Poor infrastructure hinders Zimbabwe growth

Published: 30 January 2018

POOR infrastructure continues to be a serious impediment to inclusive growth in African economies, the African Development Bank (AfDB) has said.

AfDB said this in its 2018 edition of the African Economic Outlook (AEO) that was presented to delegates at the 30th Ordinary Session of the Assembly of the Heads of State and Government of the African Union in Addis Ababa, Ethiopia, on Friday.

AEO is AfDB's flagship analysis of the state of African economies.

"African economies have been resilient to negative shocks, but poor infrastructure is a serious impediment to inclusive growth," said the report.

The report noted that Africa's infrastructure was still behind those of other regions in quantity, affordability, and quality due to lack of investment.

It observed that Africa needs higher growth and investment rates, but debt levels must be monitored closely.

In the AEO, the regional financial institution noted that public debt ratios were on the rise, stocked by appetite for infrastructure spending.

The economic report also highlights that 40 countries on the continent recorded increases in external debt between 2013 and 2016 with nine countries experiencing a decline.

It stated that although there were growing concerns about the debt levels in Africa, if used productively, the debt may be necessary to unlock long-term growth potential.

"Tackling poverty will need efforts to increase employment elasticity of growth. The employment elasticity of growth of 0.41 percent in Africa is below the desirable 0.7 percent for all developing countries.

"Pressing policy concern is therefore to ensure that growth is reflected in creation of high and quality jobs," added AfDB in the economic outlook report.

It recommended that for the international financial community to resolve the savings glut, there is a need for the adaptation of a policy of more negative real interest rates in high-income countries; implement use of excess savings to finance public investment in rich countries as well as facilitating the flow of capital to developing countries.

Estimates show that investment needs for infrastructure on the continent range from $130 billion and $170 billion annually.

The bank proposed that many new financing mechanisms could be implemented in all African countries, taking into account the specific economic circumstances and the productive structures of national economies.

It also urged countries on the continent to focus on how best they can use scarce infrastructure budgets to achieve the highest economic and social returns.

AfDB in the AEO called for infrastructure in special economic zones and industrial parks and the mobilisation of domestic resources through well-targeted subsidies and rigorous collection of fees using technology.
- zimpapers

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