By Jonathan Muga, Global Head of Infrastructure Sector: Standard Bank Corporate and Investment Banking
When speaking about infrastructure development in Africa, it’s important to see it in context. Whereas developed nations may have enviable priorities, Africa is lagging in terms of economic growth, social wellbeing and global competitiveness. To attain our goals on these fronts, we need the necessary infrastructure – from transport networks and energy grids to digital connectivity and water systems – to carry our hopes and dreams.
However, within this challenge lies an extraordinary opportunity. If we can get our infrastructure to a fully functional level, Africa’s GDP could potentially double from the current USD3.1 trillion.
This isn’t merely theoretical – we’ve seen how strategic infrastructure investments transform regional economies. For instance, efficient port operations reduce cargo dwell times considerably, directly impacting the cost of goods and regional competitiveness. Similarly, modern rail infrastructure reduces transportation costs by up to 35% compared to road transport, creating immediate economic benefits for businesses and consumers alike.
THE OPPORTUNITY IN NUMBERS
Our infrastructure challenges have not only hampered economic development, they stand as barriers to human development and social progress. The impact of this is not always easy to measure and quantify.
The economic cost, however, can be calculated. The continent has an infrastructure deficit of at least USD100 billion annually – and that’s just to address existing backlogs. Only then will it be possible to invest in growth.
Studies have shown that inadequate infrastructure reduces industrial productivity by as much as 40% on the continent. In the energy sector alone, estimates are that many African economies are losing between 1% and 4% of GDP annually due to an unreliable power supply. The water infrastructure gap is estimated to cost a further 5% of the continent’s GDP.
Water, energy and transport are typically top of mind when it comes to infrastructure. When we talk about improving healthcare delivery, we’re really talking about having reliable electricity that keeps the vaccines cold. When we discuss educational outcomes, we are also speaking about the internet connectivity that gives students access to global knowledge, as well as the safe and reliable transport systems that enable them to get to school on time.
While governments have traditionally been the primary investors in public infrastructure, the scale and complexity of today’s challenges have made it clear that public funds alone are insufficient to close the gap. In recent years, businesses, investors and multinational corporations have recognised that strategic investment in infrastructure is not only essential for long-term economic growth, but also offers substantial opportunities for innovation, returns and socio-economic impact.
Making inroads, one step at a time
There are promising signs. In East Africa, the private sector is already investing in power and road infrastructure in efforts that benefit both businesses and the community.
The transformation in investing in infrastructure seen across Africa is most evident in our ports, where private investment is thriving. Investors are strategically positioning themselves with “one foot in the water and one foot on land” because of the crucial role that seaports play in connecting Africa to global trade routes.
While enhancing port infrastructure is a crucial first step, it is only the beginning. The real challenges – and opportunities – lie in developing integrated transport corridors that link ports to the interior. The importance of these corridors cannot be overstated, especially when considering the transnational corridors connecting countries like the Northern corridor that runs from Mombasa port in Kenya to Uganda, Democratic Republic of Congo and onwards to Lagos in Nigeria. Another is the central corridor from Dar es Salaam port to Democratic Republic of Congo and Burundi. To unlock the full trade potential of such key transport corridors, we need efficient, sustainable ways to transport goods and passengers on rail or road.
Financing is just one aspect of such projects, though. For the Standard Bank Group, deals must not only make economic sense, they must also deliver social impact. When brokering agreements on this scale, preparation and prioritisation are crucial. This is reflected in the low number of proposed infrastructure projects that reach financial close in Africa. This isn’t necessarily due to insufficient capital, but rather to limited policies to support investor confidence and inadequate support during the project development phase, especially given the long lead times required.
It’s important to remember that infrastructure relates to living standards. Once they improve, local and intra-continental trade will grow. Agreements like the African Continental Free Trade Area undoubtedly present unprecedented opportunities, but their success depends entirely on our ability to connect African markets through robust infrastructure networks. After all, any system is only as strong as its weakest link.
Looking ahead, we need to think differently about how we approach infrastructure development. Public-private partnerships are no longer just an alternative – they are becoming a primary vehicle for delivering infrastructure. This shift necessitates a fresh perspective on project preparation, risk allocation and project financing.
Mega Projects in East Africa
- Nairobi – Nakuru – Mau Summit Road PPP
WHAT: Upgrades to 232kms
WHY: Part of the Northen corridor to Uganda through Kenya’s populous Nakuru City
- Nairobi Mombasa Expressway PPP
WHAT : Construction and tolling of 440kms
WHY: New northern corridor road project from Mombasa to reduce travel times by 50%
- Kampala – Jinja Expressway PPP
WHAT: Upgrade and tolling of 77kms
WHY: Part of the Northern corridor from Jinja to Kampala
- Standard Gauge Railway (SGR) – Kenya – Uganda
WHAT : Construction from Naivasha to Malaba (via Kisumu) and Malaba to Kampala
WHY: Rail option on the Northern Corridor
- Standard Gauge Railway – Tanzania
WHAT : Construction of SGR to Kigoma across to DRC, to Burundi and Rwanda
WHY: Rail option on the Central Corridor
