This is a writeup of a shallow investigation, a brief look at an area that we use to decide how to prioritize further research.
In a nutshell
- What is the problem? Insufficient infrastructure (e.g., roads, electricity, telecommunications access) may significantly deter investment, retard growth, and reduce quality of life.
- What are possible interventions? A great deal of funding is already focused on this issue. Funders may focus on providing early stage funding, alternative mechanisms for providing aid, advocating to existing funders to allocate their funds more effectively, or experimenting with novel approaches to infrastructure investment, among other things.
- Who else is working on it? Development banks (e.g., the World Bank or African Development Bank), major developed-country donors, private investors, and local governments all support infrastructure.
1. Why did we look into this area?
Improving infrastructure in sub-Saharan Africa is one of many areas where we think there may be outstanding giving opportunities. We looked into the area based on the intuition that infrastructure (roads, electricity, etc.) provides the foundation on which additional development can happen. An initial, very brief perusal of available literature confirmed this possibility.1
Our investigation thus far has consisted of preliminary reading and conversations with Todd Moss of the Center for Global Development, Michael Klein (formerly of the World Bank), Bobby Pittman (Founder of Kupanda Capital and former Vice President of Infrastructure, Private Sector and Regional Integration at the African Development Bank), and Alex Rugamba (Director for Regional Integration and Trade at the African Development Bank):
- Notes from conversation with Todd Moss
- Notes from conversation with Michael Klein
- Notes from conversation with Bobby Pittman
- Notes from conversation with Alex Rugamba
2. What is the problem?
The lack of infrastructure (e.g, roads, electricity, internet, water) in sub-Saharan Africa may directly reduce welfare and create an obstacle to private investment.
- Access to a network of well-maintained roads enables businesses to easily transport their goods.
- A consistent supply of electricity enables business to conduct their work and provides for basic quality-of-life improvements for individuals (e.g., lighting, refrigeration, charging for electronic devices such as mobile phones).
- Internet provides individuals with access to relevant, actionable information (e.g., market prices) as well as broader knowledge.
The individuals with whom we spoke pointed to several specific factors that contribute to the problem: (Note that we present these as examples, not as a comprehensive statement about the causes of poor infrastructure.)
- Lack of resources (overall) and lack of resources for early stage project investment in activities such as feasibility studies and project planning.2
- Suboptimal regulations that deter investment.3
- Lack of donor interest in infrastructure relative to other priorities like health or education.4
- There are greater political benefits to new road construction than spending on road maintenance, but ongoing maintenance is significantly more expensive.5
- Government-backed cartels may control access and deter private investment.6
- Suboptimal provision of construction subsidies.7
- Construction-project contracts are large and complex, and the degree of due diligence required by investors may not align well with the investment opportunity.8
3. Who else is working on this?
The African Development Bank estimates that sub-Saharan Africa spends approximately $45 billion per year on infrastructure.9 This spending comes from (a) local governments (~$30b), (b) foreign donors (~$6b), (c) and the private sector (~9b),10 though these proportions vary significantly depending on a specific country’s income level (e.g., lower-income countries receive more donor funding relative to local spending than middle-income countries).11
Major players in the sector include:
- Foreign donor funding via development banks (such as the World Bank and the African Development Bank); direct donor funding from OECD countries; and direct funding from non-OECD countries.12
- Funding provided by local governments
- Investment by the private sector
- For internet access specifically, corporate-affiliated nonprofits such as Google.org13 and Internet.org14
- Other actors who play non-financial roles, such as (a) think tanks that provide technical assistance or advocate for specific projects within countries;15 (b) developed-country trade government agencies supporting overseas, private investment;16 and (c) private investors and contractors17
In general, we do not know how much funding is available for the types of interventions described below. We share information where we have it.
In June 2013, the United States government announced a commitment to provide $7 billion over 5 years to increase access to electrical power in Africa.18 Because this effort is new, we do not know how it might change the funding opportunities discussed on this page.
4. What are possible interventions?
The individuals with whom we spoke suggested several possible philanthropic approaches:
- Funding early stages of infrastructure projects.19 In our conversation with Mr. Rugamba, we learned that, “there are about 50 project preparation facilities in Africa, 15 of which play a significant role in early-stage infrastructure project development. Many of them are underfunded. Funding for these facilities grew from roughly 10 million USD in 2005 to 80 million USD in 2010. The Programme for Infrastructure Development in Africa (PIDA) estimated that, for the years 2012 to 2020, $200 to 500 million USD per year is required for early-stage project development.”20 The African Development Bank is seeking to raise $200 million to support project preparation facilities of which it has raised approximately $100 million.21 Both Mr. Pittman and Mr. Rugamba believe that early stage initiatives are underfunded.22
- Experimentation with various models for structuring and financing enterprise zones.23
- Convening investors, government representatives and business leaders.24
- Advocating for improved regulation.25
- Providing subsidies based on output (once the project is completed successfully) rather than before it begins.26
- Supporting public rankings of country performance on various indicators of ease of doing business.27
- Engaging with local communities to incorporate their interests into proposed infrastructure projects.28
5. Questions for further investigation
Our investigation thus far has been quite preliminary, and we have major areas that require additional research.
- How much funding is currently available for the interventions listed above?
- What impact would the interventions above have on infrastructure development and what would the humanitarian impact be of this increased infrastructure?
|AfDB, Handbook on Infrastructure Statistics||Source (archive)|
|Africa Infrastructure Knowledge Program, Sources of Infrastructure Spending||Source (archive)|
|Buys et al. 2006||Source (archive)|
|Google.org internet grants||Source (archive)|
|Khandker et al. 2009||Source (archive)|
|Klein conversation (May 9, 2013)||Source|
|Moss conversation (May 7, 2013)||Source|
|New York Times on Internet.org||Source (archive)|
|Pittman conversation (July 7, 2013)||Source|
|Power Africa announcement||Source (archive)|
|Rugamba conversation (July 30, 2013)||Source|
|World Bank infrastructure spending||Source (archive)|