Trade and Infrastructure in Africa: Recent Developments

That infrastructure is an important ingredient for international trade? cannot be gainsaid. According to a ?2022 World Bank blog titled “How does infrastructure support international trade?”, patterns of shipping, transhipping, and distribution mean that trade depends not only on the quality of infrastructure in the two trading countries, but also of that in key third party countries on the trading network. Further, with regards to integration especially in the developing economies such as those in Africa, addressing infrastructure connectivity is as important as addressing other non- tariff barriers.

Critical questions around Africa’s infrastructure include: what is the state of infrastructure especially ?transboundary infrastructure in the continents?; what the financing options are available for African countries (and? are they sustainable given the debt crisis some Africa countries face)?; and, what are ?geopolitical discussions around infrastructure [financing] in Africa.?

This edition brings to you some interesting developments, discussions , data, and perspectives ?around Africa’s infrastructure using some of the recent developments.

Africa’s Market Integration

According to research, Intra-African trade has generally been very low relative to extra-continental trade. ?A 2021 report by UNCTAD notes that the export potential of Africa is undermined by a high dependence on primary commodities (mineral fuels and raw products) which represent about 70% of extra-African exports, while manufactured goods account for only 15%.

Infrastructure explained.

In ?trade parlance, infrastructure as a trade facilitation measure ?incorporates many elements all of which positively contribute to easing of trade. Perez, A., & Wilson, J. S. in their work “Export performance and trade facilitation reform: Hard and soft infrastructure” for? instance, indicate that trade facilitation measures can be undertaken along two dimensions: a “hard” dimension related to tangible infrastructure such as roads, ports, highways, telecommunications, as well as a “soft” dimension related to transparency, customs management, the business environment, and other institutional aspects that are intangible.

According to Africa Union’s ?Program Infrastructure Development for Africa (PIDA), infrastructure is key hence, the lack of infrastructure affects productivity and raises production and transaction costs. PIDA is one of the ?six continental frameworks have been developed under AU’s Agenda 2063 to address the development of key sectors such as Agriculture, trade, transport, energy and mining. The African Development Bank on its part notes that ?infrastructure contributes significantly to human development, poverty reduction, and the attainment of the Millennium Development Goals (MDGs).

State of Africa’ infrastructure:

Research and analysis paint a more or less complete picture of Africa’s infrastructure needs. Jerry Harr in his ?April 2023 piece “ Modernizing Infrastructure Vital to Fulfilling Africa’s Promise” notes that ?both economic and demographic growth in Africa has created the need for ?accelerating and scaling up infrastructure development. These ‘ push factors’ include? the predictions of 26 more African countries doubling their population in the next 30 years and demand for electricity ?increasing by 93% by 2035, among others. In terms of the financing gap, PIDA estimates that closing Africa’s infrastructure gap should ??cost ?around $360 billion between 2011- 2040.

?Latest Infrastructure financing deals , and the Players

PGI

?In 2023, the G7 Leaders Formally Launched ?the Partnership for Global Infrastructure and Investment (PGI). According to a White House Statement, PGI ‘will deliver game-changing projects to close the infrastructure gap in developing countries, strengthen the global economy and supply chains, and advance U.S. national security Under this the ?U.S. International Development Finance Corporation (DFC) recently announced new DFC ?$250 million? financing in support of the Lobito Corridor, which extends across Angola, Zambia, and the Democratic Republic of the Congo. It is noteworthy that the African Development Bank has ?also signed a Memorandum of Understanding (MoU), joining global partners to mobilise resources for the Lobito Corridor and the Zambia-Lobito rail line in southern and central Africa.

EU-Africa

Recently, during the ?Italy-Africa Summit, the European Commission (EC) and the African Development Bank Group have formalised a new Financial Framework Partnership Agreement to boost investments in infrastructure projects in Africa. The agreement renews the partnership between the two organisations. It opens a wide range of opportunities for both organisations to deliver new joint financing for infrastructure projects. However, the individual projects are yet to be identified. And this must be seen against the backdrop of EU’s Africa-EU Global Gateway Investment Package through which the EU will support the African continent with €150 billion worth of investments.

Italy’s Mattei Plan

At the one day Italy-Africa Summit, The government of Italy unveiled a near US$6 billion plan to’ support African development’. Again, these have been critical voices ?regarding unstructured announcements such as this. For example , African Union Commission Chairperson Moussa Faki ?noted that:

?“I understand that the Mattei Plan, proposed by Madam President of the Council, about which we would have liked to have been consulted, is consistent with this. Africa is prepared to discuss the aspects and modalities of its implementation. I must stress, here, the need to match actions with words. You will understand that we cannot be satisfied with promises that are often not kept…”

With the mentioned ?infrastructure financing gaps, are the ongoing ‘ Infrastructure deals’ the way to go in addressing Africa’s infrastructure challenges? Or are they simply a manifestation of great power competition? More particularly, are these formations to? counter China’s Belt and Road Initiative (BRI)? We shall be exploring these discussions in the coming editions.

Thank ?you and please leave your comments.