How can Africa leverage the potential of cross-border infrastructure to address critical economic bottlenecks, boost regional integration and intra-African trade, and create employment for the continent’s growing population?
Cross-border infrastructure (CBI) is a key prerequisite for the regional integration of landlocked economies and the facilitation of trade in goods and services. In the energy sector, hydroelectric plants can support stable regional electricity trading markets that distribute affordable electricity via cross-border transmission lines. In the transport sector, cross-border road and rail infrastructure is necessary to build regional economic development corridors. Hence, CBI is an effective solution to address some of the most critical bottlenecks to regional integration and economic transformation in Africa.
In comparison to national infrastructure, CBI involves transnational risks and benefits, large scale structural complexities, and the coordination of multiple key actors who are scattered across countries and governance levels. Project costs and benefits can be unevenly distributed among countries, thereby challenging national ownership and commitment. Moreover, while a substantial part of the cost of regional infrastructure and integration is borne in the short term, the national and regional gains from the development of CBI can take some time to materialise, especially for small and less developed economies.
Consequently, some of these initial challenges may lead various actors to underestimate the multifaceted gains associated with CBI, which can undermine its development. To address this issue of misrepresentation, this article looks through the lens of job creation to emphasise one of the central promises of CBI development: unlocking socio-economic opportunities and promoting sustainable development on the African continent.
Three dimensions of job creation
To illustrate the importance of regional infrastructure as a key driver of socio-economic development, three dimensions of job creation are analysed: the direct employment effects, indirect employment effects, and spill-over effects. Emphasis will be put on the latter dimension, as the first two have been widely discussed elsewhere and spill-over effects demand a nuanced narrative to reveal the broader socio-economic benefits of CBI.
Direct employmenteffects are the jobs created in the preparation, construction, and operation and maintenance (O&M) phases of an infrastructure project. For example, a construction company hires 1,000 workers to build a transmission line that runs between three countries, and a concessionaire then hires a staff of 300 workers for O&M during a 20-year contract.
Indirect employmenteffects consist of the jobs created as a result of the goods and services inputs needed for the realisation of infrastructure projects, i.e. jobs in the supply chain. In the previous example, the firm that constructed the transmission line buys cement and cables for construction and technical equipment for O&M, hence creating jobs in other sectors of the economy.
Regional economic spill-overeffects comprise macroeconomic gains stemming from the infrastructure service provided, i.e. the overall economic impact. The constructed transmission line improves the business environment in the region by providing cheaper and consistent electricity access to local firms. This may lead to the establishment of a market cluster that encourages manufacturers to invest in factories due to a stable power supply and transportation infrastructure. These market outcomes are also beneficial for farmers, as lower transport costs and additional trade result in productivity gains and higher incomes.
How can regional infrastructure spur sustainable development?
Overall, the development of CBI results in better integrated economies. A transport corridor has the potential to revitalise existing regional markets, create new ones, and support the establishment of value chains through commercial and service hubs along the corridor. This can lead to higher intra-African trade and efficiency gains, eventually promoting economic diversification on the continent and allowing African economies to become industrialised middle-income countries. During this process of productive capacity development, a variety of skills need to be developed to take advantage of the newly created employment opportunities. However, the medium-to-long term employment and growth effects generated by CBI are frequently overlooked in policy making.
In this way, regional infrastructure can play a decisive role in achieving two important and interrelated Sustainable Development Goals (SDG): Promote sustained, inclusive and sustainable economic growth, full and productive employment, and decent work for all (SDG 8); and build resilient infrastructure, promote inclusive and sustainable industrialisation, and foster innovation (SDG 9). It can also support various other SDGs in a more indirect manner.
Why should cross-border infrastructure be prioritised?
The realisation of African countries’ aspiration to transform, grow, and industrialise their economies, as expressed in the African Union’s Agenda 2063, depends on reliable infrastructure services, which are critical to boost intra-African trade, diversify economic production, and stimulate employment by generating business opportunities. As recently emphasised by the World Bank’s vice president for Africa, Mr. Makthar Diop, such a scenario can be achieved through “full-fledged programs” that foster the development of infrastructure and the creation of regional value chains.
One such “full-fledged program” that focuses on cross-border implementation of energy and transport corridors and regional internet exchange networks is the Programme for Infrastructure Development in Africa (PIDA). PIDA is anchored in the 2063 Agenda and was recently emphasised at the 2017 World Economic Forum as one of many Pan-African strategies offering tangible solutions to the significant challenges impeding intra-African trade and industrialisation. The New Partnership for Africa’s Development (NEPAD Agency), with support from the German Government, is currently developing a methodology for estimating direct and indirect labour market effects resulting from PIDA projects, as well as a manual on how to optimize job creation and skills development during the infrastructure project cycle.
In order to address key economic bottlenecks, a promising approach lies in the development of regional economic development corridors, which integrate hard infrastructure (such as transport, information and communications technology (ICT), and energy infrastructure) with soft infrastructure issues such as customs and trade regulation and one-stop border posts (OSBP) to galvanise regional economic activity, connect rural areas to market opportunities, and generate new job opportunities. A key element of regional economic development corridors are regional transport corridors, which comprise port, road, and rail infrastructure, usually spreading from a harbour to regionally integrate hinterland economies. In Africa, there are more landlocked countries than in any other region (16), and the continent also ranks first in land border’s share of total border’s length (84 percent). Thus, CBI and regional economic development corridors not only have the potential to generate enormous economic gains from regional integration, but they are also critical in connecting landlocked economies to regional and global markets.
