Africa has been touted as the new destination for investors. However, the continent still faces a myriad of challenges that hold back its potential, especially efforts aimed at improving business environment and alleviating poverty to ensure sustainable economic growth.
That’s why Africa needs leaders who can tackle these challenges and translate them into opportunities to achieve the ‘Africa we want’ as per the theme of the recently-concluded 27th African Union summit in Kigali.
Supportive policies and infrastructure that promote entrepreneurship and trade on the continent will play a critical role in helping the continent rise from the ‘ashes’ to achieve the African renaissance dreams proclaimed by the likes of former South African President Thabo Mbeki, experts say.
According to Teddy Kaberuka, an economic analyst in Kigali, infrastructures, including transport, power and information and communication technologies (ICTs) facilities, are instrumental in supporting growth in the global economy. That’s the reason why African countries must prioritise infrastructure development to ensure sustainable economic growth on the continent.
“The only way Africa can increase its production and strengthen its economy is by investing heavily in infrastructure development to support the production and ease access to markets and encourage intra-regional trade. Therefore, government must invest more in the energy, ICT and transport sectors because these are enablers of trade and development,” he said. “Without enough power, the continent’s production capacity will be affected, condemning the continent to rely on European imports.”
Kaberuka adds that transport and ICT sector are essential to ensure access to markets by farmers and the industrial sector.
With the majority of the continent’s enterprises falling in the category of small-and-medium enterprises (SMEs), experts call on African leaders to put in place policies and regulations that propel them further and help make them sustainable. The SME sector is the backbone of Africa’s economies, employing the majority of the continent’s youth and supporting millions of households.
However, the challenge of poor infrastructure and cumbersome border policies must be addressed for intra-country and intra-region trade to flourish. Most African countries are not trading with each other, preferring to trade with Europe and America where they face immense challenges as they largely deal in primary products.
According to AU statistics, improving the continent’s infrastructures, like roads, energy and ICTs, can add up to 2 per cent to GDP growth rate per year and also increase productivity by 40 per cent. The World Bank attributed more than half of impressive growth recorded in Africa to infrastructure development on the continent because it offered many countries the required stimulus for growth.
Christian Rwakunda, the Ministry of Infrastructure permanent secretary, said putting in place right infrastructure is key driver for socio-economic development. He says improving transport networks and access to reliable energy and ICTs will reduce the cost of operations and ensure efficient production and service delivery.
“For instance, development of an efficient regional railway transport system would cut the cost of export/import by almost half and reduce the transit significantly. This would open up new opportunities for export and increase regional trade,” he notes.
In addition, access to affordable and efficient energy for local industry is essential to grow the sector which is still almost dormant, he adds. Rwakunda says access to affordable power promotes growth of micro-industries allowing more Rwandans and Africans generally to engage in processing of raw materials into finished products and earn more revenue.
He says lack of efficient infrastructure facilities and skilled human resource has led to high costs of investment, while private investments remain low compared to the expectations of developing countries.
“As a result, development and operation costs remain high in Africa. For example, the recent development of the methane gas power project on Kivu Lake required skilled personnel do carry out research. Besides, implementation of infrastructure projects by foreign firms reduces benefits for local populations,” he says. The PS notes that such situations are mitigated by knowledge transfer programmes to benefit the host countries.
“To address these issues, Rwanda has put in place an investor-supportive investment policy as well as created an enabling environment. The government also promotes public-private partnerships, especially for key projects and export-oriented investments.”
“In addition, technical and vocational education has been given priority to bridge the skills gap in the industrial and other sectors,” he says.
He adds that the government encourages local content development at all levels, including human resources, local materials, local partnership or sub-contracting. Rwakunda says the African leaders need to address the key challenges affecting the continent’s development through regional frameworks that will help fast-track the implementation of the African Agenda. These efforts are crucial for the realisation of the ambitious continental free trade area (CFTA) initiative that seeks to promote trade with the continent, among others.
The CFTA will be made up of over one billion people, with a GDP of $3 trillion. It will also boost trade by 50 per cent among African countries by 2022. The continent’s gross domestic product (GDP) is also estimated to rise from $1.7 trillion in 2010 to $2.6 trillion by 2020, while consumer spending will grow from $860 billion to $1.4 trillion over the period.
Already, plans are underway by three regional blocs on the continent to create the largest free trade area on the globe, from the Cape to Cairo. The tripartite free trade area will bring together the East African Community, the Common Market for Eastern and Southern Africa and the Southern African Development Community into a single new zone. This is envisaged to ease barriers to trade, and stimulate $1 trillion worth of economic activity across the region of more than 600 million people.
However, there is need to support the private sector with improved infrastructure and other facilities and initiatives to enable free movement of people and goods. Easing movement of goods and people is critical in driving the trade and that why the launch of the African e-passport at the Kigali AU summit was a key milestone for the continent that could help in the realisation of this goal. This remarkable step could help drive trade on the continent and spur sustainable socio-economic development.
Some of these efforts could eventually help address most of the challenges hampering business growth across the continent, which will in the long-run contribute to the realisation of the new Africa aspirations, making the African renaissance a reality.