Poor infrastructure in Africa impeding economic growth

In the quest for Africa's social and economic growth, a formidable obstacle looms large: inadequate infrastructure.

The backbone of any nation's development—be it in transportation, healthcare, energy, communication, education, water supply, sanitation, or sewage disposal—infrastructure plays a pivotal role in realising the 2030 Agenda for sustainable development.

These underpinnings influence all 17 Sustainable Development Goals (SDGs), making the delivery of public infrastructure a linchpin in Africa's journey towards sustainable progress.

As per the World Bank's 2019 report, titled "Beyond the Gap," the estimated annual investment required in infrastructure for low- and middle-income countries through 2030 is a staggering $1.5 trillion.

Furthermore, the International Finance Corporation underscores the dire need for Sub-Saharan Africa (SSA) to allocate approximately 7.1 percent of its GDP annually to infrastructure investments until 2030, closing the gap and achieving its SDGs. Unfortunately, reality falls short, with current investment hovering at around 3.5 percent of GDP, forcing SSA governments to shoulder the majority of infrastructure financing from their own resources or external borrowing.

Yet, addressing this infrastructure demand demands more than public resources can muster. Constraints on public sector funding, compounded by the impact of the Covid-19 pandemic and recent global economic downturns, have driven many governments to actively seek private sector partnerships to bridge the financing gap for essential infrastructure and development projects.

Enter public-private partnerships (PPPs), hailed as an avenue to access capital, facilitate off-balance sheet borrowing, foster innovation, and share risks. They have become an indispensable mechanism for designing, constructing, financing, and operating vital infrastructure facilities. In the words of the World Bank, PPPs constitute long-term agreements between private entities and government bodies, where the private sector bears significant risk and management responsibility.

Over the last decade, Africa has enthusiastically embraced such partnerships, with road, bridge, and dam construction topping the list of common ventures. The realms of power generation, renewable energy, healthcare, and telecommunications have also witnessed a significant uptick in collaborations. Across East Africa, the implementation of PPPs has taken root, bolstered by robust PPP laws, regulatory frameworks, supportive policies, political stability conducive to PPP growth, and tools for risk mitigation and credit enhancement. These advancements have enhanced the viability of PPP project pipelines in numerous countries.

In response to these developments, the region has witnessed a surge in groundbreaking PPP projects. Kenya, for instance, stands out with a remarkable portfolio of 39 projects, representing a substantial investment of USD 5.2 billion, primarily channeled into the electricity, ICT, and transportation sectors. Additionally, there are 64 more PPP projects in the pipeline, promising further advancements.

Uganda has not been left behind, marking notable achievements such as the Umeme Power Distribution Concession, Rift Valleys Railways Concession, Kampala Serena Hotel Concession, Bujagali Power Generation, Eskom Power Generation Concession, and the ongoing construction of the Kampala Jinja Expressway Toll project.

Meanwhile, Tanzania has seen the emergence of the Songas gas power project, while Rwanda has undertaken the ambitious Kigali Bulk Water Supply Project delivering a daily supply of 40 million liters of clean water. Ethiopia, too, has made significant strides, with 12 projects receiving the greenlight after successfully passing the Project Pipeline Screening for Potential Infrastructure PPPs, as endorsed by The Public Private Infrastructure Advisory Facility (PPIAF).

While PPPs have traditionally centered on quantitative assessments of "Value for Money," it is imperative to pivot towards assessing their qualitative impact on the communities affected by these initiatives. Recognising the colossal financial requirements of the SDGs, developing nations can harness PPPs as a strategic instrument to propel their SDG aspirations in harmony with the Vision 2030 framework.

To achieve this, projects should be geared towards addressing urgent global challenges like climate change, mitigating hunger, poverty and championing the cause of gender equality while empowering women.

- The authors are transaction advisors with PwC Kenya