Investing in infrastructure can open a variety of doors for intra-African trade

03 May 2019 2 min. read

Physical connectivity amongst African countries is as crucial and regulatory freedom in order to ensure success of the African Continental Free Trade Agreement (AfCFTA), according to Chairman of KPMG Africa Kunle Elebute. Infrastructure development across the continent becomes crucial in this scenario.

A number of studies in recent years have demonstrated the need for infrastructure development across the continent of Africa. A study by the Boston Consulting Group in late 2017 revealed that the deficit in funding for infrastructure in sub-Saharan Africa currently stands in excess of $100 billion.

Kunle Elebute was elevated from Managing Director of KPMG Nigeria to Chairman of KPMG Africa around the same time, and has since been monitoring the situation carefully. According to Elebute, an increase of investment in infrastructure will have a number of far-reaching benefits for the African economy.

For instance, an increasing share of funds on the continent is being placed in pension funds and investment funds. Elebute argues that infrastructure is a lucrative and long-term area of investment for these funds, and usually has a strong guarantee of future cash flows and returns on investment.

Investing in infrastructure can open a variety of doors for intra-African trade

Nevertheless, crucial to the generation of these cash flows is to ensure that investment in infrastructure doesn’t stop at the development stage, but continues to maintaining the infrastructure on the continent. Currently, according to Elebute, most infrastructure deteriorates after a decade, due to poor maintenance.

In addition to offering such a channel for investment, investment in infrastructure will also lead to the interconnectedness of economies on the continent, which is crucial to the development of the region’s economy, primarily due to the expansive and varying geographical conditions.

A number of countries on the continent are coastal, while others are landlocked, and the movement of goods from ports to inland areas requires comprehensive transportation systems. Such mobility is crucial for the success of AfCFTA, which was signed in March 2018 to ensure a unified continental economy.

Elebute argues that there are sustainable models of infrastructure development from across the globe that can be followed to emulate success, although financing is a crucial aspect of realising this goal. Such financing need not come from within the continent, but can also come from other regions, including China and the United States.