new marshall plan

If Africa is to have its ‘Roaring Twenties’, infrastructure needs to come first

By Andrew Dawes

Posted on April 28, 2021 10:36

china kenya rail
A Standard Gauge Railway cargo train rides from the port container depot on a Chinese-backed railway costing nearly $3.3 billion, opened by Kenya’s president as one of the country’s largest infrastructure projects since independence, in Mombasa, Kenya. (AP Photo/Khalil Senosi, File)

Never underestimate the capacity of humanity to rebound from its worst crises. The tragedy of World War I and the Spanish Flu gave way to the Roaring Twenties, a decade that endowed Europe with all the symptoms of modernity and doubled the economy of the United States.

Years later, the Marshall Plan rebuilt Europe, tore down barriers and forged global alliances that remain in place today. What those recoveries shared was grand vision and infrastructure spending on an even grander scale. How can Africa bounce back from its first recession in 25 years? By borrowing from the past and borrowing for its future to usher a new era of growth on the back of large investments in infrastructure.

The US, as we’ve already seen, is stealing from its own playbook. The $3trn infrastructure bill now under consideration is the most sprawling piece of stimulus spending since the New Deal (1933-9) and is already earning Joe Biden comparisons to President Roosevelt.

Africa needs a new approach to infrastructure

Why shouldn’t Africa take a similarly audacious approach to infrastructure that combines the vision and budget of the Apollo programme? According to the African Union, the continent has an estimated infrastructure financing shortfall that could be as high as $90bn.

That includes projects like roads, bridges, ports and power plants that could catalyse Africa’s economic recovery. The deficit in digital infrastructure is no less staggering: internet access increased from 2% to 28% in the last 15 years, but it’s still far short of the connectivity in other regions.

Likewise, we cannot underestimate the need to build a robust, trade-enabling policy infrastructure on which Africa’s next 25 years of growth will depend. Imagine the boost in trade if the world’s largest free trade area, the Africa Continental Free Trade Agreement (AfCFTA), was bolstered by sweeping improvements to the continent’s ease of doing business, currently the poorest in the world. Reforms that reduce how long it takes to set up a business or move shipments through customs are as crucial to development as paved roads or railway.

Naysayers may observe that unlike the US or the EU, Africa lacks the liquidity, resolve and ability to print money on an unprecedented level.

They’ll say that state-led relief programmes like the Marshall Plan, which conferred a total of $12bn (an equivalent of $130bn today) to Western European countries ravaged by World War II, are too costly and unwieldy by today’s standards.

How can African governments invest in infrastructure while they are battling a two-headed monster of Covid-19 and a rampant debt crisis? These are good arguments that it won’t be easy, but not persuasive enough to avoid trying.

As John F. Kennedy said about going to the moon, we choose these sorts of endeavours “not because they are easy, but because they are hard.”

PPPs and allies in high places

One opportunity is Public-Private Partnerships (PPPs). In the logistics sector alone, investments via PPPs have nearly tripled since 2001, according to Okan Partners. African governments will need committed investors that can function as trusted trade partners to mobilise the capital to build thriving cities and industrial ecosystems. In turn, they will need to break down barriers of entry that impede successful PPPs.

And they will also need allies in the world’s top institutions to put African priorities at the top of the agenda. The recent appointments of Nigerian Ngozi Okonjo-Iweala, as chair of the World Trade Organization, and Senegalese Makhtar Diop, as managing director of the International Finance Corporation, are not merely symbolic gestures.

They are strong signals of Africa’s integration into the corridors of international influence.

Okonjo-Iweala’s call for fair, open, predictable and multilateral trading aligns with the prerogatives of AfCFTA. Diop’s IFC 3.0 strategy to mobilise private capital at scale responds to Africa’s greatest need: sourcing foreign direct investment.

Bottom line

In recent years, leapfrogging has enabled Africa to accelerate its development by skipping outdated, inefficient technologies with costly infrastructure. Mobile technology has rendered landlines obsolete.

Renewable energy clusters have become reliable alternatives to central power grids. In other instances, though, there are no substitutes for brick and mortar. Global commerce still depends on infrastructure and functional supply chains.

How one container ship stuck in the Suez Canal could choke 12% of global trade at a cost of $400m per hour reminds us just how fragile we are. Remember that it was just 150 years ago when the Suez Canal was the boondoggle of its time. Excavation took 10 years, it cost $100m (double the initial budget) and it claimed the lives of tens of thousands.

The Roaring Twenties gave the US the world’s first skyscrapers, power plants that nearly quadrupled electricity production and gleaming roads on which the masses drove their new automobiles.

When Africa’s lion economies borrow from the past, they too may roar.

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