Inadequate infrastructure is one of the top constraints to business in Africa, where energy and transportation are among the main bottlenecks to productivity growth and competitiveness.
According to a study prepared by the staffs of the World Economic Forum, the World Bank, and the AfDB, African firms lose as much as 8 percent of sales due to power outages, and transportation delays can account for as much as 3 percent of lost sales (World Economic Forum, 2007). Poor infrastructure also holds back commercial agriculture. Improving infrastructure thus is critical if Africa, particularly SSA, is to diversify exports, move up the value chain, and achieve sustained growth.
There is thus a large unmet demand; upgrading infrastructure requires financing and technical expertise, both lacking in many African countries. Moreover, traditional donors, bilateral and multilateral, tend to allocate only a relatively small proportion of their funding to infrastructure (Table 4), and for the private sector, investing in infrastructure in poor countries is a high-risk business.
Chinese enterprises have nevertheless been active in Africa’s infrastructure market. They are not newcomers—Chinese engineers and workers have been building large projects such as the Tanzania-Zambia railway since the 1960s. They have also gained experience in modernizing China’s own infrastructure. Their technology may be less capital-intensive and their labor and material costs tend to be lower than competitors in industrial countries, which gives them an edge in pricing and risk taking. Finally, access to substantial, long-term financing in China reinforces their competitive position. It is therefore not surprising that IMF Working Paper African Department What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang October 2007
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The IMF is an international organization
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Since the IMF was established its purposes
have remained unchanged but its
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