# **1. The wide-ranging effects of infrastructure quality**

For Africa’s awaited growth resurgence to occur, a broad range of factors—political, institutional, and economic—must be improved. The World Bank’s landmark Africa Competitiveness Report (ACR) (2004 and 2007) focuses on problems that, in the words of Artadi and Sala-i-Martin (2003), constitute the most important growth tragedy of the twentieth century—a phenomenon that has received special attention in recent growth literature, such as that of Ndulu and O’Connell (2005). It is agreed that improving Africa’s infrastructure is a crucial step toward penetrating international markets and meeting the goals of continuous growth and poverty reduction.

Infrastructure quality has a pervasive influence on all areas of an economy. Low-quality infrastructure and limited transport and trade services increase logistical and transaction costs, rendering otherwise competitive products uncompetitive, as well as limiting rural production and people’s access to markets—with adverse effects on economic activity and poverty reduction. A large number of empirical studies illustrate the impact of infrastructure on economic performance, including those of Calderón et al. (2003a and b), Calderón and Serven (2003), Canning (1998), Reinikka and Svensson (1999), Prud’homme (2004), Escribano and Guasch (2005), Escribano et al. (2005), and Guasch (2004). All suggest that Africa’s infrastructure gap is an important growth bottleneck with a negative impact on productivity and the overall competitiveness of the region. Furthermore, several studies using the methodology of Escribano and Guasch (2005, 2008) and Escribano et al. (2008a and b and 2009) have found empirical evidence—in cases such as Brazil, Chile, Costa Rica, Mexico, Turkey, and several southeast Asian countries—that improvements in investment climate (IC) conditions in general, and in infrastructure quality in particular, may lead to important gains in productivity and in other economic performance measures: employment, real wages, exporting activities, and foreign direct investment (FDI) inflows.

Disentangling the ways that infrastructure affects Africa’s economic growth poses several difficulties because of the special characteristics of the African region. The comprehensive analysis found in Estache (2005) takes stock of the basic characteristics of infrastructure in Sub-Saharan Africa and the impact of 1990 reforms, pointing out that the impact of infrastructure in Africa may be different than in other regions. As Brunel (2004) signals, the colonial period has had a lasting effect on the use of space in the region, resulting in a productive structure that consists, in most cases, of coastal cities connected inland by railways designed to carry raw materials to main ports. This and other factors that are progressively modifying the continent’s productive structure—such as continuous urbanization, the movement of economic activity from the agricultural to manufacturing and service sectors, and the increasing openness of African economies—has caused both a quantitative and qualitative mismatch between the current supply of infrastructure and ever-increasing demand. Factors such as inequality across income levels (affecting the affordability of infrastructure services), large and unoccupied areas, and regional variations in climate are increasingly becoming a concern for African policy makers managing infrastructure.

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