Programme for Infrastructure Development in Africa (PIDA)

The Programme for Infrastructure Development in Africa (PIDA) was launched on 24 July 2010 in Kampala, Uganda, along the sidelines of the 15th African Union Heads of State and Government Summit.  PIDA is a continent-wide program to develop vision, policies, strategies and programs for the development of priority regional and continental infrastructure projects in transport, energy, trans-boundary water and the ICT sectors.

PIDA is a joint initiative of the African Union Commission (AUC), the New Partnership for Africa’s Development (NEPAD) Secretariat and the African Development Bank (AfDB) Group. PIDA's program scope is quite broad in coverage. It covers transport (air, sea, river and lake, lagoon, rail and road), energy (electricity, gas, petroleum products and renewable energy), ICT, and transboundary water resources (primarily irrigation, hydropower, and lake and rivers transport), and deals with the regional and continental aspects of these sectors. 

The motivation for this initiative is rooted in Africa's infrastructure deficiencies which continue to hamper the continents growth and economic development. Infrastructure deficiencies also lead to increased production and transaction costs which result in decreased competitiveness for businesses and thereby also hinder the implementation of social and economic development policies.  The 3 institutions further recognize that in Africa:

• There is access to electricity for only 30% of the population compared to rates ranging from 70 to 90% for other major geographical zones of the developing world (Asia, Central America and the Caribbean, Middle-East and Latin America)
• Transboundary water resources constitute approximately 80% of Africa’s freshwater resources. However, current levels of water withdrawal are low with 3.8% of water resources developed for water supply, irrigation and hydropower use, and with only about 18% of the irrigation potential being exploited.
• A telecommunications penetration rate of about 6% compared to an average of 40% for the other geographical zones, and a very low penetration rate for broadband services and fixed lines.
• A road access rate of 34% compared to 50% for the other geographical zones.
• The global competitiveness indices calculated by the World Economic Forum indicate that for Africa these indices are lower than those of other regions of the developing world and infrastructure appears to be the underlying factor that contributes most significantly to Africa's relatively low competitiveness.  In fact the 2009 Africa Competitiveness Report concluded that Infrastructure remains one of the top constraints to businesses in Africa.

Other issues to be addressed by PIDA will include: the need to fill information gaps on infrastructure deficits, causal analysis, development of prioritized strategic frameworks, establishment of infrastructure investment programs around RECs strategic priorities and improved implementation strategies for these programs.  All national aspects (including, without exception, physical infrastructure, national policies, institutional and regulatory frameworks, technical standards and benchmarks) will only be considered if they have an impact on, or could be affected by, the regional and continental aspects.

The PIDA initiative requires a total amount of USD 11,391,527, which includes the cost of an independent advisory panel of experts (supported by DFID), regional and sector consultative workshops (supported by NTCF and EU) and implementation of an infrastructure database (supported by the EU). The Sector Studies component alone requires a total amount of USD 7,552,343, with the ADF providing 25.6%; the African Water Facility (AWF) with 24.6%, the Islamic Development Bank (IsDB) with 23.3%, and the NEPAD-IPPF USD 2.0 million grant representing 26.5% of the cost.  

Sources can be accessed here.

Impact of Overland Transport on Intra regional Trade in Africa

A recent USITC Study titled Sub-Saharan Africa: Effects of Infrastructure Conditions on Export Competitiveness, Third Annual Report found that intra-regional trade as a percentage of total trade in SSA averaged only 8 percent, compared to 44 percent in East Asia.  The fact is that there are intra-regional trade opportunities among African countries, especially for countries that share a border and in fact neighboring countries often have integrated transport networks and bilateral transit or customs agreements. However, the poor quality, high cost and overall port-oriented design of land transport infrastructure in SSA inhibits intra-regional trade.   

As an example, there is no overland trade between South Africa and Nigeria, the two largest economies in Sub Saharan Africa and as shown in the figure (source: Adapted by USITC from OECD, Africa Economic Outlook 2008) there is little overland connectivity between West and Southern Africa. 

However improvements in land transport infrastructure will not necessarily lower transport prices in regions where regulations render logistics markets uncompetitive. Transport firms capable of exercising monopolistic power may still maintain high transport prices and avoid passing along savings to end-users. For instance where market regulation is strong, there are high barriers to market entry, and freight bureaus and transport associations can have great influence, resulting in high transport prices. As a consequence, freight transport services in Africa can be more expensive than those in developed countries and similarly, the cost of intra regional trade would be high.

While improved road and rail links and infrastructure may increase trade between SSA countries by integrating markets and facilitating specialization, intra-SSA trade effects may also be limited by the fact that many SSA countries produce similar commodities (agriculture, oil and minerals), while demand for imports tends to be for manufactured goods.  Hence there are limited complementarities between regional economies in SSA, and in the absence of changes in the trade profiles of SSA countries, there may be little natural momentum to spear dramatic changes in infrastructure investment.

Impact of Infrastructure Services on Sub Saharan Africa's Export Competitiveness

According to a World Bank Study poor infrastructure conditions increase production costs, economic distance (the time and cost of transporting goods) business uncertainty, and undermine Sub Saharan Africa’s (SSA) export competitiveness. Generally, roads in SSA are poorly maintained, some unpaved and truck fleets generally consist of aging, fuel-inefficient vehicles that are often overloaded and contribute to further road degradation. Poor roads and truck breakdowns result in the slow movement of goods, considerable damage to goods in transit (particularly to perishable goods), and high shipping costs relative to other areas of the world.

Rail networks in SSA are also limited and generally even less reliable than trucks, increasing the dependence on roads to transport goods. “Soft” infrastructure constraints, such as excessive check points, burdensome administrative procedures, and inefficient processing at border crossings, often cause longer delays than poor road conditions. These delays increase economic distance and often reduce product quality, particularly for perishable goods, leading to higher rejection rates, higher production costs, and lower income for producers.  

For instance,  a USITC Study titled Sub-Saharan Africa: Effects of Infrastructure Conditions on Export Competitiveness, Third Annual Report found that some SSA coffee exporters take almost 42 days to export (excluding maritime travel) due to poor roads, long distances to the ports, roadblocks and customs delays while Latin American exporters take only 14 days to export- excluding maritime travel.  This difference in competitiveness means that the SSA coffee farmers are facing a significant tariff equivalent barrier to exports when compared to Latin Americans.

Given the importance of these issues, I will be focusing on the impact of infrastructure services on Africa’s export competitiveness for the next few posts.