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Improvement in Transport Infrastructure Necessary for Reducing Trade Cost and Enhancing Regional Integration in Africa: Exim Bank’s Study

Export-Import Bank of India (Exim Bank)’s study entitled “Connecting Africa: Role of Transport Infrastructure” was released at the hands of Shri Suresh Prabhu, Hon’ble Minister of Commerce & Industry, Government of India, in the presence of H E Dr Saulos Klaus Chilima, Vice President, Republic of Malawi, H E Mr Edward Ssekandi, Vice President, Republic of Uganda, Hon Gen (Rtd) Dr.Constantino G.N.D. Chiwenga, Vice President, Republic of Zimbabwe, Mr. David Rasquinha, Managing Director, Export-Import Bank of India,  Ms. ShobanaKamineni, President, Confederation of Indian Industry (CII) and Mr. Chandrajit Banerjee, Director General, CII during the CII-EXIM BANK Conclave on India Africa Project Partnership held at New Delhi on March 25, 2018, according to a release from Exim Bank.

Exim Bank’s Study analyses the existing situation of the transport sector in Africa, the challenges to its development and the strategies for enhancing transportation network and connectivity in the continent. The study highlighted that inadequate transport infrastructure adds around 30-40 percent to the costs of goods traded among African countries. Further, since Africa is home to 16 landlocked countries, poor and under-developed transportation infrastructure limit accessibility to consumers, hamper intra-regional trade and drive up import and export costs.

Though road transport is the principal mode of motorised transport in the region, roughly 28% of the roads have been paved, of which just half are in good condition. On top of these, the road to population ratio in Sub-Saharan Africa is estimated at 27-km per 10,000 people. As regards to rail transport, most of the rail lines are low-speed, small-scale, undercapitalized networks carrying low axle loads. Except for South Africa and few countries in Northern Africa, rail network in Africa lag behind those in most other regions in the world.

African ports face challenges like under-developed infrastructure, long cargo clearance times, usage of outdated equipment and low levels of automation, among others, resulting in significant revenue losses. Similarly,African air transport growth has been subdued to a large extent due to underdeveloped infrastructure and in part to the lack of a proper liberalisation policy among African nations. The share of Africa in global aviation industry remains relatively small compared to other regions. With the expected increase in Africa’s trade in the coming days, up gradation of transport sector acquire renewed interest. A better transport connectivity could lead to reduced trade costs, while enhancing regional integration in Africa.

The study reports the existence of a large gap in infrastructure financing for transport sector in Africa, which cannot be fully financed by the African National Governments and Aid for Trade, and suggested that such gap need to be bridged with innovative financing mechanisms such as infrastructure bonds, sovereign wealth funds, and output-based long-term PPP agreements, among others.

The study also suggests that African economies could emulate some of the successful infrastructure mechanisms practice by India such as toll-operate-transfer (TOT) andInfrastructure Investment Trust for monetizing existing assets for infrastructure development, among others, and collaboration with development partners for co-financing new transport projects.

 

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