INFRASTRUCTURE AND GROWTH IN AFRICA

- (a) The leader in the African region (Mauritius)<sup>14</sup>

- (b) The EAP7 representative country (Korea in stocks and Hong Kong in quality)

- (c) The South Asian leader (India in stocks and Bangladesh in quality)

- (d) The representative country among Western European economies (Great Britain)

We need to remark that in order to compute these scenarios we use the average values of the Economic Commission for Africa (ECA) countries, our benchmark countries for the period 2001–5, and the coefficient estimates in column [ **IK** 1] of table 2. Note that we also present here tables and figures with the calculations using the coefficient estimates in column [ **IK** 4] of table 2. Finally, we should point out that these catch-up scenarios implicitly assume potentially large investment efforts in the transition toward the increased levels of infrastructure development.

# Scenario 1: Growth payoffs of reaching the leader in the African region

Table 7 reports the potential gains in the rate of growth of the economy for the African region, as well as its different subregions if the growth fundamentals were to be raised to the levels of the leader in the region (panel I of table 7). If so, the actual growth rate of the average African continent would rise by 7.29 percent, while the model predicts an increase in the growth rate of 4.58 percent. Note that improvements in structural policies (education, financial development, and institutional quality) help explain an increase in the growth rate of the average African country of 4.71 percent, while infrastructure development explains a 2.26 percent surge in growth (1.77 percent could be attributed to larger stocks and 0.49 percent may be due to improved stocks). The region that shows the largest potential increase in the growth rate under this scenario is Central Africa—which is also the region that, on average, is the farthest from the African leader in most policy areas (see figure 9, scenario 1). The potential growth increase in Central Africa is 5.7 percent, with 2.8 percent being attributed to infrastructure development (2.2 percent to higher stocks, and 0.6 percent to improved quality).

In what follows we analyze the potential growth benefits across African nations of reaching the leader of the region in infrastructure (Mauritius), and break down the potential benefits of infrastructure into the different sectors: telecommunications, electricity, and roads (see table 8). By construction, the countries that are closer to the leader (or the benchmark, generally speaking) will show the smallest infrastructure gap and will, therefore, have the smallest growth benefits. In this case, South Africa, Egypt, and Tunisia show the smallest gap in infrastructure development (stocks and quality of infrastructure) with respect to Mauritius, and the potential growth gain for these countries is less than 1 percent per year. Note that, in all cases, most of the growth gains would be attributed to faster accumulation of infrastructure assets—and

> 14 Using the [IK1] index of aggregate infrastructure stocks we note that Mauritius has the highest values for the aggregate index of infrastructure stock (1.02) and the aggregate index of the quality of infrastructure services (0.73). In terms of infrastructure, it represents approximately 61 telephone main lines per 1,000 workers, 1.2 megawatts of electricity-generating capacity per 1,000 workers, and 0.98 kilometers per square kilometer of surface area in roads. Quality would be measured by waiting time of main line installation of less than 4 months, electricity transmission and distribution losses of less than 10 percent of electric output, and a share of paved roads in the total road network higher than 90 percent.

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