Accelerated Infrastructural Growth In Africa through Technology

Accelerated Infrastructure Growth

Velma Okoyo

M&A Associate

Infrastructure is a key development driver and a critical enabler for productivity and economic growth in Africa. This is according to the Global 2030 Sustainable Development Goals (SDGs) signed by all African countries in 2015.[1] A decade away from the policy endpoint, African countries are still trying to figure out the policy mixes that would enable them achieve these targets. For many countries, financing and implementation remain the largest hindrances.

Investment in infrastructure accounts for more than 50% of overall improvement in Africa’s economic growth and has the potential to achieve much more. As much as Africa’s infrastructure growth has been improving, it still lags behind the global average. Africa’s annual financing needs for infrastructure stand at US$130 Billion-US$170 Billion. According to UNCTAD, African countries need to enhance domestic resource mobilization and improve fiscal policy efficiency and efficacy to narrow this financing gap.

Africa’s vast infrastructure deficit provides an opportunity to leapfrog to new, more efficient technologies.[2] For businesses involved in the development or financing of infrastructure projects, this represents a great opportunity since development of infrastructure is synonymous with the development of Africa and unlocking her potential.[3] Africa’s internet penetration remains low at 25% and so is access to electricity which is at an average of 43% compared to 87% globally, limiting the adoption of life-changing technologies.[4] Thus, more needs to be done in investing in both hard and soft infrastructure.

As the world’s growth frontier, Africa is being closely watched with the narrative having persisted for over a decade. The main reasons for this optimism include: Africa is home to the world’s youngest population, it is poised to become a major consumption market, and most of its population is mobile-enabled. Today, Africa’s digital generation is using technology to solve various socioeconomic challenges.

The World Economic Forum recently launched the Africa Growth Platform. This is an initiative aimed at helping African startup enterprises grow and compete internationally. With early-stage entrepreneurial activity 13% higher than the global average, Africa is well placed to get startups off the ground, but it also has a higher-than-average failure rate due to insufficient support and infrastructure (World Economic Forum).  This platform is set to bring together governments, investors, and businesses to help these companies thrive and become more sustainable.

African countries are forging strong partnerships with players in the private sector both regionally and internationally to accelerate investments in strategic areas of technology. Mo Ibrahim and Tony Elumelu are already championing investments in health, education, governance and entrepreneurial development. In addition, other players are setting up tech hubs and investing in youth-led tech start-ups that are changing the face of the continent. With a grasp on the “Fourth Industrial Revolution” concept, more than 400 tech hubs have sprung up across the continent with Nigeria, Kenya and South Africa emerging as internationally recognized technology centers.[5] Currently UNDP is investing heavily in alternative models of developments to scale up solutions and through its 60 SDG Accelerator Labs with more than half (36) in Africa, the continent is poised for unprecedented development. We can already see this development as in 2019, an unprecedented amount of US$1.34 billion was raised by start-ups in Africa.

These countries and cities host thousands of startups, along with the incubators, accelerators, innovation hubs, maker spaces, technology parks and co-working spaces that support them. However, these initiatives are largely being driven at a city or enterprise level rather than an integrated national level. According to the World Economic Forum’s “Readiness for the Future” report which analyzed 25 African countries’ preparedness to capitalize on emerging technologies, 22 were classified as having a low level of readiness for the future due to lack of enabling conditions. Beyond tech platforms and innovation capacity, these include a robust institutional framework, the right skills and talent, the ability to attract global trade and investment, availability of sustainable resources and a thriving demand environment. African countries, therefore, need to be overcome significant hurdles to transform to digital economies.

To do this effectively, Africa’s fragmented system needs to be turned to a cohesive innovation eco-system. The World Bank suggests the comparative success of certain African tech clusters can be attributed to the establishment of organic, multi-stakeholder ecosystems and that these are more effective than initiatives led by government, the private sector or academia alone. If Africa can develop these clusters further and create an integrated innovation ecosystem to tackle the fourth Industrial Revolution, it stands to supercharge its economies, its societies and the livelihoods of millions. The future of development is certainly in Africa. Despite the challenges, it is becoming a center for big-tech investments and commercially-oriented start-ups.

 

[1] United Nations Economic Commission for Africa- Economic Report on Africa 2019

[2] African Development Bank- Infrastructure Development

[3] Rand Merchant Bank- Infrastructure in Africa: The Growth Essential

[4] UNDP Africa

[5] World Economic Forum- Innovation rather than Industrialization

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