Africa Needs More transport infrastructure- UNECA

Quality Roads: 60,00Km deficit
The UN Economic Commission for Africa, UNECA, has just published a report on the effect of AfCFTA, on the transport sector. It says that the FTA will nearly double intra-Africa trade by 2030. This will raise demand for transport services by nearly 50 percent by 2030 resulting in new demand for transport equipment- Trucks, Wagons, Airplanes, and Marine Vessels.  In turn, the increased equipment will put pressure on the existing transport infrastructure- roads, Railroads, Airports, and Sea Ports. This demand spiral will cost US$571 billion to meet, says the report.

 The report quantifies gaps in the sector that could stymie the FTA’s effect and the cost of meeting the new demand for transport infrastructure and equipment. Transport equipment will cost $411 billion while infrastructure will cost US$160 billion says the report. The bulk of the costs will fall on the private sector, that is, Truckers who will cough up S$345.5 billion for the more than two million trucks needed to truck an additional 40 percent increase in intra-Africa trade.

The public sector will pick up the balance, that is, US$62 billion to buy additional Rail wagons, Marine Vessels, and Aircraft.  If we load the US$160 billion for infrastructure, the public sector will pick up an estimated $222 billion.

Railroads: 25000KM deficit

UNECA’s estimates on the cost of infrastructure are in tandem with an earlier estimate by the Africa Development Bank, AfDB, which in 2018,  estimated that Africa needs to invest some US$35-47 billion a year on transport infrastructure for seven years, between 2018 and 2025 to meet the infrastructure deficit.

 Apart from quantifying the transport equipment needed, the report also quantifies the length of transport infrastructure deficit, effectively debunking the thesis that Africa is investing in excess capacity. Instead, it exposes the gaps which it terms opportunities.

Born in 2021, the Africa Continental Free trade Area, AfCFTA, theoretically creates a large market of 54 countries with a total population of 1.3 billion people with a total GDP in excess of $3.8 trillion and an annual consumption expenditure in excess of $4 trillion. The FTA is expected to increase intra-Africa trade by 40 percent in the medium term.

The Paper, Implications of AfCFTA on demand for transport Infrastructure and Services, shows that the FTA will increase demand for transport services by roughly 50 percent by 2045. The transport sector will be the second-largest beneficiary bagging 26 percent of the real gains. It will also form 40 percent of new services production in Africa, says the report. Every industry in the sector will register a three-digit expansion, it demonstrates.

The paper says that the business services sector will be the largest real gainer of trans-Africa trade, bagging 43 percent. However, the study focused on the transport sector.

Demand for transport services will rise between 100 to 255 percent depending on the mode of transport, the report demonstrates. Road transport, which already dominates intra-Africa trade, will rise by 100 percent from 201 million tons to 403 million tons by 2030.  Other industries such as Rail transport will rise 227 percent while air transport will rise 100 percent to 4.5 million tons.

The growth in demand for transport services will trigger an explosion in demand for transport equipment-Trucks, Aircraft, Wagons, and Marine vessels.  This will include; 2 million bulk Cargo and Container trucks, 118,220 bulk and Container Wagons, 254 new Aircraft, and 141bulk cargo and container freight Vessels by 2030, costing a tidy $411 billion.

This new demand, states the report, will put a lot of pressure on the existing infrastructure creating the need to build new infrastructure and upgrade the existing ones. This will cost an additional $160 billion, bringing the entire AfCFTA related cost to $571billion.

There are 2.8 million Kilometres of roads in Africa, of which 445,018 Kilometres are linked to cross-border trade says the paper. Of these, there are 61,450 KM that will require upgrades to accommodate heavier traffic.  These are classified as critical roads. The trans- Africa highways program has 57,300km of these spread over 10 sections in the continent under its armpit. If build, these roads will reduce the length of critical roads to 20,031km.

On rail transport, UNECA projects that by 2030, the quantity of freight transported by rail will rise 520 percent from 0.76 million tons to 39 million tons. Trans-Africa rail freight will grow from the current 0.3 percent to 6.8 percent, also piling pressure on Rail infrastructure and hardware. As of now, Africa boasts 80,607 KM, which is insufficient. There are 26,500KM of rail on the drawing board and if implemented that will raise the total length of railways to slightly over 100,000 KM.

There is still the nagging question; where’s the money? The public sector will need US$262 billion to build transport infrastructure and equipment, especially Marine Vessels, Rail Wagons, and Aircraft. In 2018, AfDB suggested that Africa could borrow from the international financial market which is awash with sovereign funds in the order of US$100 trillion.  It called on African governments to craft bankable infrastructure programs to attract the private sector. This was in recognition of the fact that public sector funding is insufficient to finance the needs.  See also http://eaers.blogspot.com/2019/08/africa-needs-to-invest-12trn-to-fast.html. We will still need more debt.

Three years ago, this publication argued that AfCFTA is a lifeline for struggling African Airlines. See http://eaers.blogspot.com/2019/07/afcfta-african-airlines-hanging-fruit.html. Now, UNECA’s new research says the whole transport sector, regardless of the Mode, is among the largest gainers from the FTA.

However, Infrastructure projects, take a long time to build, say three to five years, even when fast-tracked. This is on the assumption that the funds are already sourced and secured. If the funds are yet to be sourced, dependence on air transport could stretch into the long run. This will provide the needed lifeline for African Airlines reeling from low demand and under-capitalization.

By 2019, Africa airfreighted 2.3 million tons which is expected to double by 2030 to 4.5 million tons. Therefore, to transport freight efficiently, Air transport will a better option in the short to medium term because its infrastructure is already in place.

 

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