In the last decade the size of the African economy has more than tripled, with West Africa now the fastest growing region on the continent.
This year’s African Economic Outlook report, produced by the African Development Bank, the OECD Development Centre and the United Nations Development Program, indicates that a favorable macro-economic climate across West Africa means that growth is likely to accelerate above 7% in the next year, compared with 5.7% for the continent as a whole.
But infrastructure investments in Africa have not kept pace with the growth in demand, despite stats that show the sector has now become one of the most promising investment opportunities, as well as being the key to unlocking the region’s immense economic potential.
“It is clear that infrastructure investment in Africa has not kept pace with the increased demand generated by rapid economic growth and a population now exceeding 1 billion,” said Arun Panchariya, principal and founder of GFCL. “GFCL has been working in partnership with UEMOA [West African Economic and Monetary Union] for nearly two years to identify infrastructure requirements across the region.”
West Africa’s resilience in recent years to global and regional economic challenges has been impressive. The African Economic Outlook expects the region to remain on a high growth path: public and private investment there is now an important growth driver, and that growth has been further supported by developments in the agriculture, manufacturing and services sectors.
Should this level of growth be sustained, important developments to regional infrastructure must take place to support it.
Ernst & Young’s 2014 Africa Attractiveness Survey found that 77% of investors, when questioned, identified infrastructure as the key focus for attracting greater investment to sub-Saharan Africa. By 2035, the African continent will have the world’s largest workforce, with over half of its population currently under the age of 20. That workforce will have a greater need than ever for cross-border transportation networks, import/export facilities, and energy.
Overseas investment in infrastructure is therefore essential if West Africa’s current trajectory is to be maintained. GFCL analysis suggests that return on investments in Africa has consistently been among the highest in the world since the 1990s. That fact is borne out by the fact that foreign direct investment projects in West Africa grew at a CAGR of 27.7% from 2007 to 2013 – the strongest growth on the continent, and indicative of improving investor sentiment.
The GFCL says fiscal policy in the West Africa region has also shown improvement. A number of countries have successfully implemented policies to reduce budget deficits. In 2013, the average overall fiscal deficit for the region was reduced from an estimated -2.2% of GDP to a projected -1.8% in 2014.