Power represents Africa’s largest infrastructure challenge, a new thought-leader report argues, noting that the continent’s power infrastructure delivers only a small fraction of that delivered in other developing regions.

Titled ‘Foundations for Growth - Infrastructure Investment in Emerging Markets’, the report has been drafted by Llewellyn Consulting on behalf of commodity trading and logistics group Trafigura.

Co-author Russell Jones tells Engineering News Online that, while the infrastructure gaps relating to water and transport are also “colossal”, the electricity backlog remains the highest priority, as without power many of the other infrastructure challenges cannot be dealt with.

The 48 countries of sub-Saharan Africa (SSA), which have a combined population of 936-million, generate less electricity than France, with a population of 65-million.

“Electricity consumption is also very low, and lags well behind other developing countries. Power shortages and outages are commonplace and often extended (whether because of natural causes such as drought, intermittent oil price shocks, conflicts, or structural issues), leading sometimes to disastrous economic losses,” the report notes.

It points out that African firms are losing 5% of their sales because of frequent power outages, while the figure for the informal sector is estimated to be as high as 20%.

The overall damage to gross domestic product (GDP) as a result of inadequate and poorly maintained infrastructure has been estimates at two percentage points a year. Jones estimates that $2-trillion would need to be spent by 2020, before maintenance capital, to cover the shortfall.

The figure is in line with the African Development Bank estimate that SSA countries would need to invest more than $90-billion a year over the coming decade – the equivalent to around 15% of the region’s GDP – to address the backlog.

Of that, the report asserts, about 40% would be required for the power sector, while 20% apiece would be required for the water and sanitation and transport sectors.

“These spending requirements are much higher than the sums currently spent on African infrastructure − indeed they are about double the total of current outlays,” Jones argues.

To address the funding shortfall of about $30-billion a year, Jones believes that public-private partnerships (PPPs) will need to be pursued on a larger scale. “The only way to make any decent inroads into that shortfall is to see the public sector working much more closely with the private sector.”

However, PPPs are not a “silver bullet” and will need to be well designed and governed if there is any chance of ensuring the benefits outweigh the costs.

Jones believes the global low interest-rate environment is making double-digit-yielding African infrastructure projects attractive to private finance.

However, Africa’s inadequate institutional architecture for the planning, project preparation and delivery remained a critical impediment to private investment.

That said, there is broad-based economic consensus that infrastructure investment will have a powerful influence on raising aggregate demand and supply, which, in turn, will help promote economic development.

“Infrastructure won’t solve all of Africa’s problems – it’s not a silver bullet for development in and of itself. In other words, good infrastructure is necessary but not sufficient. In its absence, though, there will be bottlenecks, issues with power generation and real problems in advancing economic development.”