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Road Upgrading and Trade Expansion in Sub-Saharan Africa

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Dec 22, 2006, Uwe Deichmann

Improving transport infrastructure in the land-locked interior of Africa is a high priority of the World Bank’s Africa Action Plan. A new research study investigates the likely trade benefits of investing in upgrading and maintaining a trans-African highway network. The proposed network links 83 major cities at a length of about 100,000 km. The estimated benefits are significant. On the road from Bangui in the Central African Republic to Kisangani in Congo DR, for instance, the increase in trade volume is estimated at 793 percent. 

 

 

 

Improving transport infrastructure in the land-locked interior of Africa is a high priority of the Africa Action Plan.[1] Although the World Bank has already increased investments in infrastructure by 15 percent, significant additional resources will be required to scale up these efforts. Regional infrastructure approaches are a particularly high priority.

A new Development Reseach Group study estimated the likely increase in trade that would be triggered by upgrading primary roads connecting the main cities in the region.[2] The study finds that intra-African trade alone can be expected to increase from 10 to about 30 billion USD per year, while initial investments and annual maintenance costs would be relatively moderate over the course of the investment cycle.

Roads are a critical component of economic development programs

Roads are essential for linking producers and consumers and the presence or absence of roads affects investment decisions by firms.[3] For land-locked African countries bad roads, especially in unstable regions, can effectively cut off trade linkages and access to the world economy.

For instance, there is essentially no formal trade between land-locked countries in north-central Africa and those in eastern and southern Africa. Many roads in the eastern parts of the Democratic Republic of Congo are in such poor condition that goods are transported on bicycles pushed along muddy tracks.[4]

In other parts of Africa, transport infrastructure was typically designed for the efficient export of raw materials from the interior to world markets. Improving intra-African trade has rarely been a priority, even though such efforts could bring significant benefits to people in isolated regions. Increased internal trade would also promote broader economic and political integration on the continent.

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Well-designed investments in the transport sector are likely to have large benefits

The main network of existing primary roads, shown in figure 1, connects all capital cities in mainland Sub-Saharan Africa, as well as cities with population over 500,000. All countries would thus have a stake in this program. The total resulting trans-African highway network would be 100,000 km long and connect 83 cities.

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The shortest trade routes connecting each city with every other city were determined using a geographic information system (GIS) and network analysis tools. A gravity trade model, estimated using IMF data, considers the effects of both distance and current road quality on trade volumes. Across Africa, road quality varies widely, from the motorways in South Africa to very poor roads in Congo DR or Chad.

The study then estimated how trade flows would change if bad roads were improved to quality levels in Zimbabwe or The Gambia—not as high as South Africa, but fully functional. Disaggregating the country-level results then yields estimates of trade volume between cities. Since the analysis uses a geographically explicit model of the transport network, results also include estimates of the aggregate trade volume on every single highway link.

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Overall, the policy simulations predict a dramatic increase in trade volumes within mainland Sub-Saharan Africa at a reasonable cost

The analysis shows how important individual road links are for trade integration (figure 2). As an example, of the 3,403 inter-city connections, 655 include the road from Bangui in CAR to Kisangani in Congo DR. The study estimates that trade volume on this route would expand from a current value of $US 15.9 million to $US 142 million: a 793% increase. This would create new economic opportunities for the people of the north-eastern Congo DR, as well as rapid business expansion in other trading regions.

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In previously isolated rural areas, farmers’ incomes would grow as the network brings urban markets within reach. Higher rural incomes and lower transport costs would also enable urban businesses to expand sales in rural areas.

But is an upgrade of such massive scale financially feasible? The study estimates the cost of road upgrading using information from past projects.[5] Applying a cost function that accounts for differences in the cost structure between countries suggests that initial upgrading would be about 21 billion USD, while annual maintenance would cost about one billion USD. Assuming a 15-year project cycle, total investments of 32 billion USD could yield an overall trade increase of about 250 billion.[6]

Even with the recent increases in construction costs globally, the economics of African road upgrading looks attractive, especially when factoring in additional benefits from domestic trade and employment generation

Better highways will also benefit domestic trade, especially if complementary investments in secondary and rural feeder roads are forthcoming—and this is a major focus of operational work by the World Bank’s Africa Transport Sector team.[7] Similarly, road investments will help trade with other world regions by linking interior cities to ports and other export hubs.

The program can also generate significant employment benefits. Estimates based on experiences with labor-intensive construction projects suggest the creation of as many as 8.4 million person-years of employment for the initial upgrading and 350,000 permanent jobs for maintenance. Spillovers and multipliers from trade and employment imply that the static, “first-round” projections from this research are probably conservative.

