Despite the rise of emerging markets and of Africa in particular, in the global trade scene, inadequate infrastructure however remains a major obstacle towards Africa achieving its full trade and economic growth potential. With Africa seen as one of the world’s fastest growing economic hubs, meeting the demand for key infrastructure has been identified as a priority. SImilarly, the African Development Bank and other development agencies have  advocated friendly visa regime, among others as  viable measures to enhance trade relations. FEMI ADEKOYA writes.

THE rise of the emerging markets and of Africa in particular, has added a new dimension to the fast-growing and increasingly complex global trading environment. Even without the emerging market effect, trading volumes have mushroomed in the last few years and liquidity has fragmented in both the United States and Europe.

Inadequate infrastructure however remains a major obstacle towards Africa achieving its full trade and economic growth potential. With Africa seen as one of the world’s fastest growing economic hubs, meeting the demand for key infrastructure has been identified as a priority.

Specifically, this translates into exciting opportunities for global investors who need to look past the traditional Western view of Africa as a homogeneous block, and undertake the detailed research required to understand the nuances and unique opportunities of each region and each individual country.

To address this trend, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) at its recently concluded yearly general meeting, examined key issues affecting the nation’s economic prosperity as well as its efforts towards attracting foreign direct investments into the country.

Similarly, experts at Delloite believe that greater economic activity, enhanced efficiency and increased competitiveness are hampered by inadequate transport, communication, water and power infrastructure.

To them, the world is eager to do business with Africa, but finds it difficult to access African markets, especially in the interior, due to poor infrastructure.

Physical infrastructure covering transportation, power and communication through its backward and forward linkages facilitates growth; while social infrastructure including water supply, sanitation, sewage disposal, education and health, which are in the nature of primary services, has a direct impact on the quality of life.

Without this infrastructure, experts believe that it may be difficult for Africa to achieve the growth levels expected or required. Infrastructure planning and investment are therefore critical if Africa’s huge economic and developmental potential are to be realised. Key in helping the continent realise its economic potential, is the careful construction of a sustainable infrastructure that can assist to turn the situation around.

Africa’s economic growth and development are intrinsically linked to infrastructure development, but it is the push-pull relationship with commodities that has become the driving force for infrastructure development in the region.

Immediate Past President, Dr. Herbert Ajayi said: “For Nigeria, meaningful, long-lasting economic growth and development is almost entirely contingent upon its embracing good governance structure that would serve as essential ingredient for attracting substantial amounts of FDI into the country.  You will all agree that FDI is crucial for the Nigerian economy, as it permits the transfer of technology and facilitates improvements in productivity. Ultimately, this can help alleviate Nigeria’s widespread poverty by increasing per capita income and elevating overall standards of living towards the realization of the Transformation Agenda of the Federal Government of Nigeria

“To do so, Nigeria must address all impediments to growth through extensive political and economic reform. For instance, there must be a dramatic and comprehensive restructuring of Nigeria’s economy through a greater diversification of the economy and also diversification of the FDI it receives.  Up until now, Nigeria’s FDI inflows have been almost exclusively in the natural resources sector, specifically in the oil and natural gas industries. Obviously, such a concentration of FDI limits technology transfer and inhibits job creation, due to the capital-intensive nature of the extractive industry process.

“Nigeria should therefore endeavor to attract FDI in other sectors, including manufacturing, tourism, consumer products, and construction projects which would generate greater employment and create more balanced economic growth, provided of course that good governance practice, is seriously embraced.

“Government’s promise to improve transportation infrastructure (roads, railway, waterways and air) in the country has not yielded the desired result; as about 50 per cent of Federal and State roads are still in poor and deplorable conditions, thus, increasing the already high cost of doing business in Nigeria.

“We therefore, wish to canvass the need for Government to continue to sustain its collaboration with the private sector through the on-going Public-Private Partnership (PPP) arrangement to ensure the provision of adequate and reliable infrastructure with respect to road, rail, air and waterways transportation.”

On his part, Managing Director, The Infrastructure Bank, Adekunle Oyinloye noted that a combination of the challenges of a growing population, rapid urbanisation, inadequate resources of government to solely fund capital projects among others, have led to a state of continuous under-investment in the development, expansion and maintenance of infrastructure which has resulted in most infrastructure assets being in a state of decay or virtual collapse in most Nigerian cities today.

He said: “Nigerians experience the negative consequences of lack of adequate infrastructure on a daily basis. Lives are lost through needless accidents as a result of bad roads, cost of doing businesses remain high owing to inadequate power supply, the poor state of the rail network means that continuous pressure is being put on an already dilapidated road transportation both for the freight of passengers and goods.

