Abstract

Infrastructure is viewed as a crucial ingredient to foster growth and productivity. Amid the post -- global financial crisis slowdown, Sub-Saharan Africa is in dire need to continue the growth momentum it experienced during the period of the Africa Rising narrative. An emerging consensus in the empirical literature is that, under the right circumstances, an adequate supply of infrastructure can help foster growth in the region. This paper provides a scorecard on infrastructure development in Sub-Saharan Africa over the past decades along four sectors (telecommunications, electric power, transportation, and water and sanitation) and three dimensions (quantity, quality, and access). First, it documents the existence of a large gap in infrastructure in the region—although the magnitude of the gap depends on the sector, dimension, and country/group. Second, the potential growth benefits from closing the infrastructure gap are large. Third, the infrastructure financing needs are very large, and the public sector so far is unable to meet these needs. Other options that involve the private sector may be available for the region. Finally, there is room for improving the efficiency of public infrastructure spending (that is, the quality of public investment management systems and procurement methods), which, in turn, may increase the output multiplier of investment spending. Document type: Book

Abstract

Railway transport generally has the advantage for large-volume, long-haul freight operations. Africa possesses significant railway assets. However, many rail lines are currently not operational because of the lack of maintenance. The paper recasts light on the impact of rail transportation on firm productivity, using micro data collected in Tanzania. To avoid the endogeneity problem, the instrumental variable technique is used to estimate the impact of rail transport. The paper shows that the overall impact of rail use on firm costs is significant despite that the rail unit rates are set lower when the shipping distance is longer. Rail transport is a cost-effective option for firms. However, the study finds that firms' inventory is costly. This is a disadvantage of using rail transport. Rail operations are unreliable, adding more inventory costs to firms. The implied elasticity of demand for transport services is estimated at -1.01 to -0.52, relatively high in absolute terms. This indicates the rail users' sensitivity to prices as well as severity of modal competition against truck transportation. The study also finds that firm location matters to the decision to use rail services. Proximity to rail infrastructure is important for firms to take advantage of rail benefits. Document type: Book

Abstract

Transport connectivity is among the most important factors in increasing firm productivity and accelerating economic development. The literature generally supports the idea of agglomeration economies, although there is little evidence of their effectiveness in Africa. There are often empirical challenges, such as spatial externalities and endogeneity of infrastructure development. Using firm registry data in Liberia, this study used the instrumental variable spatial autoregressive model to examine the effects of transport connectivity on firms' decisions on where to locate. The study found significant spatial autocorrelation and possible endogeneity related to transport infrastructure, and that firms are more likely to be located where market accessibility is better. The data indicated strong agglomeration economies, indicating that the primary city, Monrovia, is likely to continue to grow and attract more people and firms, and that secondary cities can also grow with greater transport connectivity between populated areas, such as district centers. Document type: Book