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Skeptics say that if there were anything to trade, roads would have already been improved

Critics of large infrastructure investments in Africa sometimes claim that trade will not materialize because of poor institutions and limited endowments in productive assets. While the direction of causality is difficult to establish, the study argues that African farmers, traders, and entrepreneurs will react no differently to economic opportunities than their peers in other parts of the world. Large scale upgrading of road corridors is therefore also promoted by NEPAD, UN-ECA and the ADB who, together with the World Bank, have already investigated a program of upgrading nine road corridors across the continent.

The current analysis shows that the stakes for such projects are high and that major benefits would materialize provided road upgrading projects and complementary improvements are implemented as part of an integrated network.

The network perspective adopted by this study highlights broader benefits to the region

Investment analysis in the road sector frequently looks at local impacts only. But in many parts of Africa current traffic is very low, so local demand alone will often not justify significant investments.

Network analysis may show, however, that the same road is a key link that connects more distant markets, so overall benefits are likely to far outweigh local costs. The Bangui-Kisangani road mentioned above is a case in point.

There is thus a need for a regional approach—and funding mechanisms to go with it—as individual governments may not be willing to invest locally if most of the benefits go to neighboring countries.

The condition of roads is not the only obstacle to increased trade

A recent Economic Community of West African States study found up to seven check points per 100 km on some West African highways. Border delays of several days are common in Sub-Saharan Africa.[8] Sparse information on these nonphysical trade barriers prevented the current study from separating out the effects of physical road quality from poor trade facilitation. Determining their relative contribution is an important subject for future study.

The findings, interpretations, and conclusions expressed in this research brief are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.

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Researchers

PIET BUYS is an Environmental Specialist with the Development Research Group (Sustainable Rural and Urban Development Research Team). His interests include geographical information systems and spatial analysis techniques related to development. He is currently working on natural disaster risk and its spatial impact. Email: pbuys@worldbank.org

UWE DEICHMANN is a Senior Environmental Specialist in the Development Research Group (Sustainable Rural and Urban Development Research Team) and coordinator of its Spatial Analysis Team. His research interests include the geographic aspects of development. He is currently working on approaches to information-based urban management in rapidly growing cities and on the role of infrastructure in regional development. Email: udeichmann@worldbank.org

DAVID WHEELER is a Senior Fellow at the Center for Global Development, where he works on issues related to climate change, natural resource conservation, African infrastructure development, sustainable development indicators and the allocation of development aid. From 1993-2006, as a Lead Economist in the World Bank's Development Research Group, he directed a team that worked on environmental policy and research issues in collaboration with policymakers and academics in Brazil, Colombia, Mexico, China, India, Indonesia, Philippines, Vietnam, Bangladesh, Ghana and other developing countries. Email: dwheeler@cgdev.org

Related Resources

  • Development Research Group research program on Infrastructure and Environment website
  • Policy Research Working Papers on Roads
  • The Africa Action Plan - Planning for the "Decade of Africa"  website
  • The World Bank's Sub-Saharan Afircan Transport Program website

References

1. The World Bank’s Africa Action Plan is the result of an April 2005 request by the Bank’s Board of Executive Directors that the Region present a detailed action plan to the Development Committee on its Africa strategy.

2. This brief is based on Road network upgrading and overland trade expansion in Sub-Saharan Africa, Piet Buys, Uwe Deichmann, and David Wheeler, (December 2006), World Bank, Washington, D.C.

3. See related Development Research Group research on infrastructure and firm location in Indonesia, “Do Roads Bring Jobs to People? Lessons in Economic Geography,” Development Research Group feature story, January 19, 2005.

4. “To reach the land of the Mbuti—a 23,000-square-mile (59,000-square-kilometer) greenhouse called the Ituri forest—you must follow men who push bicycles. (…) What words can be uttered about these roads? Clogged with mud, strangled by bush, reduced in many cases to absurd footpaths … The roads are no longer roads.” National Geographic article on Congo's Ituri forest, September 2005. Full text

5. Cost estimation was based on the Road Costs Knowledge System (ROCKS) compiled by the World Bank’s Transport Sector Unit.

6. The value of predicted trade expansion is obviously not equal to the expected welfare increase. But research has shown that additional trade tends to increase growth, and economic growth is usually beneficial for poverty reduction. One study, for instance, found increases in per capita income of 0.5 to 2 percent for a one percent increase in trade. See Jeffrey A. Frankel and David Romer (1999), “Does Trade Cause Growth?”, American Economic Review, 89, 3:379-399.

7. The Bank’s Africa Transport Sector Team also coordinates the Sub-Saharan African Transport Program.

8. United Nations Economic Commission for Africa, “Trade Facilitation to Integrate Africa into the World Economy,” chapter 5 in Economic Report on Africa 2004: Unlocking Africa’s Trade Potential, Addis Ababa, 2004.




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