## Infrastructure Investment: Part of Africa’s Solution

_IMF Blog, October 28, 2014_

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## Bibliographic details
- Authors: Antoinette M Sayeh
- Published: October 28, 2014

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### Context and objectives
- Author: Antoinette M. Sayeh.
- Date: October 28, 2014.
- Purpose: Summarize progress, challenges, and policy actions for addressing sub-Saharan Africa’s infrastructure deficit, drawing on work in the Regional Economic Outlook: Sub-Saharan Africa.

### Current situation and rationale
- Tremendous efforts are under way to upgrade sub-Saharan Africa’s infrastructure, yet needs remain immense, evidenced by frequent electricity blackouts, poor roads, and insufficient access to clean water in many countries.
- Infrastructure is a key challenge for policymakers; improved infrastructure can generate new growth opportunities in manufacturing and services, reduce barriers to intraregional trade, and help economies transition to higher productivity activities.
- Without improved infrastructure, the increase in productivity and greater economic diversification necessary to sustain Africa’s current growth momentum may not materialize.
- The region has experienced a revolution in access to telecommunications, with mobile phone subscriptions exploding due to market liberalization and competition.
- Progress has been far more limited in supplying electricity and water, and in road and railway development; the region still lags far behind other developing regions.

### Findings on financing and investment trends
- Many countries have maintained, or even increased, public investment in infrastructure over the last decade.
- The lion’s share of infrastructure projects are still financed domestically, either from increased tax revenues or local investors buying domestic public debt.
- African banks are increasingly stepping in to finance infrastructure projects.
- External financing has improved: foreign investors have been increasingly drawn to sub-Saharan Africa and new partners, most notably China, have emerged.
- New financing instruments could make institutional investors—including pension funds both from inside and outside the continent—more willing to finance relatively risky, but high-return, projects.

### Shortfalls between investment and outcomes
- Higher investment has not always translated into better outcomes for the population.
- Telecommunications is a clear success story; other sectors—electricity, water, roads, railways—show limited progress despite increased investment.

### Policy recommendations — "Way forward"
- Overall principle: Scale up infrastructure effort together with “investing in investment” — develop a clear vision for the whole sector and plan spending beyond the current budget.

- Strengthen public investment management:
  - Improve public administration capacity to identify, implement, and monitor complex projects within the existing resource envelope.
  - Create a central agency to prioritize projects proposed by various ministries and conduct cost-benefit analyses.

- Mobilize and structure private sector involvement:
  - Look beyond purely public investment; encourage private companies where the business case and business environment are conducive (example: telecommunications; potentially railways or electricity generation).
  - Use public-private partnerships where appropriate, with public sector providing some insurance and the private sector providing execution expertise and innovation.
  - Ensure user fees are appropriately designed to allow companies to recoup investments while minimizing recourse to taxpayer money.
  - Clearly define roles, responsibilities, and potential financial liabilities of public and private partners in such contracts.

- Improve public enterprises and the regulatory environment:
  - Strengthen performance of state-owned utilities that often operate as monopolies, lack proper funding, or cannot generate adequate revenue because prices are set too low by government agencies.
  - Improve regulation to allow public enterprises to deliver better services and to catalyze interest from private investors.

### Outlook
- The region’s formidable growth momentum of recent years is still on; IMF forecasts show sub-Saharan Africa will continue to be the second fastest–growing region in the world, just behind emerging and developing Asia.
- Infrastructure investment is part of the solution, but must be well implemented to ensure sustained and durable growth; it is an opportunity not to be missed and can be done.

*Antoinette M. Sayeh, October 28, 2014 — Infrastructure Investment: Part of Africa’s Solution*

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## References

- [Regional Economic Outlook: Sub-Saharan Africa](http://www.imf.org/external/pubs/ft/reo/2014/afr/eng/sreo1014.htm)

_Source: https://www.imf.org/en/blogs/articles/2014/10/28/infrastructure-investment-part-of-africas-solution_