Creating new value chains and boosting growth through regional transport corridors
When a regional transport corridor becomes operational, its road, rail, and port infrastructure triggers spill-over effects that can catalyse a comprehensive process of regional socio-economic development. In economic theory, as transportation costs decrease, traffic increases, and as a result, trade in goods and services intensifies. Due to lower trade barriers and enhanced market opportunities, new commercial and service hubs are established along the corridor. On the one hand, regional transport corridors can incentivise the creation of new businesses, and on the other hand, they can also connect existing manufacturing and agricultural clusters to new cross-border markets. Likewise, feeder roads can link agricultural areas with the manufacturing sector, similarly creating the potential for new value chains. The new corridor can thus generate substantial competitiveness and productivity gains, create new economic opportunities, and ultimately lead to an increase in national and regional GDP.
To give a practical example, the Central Corridor, a so-called “multimodal” transport system (road, rail, and port)and flagship program of PIDA, starts from the Port of Dar es Salaam and connects Tanzania with the Democratic Republic of Congo, landlocked Burundi, Rwanda, and Uganda, through integrated transportation services. At African ports, the average container processing time is 20 days, compared to three to four days at other international ports. As a result of the Central Corridor infrastructure programme, the average container processing time at the port of Dar es Salaam is expected to decrease from 29 to 9-11 days and the container capacity is expected to double from 600,000 to 1,2 million 20-foot equivalent container per year. The enlarged bridge connecting Rwanda and Tanzania allows for the transport of 400 tons of cargo, compared to the former capacity of 56 tons, and the number of official border checks is expected to decrease from 17 to three thanks to OSBPs. The Central Corridor is opening up new value chains for domestic producers and new opportunities for economic development.
On top of providing adequate physical infrastructure, addressing the critical issue of soft infrastructure (including though OSBPs, port processing, and logistics) can lead to vast efficiency and competitiveness gains, as illustrated by the Central Corridor project. These gains, in turn, can trigger a broader process of socio-economic development and overall structural transformation. To unfold the full regional economic potential of the Central Corridor, several elements are currently being implemented.
Regional economic spill-over effects
Commercial and service hubs have the potential to transform into labour intensive industrial parks and to boost employment and economic growth. For example, if implemented as planned, projections estimate that the Hawasa Industrial Park in Ethiopia may generate 60,000 jobs and US$ 1 billion in apparel export value per year. Generally, industrial parks might further develop and turn into growth poles that agglomerate multiple industries. Such poles benefit their periphery through spill-over effects such as technology, knowledge, or institutional transfers, and as a result, they can foster economic growth in neighbouring states or other parts of the country. An important aspect is that CBI lays the groundwork for this process by incentivising private sector involvement and financial investment, which is needed for the establishment of new factories and branches of private sector operators that can, with the help of ICT, energy, and transport infrastructure services, eventually develop into fully integrated regional economic development corridors involving industrial parks and growth poles.
Regional transport corridors have tremendous potential in terms of direct, indirect, and spill-over job creation. However, these employment opportunities – that can be related to the construction of roads, the O&M of power plants, regional electricity trade, technical machinery operation, or the establishment of small and medium sized businesses – require specific skills. In this way, all three dimensions of job creation encourage public and private institutions to develop a workforce with technical and entrepreneurial skill sets, that is able to benefit from these newly created job opportunities. This is well illustrated, for example, by a recent ECOWAS initiative that currently runs a feasibility study with a view to maximising the creation of business opportunities for women in the energy value chain.
Ensuring cross-border infrastructure’s potential is fully tapped
To illustrate the potential gains of cross-border infrastructure (CBI), this article explained the extensive gains associated with CBI development in Africa by looking at its effects on job creation. To ensure this potential is fully tapped, it is crucial to foster an understanding among key African and international stakeholders of CBI development as a cross-sectoral and multi-faceted process able to address multiple policy issues in an integrated manner. This should be done by contextualising CBI in its broader chain of effects, including in terms of job creation and skills development, regional economic integration, diversification of economies and revenue streams, industrialisation, and sustainable development. For example, the holistic approach of regional economic development corridors is one particularly promising way to realise and apprehend the benefits of CBI.
Although not a panacea, CBI development will be pivotal in achieving SDG 8 and SDG 9, and in supporting the realisation of other SDGs. However, it is a policy area that is often overlooked and needs to be put higher on the continental, regional, and national agendas for medium-term and long-term policy planning. To be effective, multi-level coordination networks, such as regional and continental organisations, need to be strengthened in their role as honest brokers and coordinators of CBI development. This can only be realised if CBI’s potential contribution to sustainable development, in particular by addressing key structural constraints and providing a multi-facetted stimulus, is widely recognised. It remains to be seen whether the job creation and development potential of CBI can be used as an effective political leverage tool to gain national commitment and ease bottlenecks during the preparation and implementation phases.
The views expressed in this article are those of the authors and do not represent those of the institution with which the authors are affiliated.
Authors: Niklas Malchow, Former consultant on regional integration and cross-border infrastructure development in Africa, Deutsche Gesellschaft für International Zusammenarbeit (GIZ). Anna Waldmann, Programme Head, Infrastructure Development in Africa (PIDA), Deutsche Gesellschaft für International Zusammenarbeit (GIZ).
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