Sep 30, 2010
Infrastructure deficit deters foreign investment in AfricaBack
Africa|Education|Environment|Industrial|Resources|Water|Africa|China|India|South Africa|Gross Domestic Product|Oil|Transport|Infrastructure|Power|Pravin Gordhan|Shantanyanan Devarajan|Water
© Reuse this
Africa only draws about half the private foreign investment that China attracts, at around 15% of the continent's gross domestic product (GDP) growth.
Speaking at a lecture at the University of the Witwatersrand in Johannesburg, World Bank African chief economist Shantanyanan Devarajan said that this was mainly as a result of infrastructure and educational deficits playing a deterring role.
Interestingly, he pointed out that these deficits were rather being brought on by governmental failures than a lack of capital.
Nevertheless, Devarajan said that the continent had made some "impressive" strides in the past two decades as far as policy reform goes.
"Overall, progressive political decisions over certain economic policies that previously hindered growth had significantly improved across the continent."
In 1995, 13 African countries showed inflation rates above 20%, while only two countries showed inflation rates over 20% by 2007.
The progressive policy changes had led to growth accelerating to around 6%, alleviating poverty at around 1% a year for more than a decade, faster than the poverty decline in India.
Devarajan emphasised that the growth also took place outside the traditional oil, resources and commodities sectors.
With the onslaught of the economic recession, however, the continent's growth rate dropped to 1% again, but most African governments continued to follow sound economic policies, which catapulted the continent back to strong economic growth as the world economy started to recover. Africa is set to show GDP growth of around 5% for 2010.
Yet, the continent battles with certain developmental deficits and attracting foreign investment.
Devarajan said that greater African integration through cooperation, rather than trade, could greatly assist the continent in relieving some of its infrastructure challenges.
"Infrastructure, specifically in areas such as power, water, and transport, requires the benefit of economies of scale. This benefit could be leveraged from greater cooperation between the different countries in Africa. The problem is politics, and nations running scared of losing their sovereignty, so when push comes to shove, nobody wants to cooperate."
Further, Devarajan showed that progress had been made in attendance rates at schools, with an average of 80% of pupils now enrolled for primary education across the continent. However, a study done by the World Bank showed that 50% of grade three graduates could not write a complete sentence in their mother language.
The study further showed that 20% of the time teachers were not present at schools, while of those that were present, only 18% were actually busy teaching pupils.
These statistics emphasised Devarajan's earlier point, that these developmental deficits could easily be overcome by some fundamental intervention rather than increased capital investment.
He recommended several changes that could revolutionise the way most African countries and their citizen's operate, including the spread of information, especially relating to funding and where the funding goes, transferring the power to the client such as the communities, and implementing incentive structures that would motivate production.
Devarajan said that Africa was at the brink of a growth offtake, similar to where China found itself 30 years ago, or India, 20 years ago. Nevertheless, it still needed to work on some of the developmental challenges that the continent was faced with and pull increased foreign investment going into the future.
Meanwhile, South Africa has shown an average growth of around 3% over the last decade.
Finance Minister Pravin Gordhan recently declared the country's ambitions of 6% to 7% sustainable growth over the next 20 to 30 years, to eradicate poverty and grow employment rates.
While South Africa has been known as a relatively free economy, certain calls had recently been made for increased State intervention in the country's economic policies, mainly from the side of labour unions. The country has also been plagued with continuous industrial action in recent times.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Updated 2 hours 17 minutes ago Stand a chance to win a CAT Phone. Subscribe to Engineering News & Mining Weekly at a 30% discounted rate. The weekly print magazines will be posted to your preferred postal address. Also gain online access to: Project Browser - providing an overview of latest...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...