By Kgomotso Modise, Deputy Director General, Department of Public Enterprises
The impact of transport on economic development of Africa cannot be over emphasized. Inferior transport systems have negative knock-on effects on the economies of countries. The relationship between effective transport systems and economic development is shown by African economies that exhibit the lowest levels of productivity and are the least competitive in the world.
Poor and substandard transport systems raise the transaction costs of doing business in African countries, which impedes the growth of economic activities. Despite the wealth and abundance of resources with which Africa is endowed, the serious deficits in Africa’s transport infrastructure place enormous strains on domestic economic productivity and limit the development of economic regional integration.
African states with inadequate transport systems suffer the consequences of the high transaction costs of doing business, as well as the huge inefficiencies created by poor transport systems that severely curtail economic development. As a result, intra-Africa trade still remains a challenge on the continent due to sub-standard transport networks. Given that intra-Africa trade is only 12% of all trade on the continent, Africa needs to improve transport infrastructure in order to increase the volume of trade amongst African countries. This in turn will facilitate the growth of key sectors of African economies.
Effective transport systems are key to Africa’s economic integration. By ensuring that transport systems between countries are designed in such a way that production centres are linked with distribution hubs across the continent, greater efficiencies will be created. Such integrated transport networks will allow African countries to compete effectively and, importantly, tap into regional markets.
Productivity, growth and economic competitiveness are higher in countries with effective transport infrastructure services. Effective and efficient transport infrastructure (road, rail, air, etc.) is a pre-requisite for opening up production zones in landlocked countries. Reliable road and rail transport allows companies to import and export goods. This is the case in South Africa where most of the bulk commodities for export are carried by Transnet Freight rail, and 70% of consumer goods going to various destinations are transported by road.
Inadequate infrastructure in sea ports in Africa compromises the competitiveness of market centres given the fact that about 80% of the world’s trade is facilitated by sea ports linked to road and rail infrastructure. Despite the high volumes of goods that require transport, most African countries priorities road infrastructure investments over rail transport investment due to the enormous capital investment needed for rail infrastructure and rolling stock. As such, the inadequacy of transport systems cuts rural areas and marginalized communities off from market centres and makes it difficult to stimulate economic activities in these areas.
The provision of air transport infrastructure plays a big role in boosting economic development. Air transport plays a significant role in linking countries, cities and towns with respect to transporting goods needed for development. Facilitating the transportation of goods and people by air is instrumental in unlocking economic opportunities in countries. Furthermore, providing air transport in countries stimulates greater infrastructure development, which then promotes economic growth in areas cut off from transport services. Apart from creating employment, air transport impacts positively on developing local economic potential through its unique characteristics, such as speed, reliability and safety.
There is a direct relationship between the maturation of air transport and the development of infrastructure and economic development. Developing efficient air transport infrastructure in Africa is of strategic importance, given the fact that six of the world’s fastest growing economies are located in the continent. African countries present innumerable opportunities for investors intending to develop transport infrastructure networks that can catalyze economic development. Such investment in transport is needed to sustain the impressive economic growth rates exhibited by African countries.