Africa Infrastructure Investment Offers High Returns – World Bank
Sub-Saharan Africa could generate some of the world’s highest economic and social returns from new infrastructure investment, with transportation emerging as a particularly promising area, according to a new World Bank report.
However, the report cautions that high financing costs, infrastructure deficits and uneven access across countries could prevent the region from fully converting these opportunities into stronger economic growth.
The report, Infrastructure Foundations: From Current Assets to Future Growth, finds that 97% of Sub-Saharan African countries have higher infrastructure efficiency ratios for transportation than for energy. The region recorded the highest share on this measure among the regions assessed.
It also estimates that transportation investment in Sub-Saharan Africa can generate social returns exceeding the associated costs by more than 22 times, highlighting the potentially significant impact of well-targeted infrastructure spending.
The findings suggest that governments facing tight fiscal conditions should focus not only on how much they spend on infrastructure, but also on where scarce resources are allocated.
The World Bank’s analysis covers about 150 countries and compares the potential social returns from infrastructure investment with financing and depreciation costs. An efficiency ratio above one indicates that the potential social benefits of additional investment exceed the associated costs.
Globally, 92% of countries have transportation efficiency ratios above one, while the figure rises to 98% for energy. Sub-Saharan Africa stands out for having particularly strong efficiency ratios in both areas.
The report also identifies a significant infrastructure capital gap across the region. Sub-Saharan Africa has accumulated less infrastructure capital than would generally be expected at its level of economic development, placing it among regions where infrastructure stocks remain below levels predicted by income.
The shortfall is particularly evident in transportation infrastructure. According to the report, transportation represents only about 27% of infrastructure capital in the poorest countries, compared with 75% in the richest economies.
For African economies, closing this gap could have wider economic benefits by improving connections between producers and markets, facilitating regional trade and enabling businesses to participate more effectively in international value chains.
The World Bank also cautioned against relying solely on national infrastructure averages, which can conceal significant disparities within individual countries.
Nigeria, for example, is cited as a case where power generation capacity is heavily concentrated in the southern part of the country, leaving northern regions significantly underserved.
Transportation is identified as a particularly strong investment opportunity because developing economies generally have less extensive transport networks. As additional roads, railways and other connections are built, they can generate substantial economic benefits. However, the report notes that returns tend to decline as infrastructure networks become more developed.
Of the 36 Sub-Saharan African countries assessed, 35 have higher transportation efficiency ratios than energy efficiency ratios, representing 97.22% of the countries analysed.
The modelling further suggests that around half of the Sub-Saharan African countries assessed would have an optimal transportation allocation of more than 75% if infrastructure investment were equivalent to 10% of GDP.
The World Bank, however, stressed that this does not imply that governments should reduce investment in energy infrastructure. Instead, it recommends that countries determine the appropriate balance based on their existing infrastructure stocks, expected returns and individual economic circumstances.