“A lot more can however still be achieved and it is suggested that based on the crucial role of infrastructure development towards the achievement of the transformation agenda as envisaged by the Federal Government, the TIB should receive more support of the government in its bid to transform the infrastructural landscape.”

In its report on Addressing Africa’s Infrastructure Challenges, Deloitte noted that the lack of infrastructure is a serious obstacle to growth and development, and results in a low level of intra-African trade and trade with other regions.

For instance, the continent accounts for 12 per cent of the world population but generates a mere one per cent of global GDP and only two per cent of world trade. Despite this, six of the world’s ten most rapidly expanding economies are now located in sub- Saharan Africa. This gives even more reason for speedy infrastructure transformation.

Studies, such as that by the Infrastructure Consortium of Africa (ICA), have shown that poor road, rail and harbour infrastructure adds 30-40 per cent to the costs of goods traded among African countries.

Furthermore, a recent World Bank study on infrastructure also highlighted challenges in this regard for continental economic development. It found that the poor state of infrastructure in sub-Saharan Africa, that is electricity, water, roads and information and communications technology (ICT), reduced national economic growth by two percentage points every year and cut business productivity by as much as 40 per cent.

It is estimated that the sub-Saharan Africa needs about US$93-billion annually over the next decade to overhaul infrastructure. About two-thirds or $60-billion of that is needed for entirely new infrastructure and $30-billion for the maintenance of existing infrastructure. Only about $25-billion annually is being spent on capital expenditure, leaving a substantial shortfall that has to be financed.

Meanwhile, at a time when African nations, especially countries within the Economic Community of West African States (ECOWAS) region, are seeking alternatives to boost trade within the region through the Trade Liberalisation Scheme, the African Development Bank has advocated reduced visa restrictions as a viable measure to enhance trade relations.

Specifically, Chief Economist and Vice-President of the African Development Bank, Professor Mthuli Ncube, said: “Africa is one of the regions in the world with the highest visa requirements. Visa restrictions imply missed economic opportunities for intra-regional trade and for the local service economy such as tourism, cross-country medical services or education.”

Ncube underlined that “The movement of talent and people is at the core of regional integration and is a core pillar of the Bank’s Ten-Year Strategy. Twenty-five percent of all trade in Africa is informal; it is the strongest in West Africa. If there were no visa requirements, informal sector trading would boom.”

In his opening remarks during the recently concluded African Development Bank yearly meetings, Ncube  noted that African nations may need to relax visa requirements in order to boost intra-regional trade.

The panel organized jointly by the World Economic Forum and the African Development Bank, discussed the benefits of relaxing visa restrictions throughout Africa.

ECOWAS Commissioner of macroeconomic policy, Dr. Ibrahim Bocar Ba, underlined that Africans mainly migrate to Africa.

He said: “In ECOWAS more than 80 per cent of all migration is intra-regional. Nonetheless, Africans need visas to go to 80 per cent African countries, these restrictions are higher for Africans traveling within Africa than for Europeans and North Americans.”

Director, General Planning at the Ministry of Finance and Economic Planning in Rwanda Leonard Rugwabiza, who shared the lessons of Rwanda, said the country moved to biometrix border management, low restrictions on transfer of services in engineering and legal services as well as visas on arrival for all African citizens since January 1, 2013.

“Rwanda, with a limited number of embassies abroad, has also introduced e-visas in order to reduce the costs and time constraints of people in obtaining visas. Since we opened our borders, tourism from African countries has increased by 24 per cent.” Furthermore, “trade actually shifted from being oriented to Europe and North America, and is now oriented to neighbouring countries. Trade with neighbouring countries increased by 50 per cent last year, and trade with neighbouring Democratic Republic of Congo rose by 73 per cent”.

“The private sector is the engine of growth, and we all talk about improving the climate for business sector. Visas are a major barrier, and pose restrictions on doing business”, some of the stakeholders noted.

Last year‚ a World Bank report showed how African countries are losing out on billions of dollars in potential trade every year because of high trade barriers with neighbouring countries. It also showed that it was often easier for Africa to trade with the rest of the world than with its neighbouring countries.

The cross-border production networks that have spurred economic dynamism in other regions‚ especially East Asia‚ have yet to materialise in Africa.

African leaders have called for a continental free trade area by 2017 to boost trade within the continent.

Indeed, trade and regional integration are core elements of the World Bank's new Africa strategy‚ launched in March 2011‚ to help countries create opportunities for transformation and sustained growth.