Assessing infrastructure deficiencies in Africa

By Isaac Twumasi Quantus in Accra.

It is a well-known fact that infrastructure deficiencies undermine the capacity to trade and grow economically. Several meetings and documents continue to point out that lack of adequate and quality infrastructure in roads, railways, electricity and other forms of energy, water, ICT and plant and equipment technology severely hampers the production and sale of goods.

When goods cannot easily cross borders in Africa because of poor transport networks, intra-African trade suffers. But Africa is making some progress in its infrastructure development, though much still remains to be done in terms of inter-State links to facilitate the movement of goods across Africa.

Domestically, there is also a great need for linking production centres e.g. rural farming communities to both urban and sub regional/regional markets. It is argued that improving infrastructure not only domestically but also internationally can raise the profitability of investment in adjacent countries, because it would create a wider market and improve opportunities for exports.

Strong manufacturing capacities built on inter country linkages in the use and transformation of raw material inputs and good infrastructure networks among countries are necessary to boost intra African trade. The development of these capacities should be paramount in Africa’s investment priorities.

However, there are other obstacles to intra-African trade, but they can easily be fixed with a strong political will to implement the right sets of policies. The stark reality in Africa is that many countries rely heavily on trade taxes as a source of government revenue. In some countries, such taxes represent over 50 per cent of total public revenues. Thus, any trade liberalization initiative pursued by them has a significant impact on national fiscal accounts.

Evidence in intra African trade flows suggests that gains from trade liberalization normally accrue to countries that are more industrially developed and are obviously in a better position to capture the bulk of the additional opportunities with their exports.

In some regional economic communities, this imbalance has given rise to only a halfhearted commitment to trade liberalization schemes by certain countries and delays in the establishment of full free trade areas and customs unions.

The establishment and effective implementation of compensation and equalization schemes can help address the fear of loss of revenue and imbalances in gains from trade. Compensation mechanisms can be funded through the imposition of a small amount of tax on imports from outside Africa. The funds thus generated can serve to mitigate revenue losses from trade liberalization. Part of the funds could also be used to finance development projects in the least developed countries in order to enhance their supply and trade capacity and thus their ability to take advantage of the opportunities offered by trade liberalization.

Alternative sources of government revenue such as value-added taxes are other means of reducing dependence on trade taxes. As one of the immediate priorities, the creation of the African common market needs to be hastened, with the aim of promoting intra African trade as a whole.

 

This article was originally posted on Africa Media Network

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