percent of Africa's gross domestic product (GDP).
The study is one of the most detailed ever undertaken on the continent, according to the World Bank. Surveys were conducted among 16 rail operators, 20 road entities, 30 power utilities, 30 ports, 60 airports, 80 water utilities and over 100 ICT operators, as well as the relevant ministries in the countries.
The study forms part of the Africa Infrastructure Country Diagnostic, commissioned after the 2005 Group of 8 (G8) summit in Gleneagles, Scotland, and carried out by task team leaders Vivien Foster and Cecilia Brice241o-Garmendia for the World Bank.
The report says Africa's infrastructure networks lag those of peer countries in the developing world, despite some countries on the continent having had an early advantage. For example: "In 1970, sub-Saharan Africa had almost three times the generating capacity per million people as south Asia. In 2000 south Asia had left sub-Saharan Africa far behind with almost twice the generation capacity per million people," the report said.
The report estimates that $93 billion (R686.5bn) is needed annually to fund new infrastructure investment as well as the maintenance of existing infrastructure, twice the 2005 estimate by the Commission for Africa. Of this, $45bn is existing expenditure - much higher than previously estimated. "Also surprising was that most is domestically financed by African taxpayers," the report said.
The study found considerable wastage and estimated efficiency improvements could expand available resources by a further $17bn. "Excess expenditure" of $3.3bn a year was largely due to public spending on ICT that the private sector could provide.
Even after efficiency gains, there would still be a $31bn shortfall every year. The region could look to public budgets, resource rents, local capital markets, private sector and non-Organisation for Economic Co-operation and Development finance as well as traditional donor assistance to meet this need.
About half of the annual funding is needed "to address the continent's power supply crisis".
The report says: "Power is by far Africa's largest infrastructure challenge with 30 countries facing regular power shortage and many paying high premiums for emergency power."
Among other things, the report refers to the need for "institutional strengthening of the sector line ministries" to ensure construction of new assets begins early enough to come on stream when needed".
n WATER: Africa has a similar water endowment to other continents but captures less for its development. Less than 5 percent of agricultural land is irrigated, less than 10 percent of hydropower potential has been tapped. One in three Africans has to make do without any kind of toilet facility. Households devote substantial resources to developing their own on site facilities.
n TRANSPORT: Africa has seen strong growth in air traffic in recent years. Only a handful of African ports are large enough to receive calls from major shipping lines. The importance of railroads has declined markedly over the past 30 years. Improving road accessibility in rural areas is critical to raising agricultural productivity. Source: World Bank
n ICT: Between 1999 and 2006 the share of the African population living within range of a mobile signal mushroomed from 5 percent to 60 percent. Africa has ' million new cellular subscribers, almost all on prepaid telephones. Signal coverage could profitably be expanded to cover over 95 percent of the population without any public subsidy, by reducing regulatory barriers. A monthly basket of prepaid telephone services costs $12 in Africa but only $2 in south Asia. An international phone call within Africa costs significantly more than a call to the US. As countries hook up to sub-marine cables the price of international communication can fall by as much as one half.
n POWER: Only a fifth of sub-Saharan Africa's population has access to electricity. At present rates of electrification, most African countries will fail to reach universal access by 2050. Africa's power costs are twice as expensive as elsewhere. Africa is well endowed with large-scale, cost-effective energy resources but they tend to be located a long distance from major demand centres. There is a financing gap of $23 billion a year.
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