UN report calls for increased public investment in Africa
Addis Ababa, 3 July 2014 (WIC) – A new report by the United Nations Conference on Trade and Development (UNCTAD) called for an increased public investment in Africa highlighting the strategic role it plays in accelerating investment in the continent.
The Economic Development in Africa 2014 Report, subtitled Catalysing Investment for Transformative Growth in Africa, noted that public investment has a positive effect on growth through raising the effectiveness of private investment.
Despite the crucial and catalytic role of public investment in the development process, there has been a decline in public investment rates in at least 23 African countries over the past two decades, says the report.
The biggest declines are observed in Cape Verde (from 18.1% to 13%), Egypt (from 14.5% to 8.2%), Eritrea (from 17.6% to 13.4%) and Lesotho (from 18.2% to 9.1%) as a percentage of GDP.
The average public investment rate in Africa in the period 1990-1999 was 7.6 per cent and over the period 2000-2012 it was 7.5 per cent. The report is wary of this declining trend which masks significant declines in public investment in some African countries.
The figure on Ethiopia, however, tells a different story as the government pumps public fund for various infrastructure developments including railways and mega hydroelectric dams.
In Ethiopia, the share of public sector in gross fixed capital formation has shown a rise from 6.6 per cent during the period 1990-1999 to 15.1 per cent in 2000-2012.
“It is practically difficult to imagine strong economic performance in Africa in the absence of the supply of adequate quantity and quality of infrastructure, this is one area where public investment plays an important role,” the report notes.
“While it is important for governments to enact policies that incentivize private investment, it is clear that the first priority must be to substantially increase allocation to public investment,” the report adds.
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