Africa Matters is a blog that follows the news and offers analysis of African affairs. Our aim is to delve deeper into the issues of African politics and development. We don’t presume to be experts, and we don’t presume to have all the answers—we are just trying to ask the right questions.

Saturday, October 18

Investing in infrastructure

Anyone who has spent time in a city like Kampala knows what a headache poor roadways are—in town, potholes riddle the streets, some growing so large that they could literally swallow a whole car, causing one-, two-, three-hour-long jams as drivers fight for the small sliver of pavement remaining in a key intersection. Outside urban areas, things are worse: conditions can get so bad that, if you have a car that can handle it, you're often better driving in the dirt along the shoulder than suffering the craters pockmarking the tarmac. Most puzzling, though, is that the conditions aren't necessarily a product of disrepair—but more misrepair. A pothole will be filled and paved over, and then open again within a matter of weeks. During a year, I saw neither the beginning nor end of the repaving of the main artery serving northern Uganda. In the meantime, workers set up speed bumps, every 10 yards or so, for miles at a time—the tedium of riding over these is even worse than the jolting you get from potholes.

Some countries are better than others (Rwanda, for one, seems to have its act together), but frequently infrastructure suffers from a lack of foresight and capital investment. In Uganda, in preparation for CHOGM and the influx of high-level visitors it brought, the government launched a massive clean-up campaign, part of which entailed repairing many of Kampala's roads. Afterwards, though, the permanent secretary of the Ministry of Works and Transport told the Parliament that none of the improvements would last more than two years, as funds had been disbursed too late to do the job both well and by the deadline—so it was just done poorly.

It is auspicious, then, that the Economist reports this week on some private-sector leaders taking on Africa's infrastructure woes.  The sorry state of African transport is currently a substantial obstacle to development—progress on this front is often hampered by corrupt, distracted, or overstretched governments, nor does it make for a particularly popular object of foreign aid.

The loss is huge, though: shipping a ton of wheat to Kampala from Mombasa (the closest port, and the source of the vast majority of Uganda's imports) costs more than shipping it to Mombasa from Chicago.

It seems that a handful of foreign companies, however, have taken it upon themselves to fix things.  Their motives are not altruistic: the leader so far, Bolloré Africa Logistics, earns $2 billion in revenues annually from its Africa business (20% of its total) and projects growth of 12% to 17% for each of the next five years.

Still, these companies are providing an important service, one that perhaps the private sector is best-placed to undertake in Africa.  Improved efficiency in the journey from source to market will have widespread benefits for people along those routes.  Further, such efforts can help to actually generate African industries, not simply strengthen them; Bolloré, for example, has a deal with a Western company to transport tobacco from farms to factories to markets, all within Africa—this presents a step forward for a continent that is, by and large, an exporter of raw goods and importer of finished products.  And the ultimate effects may prove to be even deeper.  Ivorian officials, for instance, credit Bolloré's continued investment in cocoa exports throughout the war with forestalling Côte d'Ivoire's outright collapse.  The Economist also predicts that improvements in logistics will, in turn, improve governance, by increasing tax revenues and reducing opportunities for corruption.

There are some worrying signs here, though.  Most of these investments are being made by foreign companies, and many have already established monopolies in vast swaths of the continent.  Currently, Bolloré oversees 80% of West Africa's non-oil exports; another company, Dubai World, controls all of the ports in the Horn of Africa.  Better infrastructure will no doubt pay dividends for years to come, but at what cost to Africa's indigenous industry?

Nevertheless, investment by companies like Bolloré may, at the very least, signal some newfound but much-needed faith in African economies.  The continent as a whole possesses more potential for investment than anywhere in the world, yet persistent instability in many countries tempers outsiders' confidence in these markets.  And, if there's one thing we've seen in the last few weeks, when watching market indices has felt like trying out the latest Six Flags ride, it's that confidence is the keystone.