AFRICA: GOVERNANCE AND INFRASTRUCTURE IN THE CONTINENT

By Mthuli Ncube

4 October 2010

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The African Development Bank has made infrastructure development a cornerstone in its development agenda with regional member countries.opinion

The Bank recognizes that lack of adequate social and economic infrastructure is one of the key constraints to short- and medium-term poverty reduction in Africa, and has thus been a major force in private and public sector infrastructure development through the provision of financial and technical resources. At the same time, the Bank recognises the increasing importance of governance for infrastructure development and has made good governance an imperative in its lending and non-lending operations.

Africa's lack of the basic infrastructure to facilitate sustainable development and trade – both regionally and globally – and to ensure competitiveness is already known. In particular, for the large number of landlocked countries, their access to markets is hampered by weak transport and energy infrastructure.

While some countries have been able to implement individual projects to alleviate those difficulties, Africa does not have common strategic targets for infrastructure development.

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Good governance is crucial for ensuring the effective and efficient provision of infrastructure. This is largely because, firstly, good governance means that resource allocations will reflect national developmental priorities and thus respond to societal demands.

Secondly, good governance promotes accountability, reduces corruption and therefore minimises resource wastage through inefficiency.

And finally, good governance ensures stability (economic and political) and reduces the level of risk associated with large and lumpy infrastructure investments. This in turn facilitates the mobilisation of both public and private sector financing resources that are critical for infrastructure development.

However, governance is multidimensional, and the question of its definition and measurement is problematic. Against this background, this article examines the relationship between governance – based on the Ibrahim Index – and the quality of infrastructure in Africa.

There have been considerable changes in the delivery of national infrastructure services across Africa. However, performance in terms of infrastructure service delivery and quality continue to vary across countries. A simple analysis of the extent of association (correlation) between specific variables in the Ibrahim Index seems to suggest that not all components of governance, as defined by the Index, are important determinants of infrastructure quality.

Rather, it is those aspects of governance that impact on costs, risk levels and efficiency in resource allocations that matter most. For instance, while corruption is a symptom of failed governance, it can also further weaken the governance environment. Corruption not only raises the price of infrastructure, it can also reduce the quality of, and economic returns from, infrastructure investment.

How is the quality of infrastructure related to governance in Africa? By applying some correlation analyses using selected variables from the Ibrahim Index, it was found that positive correlations are observed between the Quality of Physical Infrastructure and the following variables: Judicial Independence; Property Rights; Corruption in Government and Public Officials; Prosecution of Abuse of Office; and Corruption and Bureaucracy.

The implication from this observation is that a positive relationship exists between governance and the Quality of Physical Infrastructure. A country can therefore improve the quality of its infrastructure through improving governance, especially in the areas of property rights, rule of law, and accountability and corruption. Improved governance improves market conditions, attracts resources and ensures efficiency in their application.A further analysis with scatter plots of country averages shows that there exists positive feedback from governance to infrastructure. This may reflect partly the market responses and donor resource allocations that are determined on the basis of the performance of the recipient country.

The writer is chief economist and vice-president of the African Development Bank.