Posted by: beninmwangi | September 20, 2007

Africa’s Infrastructure-Incremental or Entrepreneurial?

Ordinarily, when I run into the opening phrase, ” what Africa needs is…” my mind is then prepared to hear all manners of conjecture next-maybe because the phrase connotes one big homogeneous landscape, where there is uniformity throughout the furthest reaches of the continent. However, that all changed the moment that I stumbled onto Andrew Mack’s blog, yesterday. For his post seemed to start in a similar way, but what came next made a lot of sense to me. This post was inspired by a post on Ethan’s blog, however, Andy holds a slightly different view of the continents infrastructure related challenges.

And, oh before I get ahead of myself let me say a little bit about this blogger for those of you who may not be familiar with his work. Andrew Mack blogs at Andy’s World View, where he shares his insights derived from a proffesional development background spanning 20 years. During that time frame he has worked primarily in Africa as a banker and official for the World Bank. Presently he holds the title of founder and principal of AM Global.

The following excerpt from Andy’s Global View, captures the essence of his argument:

Incremental or not, what Africa needs is Entrepreneurial Infrastructure

He cites the logistical and budgetary problems of many nations as they seek to build out not just the famous “last mile”, but in cases like DRC, many of the basic earlier miles that need to be in place if a country wants to be connected – by road, by power grid, or by wireless. And, while he doesn’t dwell on one of the real reasons for this failure – Government disorganization or outright corruption – he hints at it as a driving force which creates both the space and the need for other approaches.

However, while the idea of incremental infrastructure is interesting, I would argue that at least to some extent, Ethan’s argument misses the larger point. It is not incremental infrastructure so much as “entrepreneurial infrastructure” that Africa needs and has shown it wants. Moreover, there are issues of economy of scale and policy. Consider the case of neighboring Uganda. In Uganda, cellphone licenses were bid out, encouraging competition, and cellphone use has grown from some 5,000 lines in 1998 to more than 2.6 MILLION today. The major carriers have invested – and made – millions, and I would argue, have done more for Uganda’s development than most of the major donors over the last decade. A licensing regime that favored incremental providers might have brought service to a few villages, but today, CelTel is the largest taxpayer in the country, serving the entire nation and recently, offering no-roaming service across the sub-region – in Kenya, Tanzania, and recently also in DRC. An incremental approach would not have been able to provide this service, pure and simple.

What we need to do is re-orient our thinking, I believe. Rather than focusing on the challenges – and there are many – we need to step out of our past frame and see the markets as what they are: big and underserved. What we need is not so much small (incremental) infrastructure as infrastructure that is constructed by people with an entrepreneurial mindset. If the Government of Kenya is prepared to invest in wiring classrooms and has both the scale and technical savvy to pull it off, that’s great. If the private sector can do it better, then the Government should act as facilitator. In some instances, a public-private approach will be the best.

There is one thing that I really like about Andy’s post.  He hammers home the point that “incremental infrastructure” is not as scalable or may not be as efficient as entrepreneurial infrastructure.   I also like that he points out that entrepreneurial infrastructure could allow a community or a nation to sidestep government inadequacies.

What I am not so sure about however, is his supposition that Ethan’s argument somehow diminishes the importance of entrepreneurship in Africa.  In one sense what Ethan describes when he talks about over building for ones personal needs with the goal of selling extra capacity to your neighbors sounds like what some would call a cottage industry.  In another sense, it seems like an affordable answer to supplying a need There is something deeper, though, which causes me to resonate with Ethan’s premise.  There is an example that I was hoping Ethan would mention, while I read his post the first time-private  security.  In nations where the public security or police force is not meeting the demands of shop keepers within a small confined geographic area, I have heard of small groups of merchants pooling their funds to pay for private security.  The interesting thing about it is that surrounding merchants or consumers who didn’t pay for the services derive nearly the same benefit from the heightened security and reduced crime as the businesses that paid.  Another thing that I’d like to point out is that this solution does rely heavily upon the entrepreneurial function, yet if we use Ethan’s definition it is an incremental approach to building infrastructure. To me this would indicate that  incremental and entrepreneurial infrastructure are necessarily mutually exclusive.

Now here is an excerpt from Ethan’s post, the one that inspired Andy’s writing:

My friend and colleague Mike Best has challenged me on the idea of whether the examples I’m offering are really “micro” enough. By that definition, he’s most interested in “picoinfrastructure”, ways that small communities can build data infrastructure for a few thousands of dollars, not the single-digit millions I’ve pointed to in my examples from the mobile phone business. The examples Mike is offering mostly outline a model of “self-provisioning”, one where you’re building a network to meet your own needs because no one else has built that infrastructure. Where self-provisioning meets incremental infrastructure, I think, is where you overbuild for your personal needs with the goal of selling that capacity to your neighbors. Mining and oil companies self-provision infrastructure all over the African continent. Visit a gold mining center in Ghana and you’ll find infrastructure that outpaces that in many secondary cities. But that infrastructure isn’t shared and resold – it might be vastly more cost-effective if it were, and would likely address some community concerns about the impact of extractive industries. That said, I can imagine incremental infrastructure being built at mini, micro and pico-levels. A farmer investing in water pumping equipment that could irrigate both his fields and neighboring fields might be builting pico-level incremental infrastructure, while a mobile phone company that built power plants to provide energy to mobile phone base stations, and used excess capacity to run irrigation pumps might be working on a micro or mini scale.

I guess what it may come down to is not whether one should use an infrastructural or and entrepreneurial approach, but when one should use an incremental versus an entrepreneurial approach.  To me the answer to this question is-“whose paying?”.  If the local government, assuming that a certain level of transparency and accountability exist, is accepting bids from private suppliers to build infrastructure; then we are talking entrepreneurial infrastructure.  Whereas, if the government can’t or won’t be paying for the service but several smaller interests do have a tangible need for a specific type of infrastructure-like feeder roads; then the enterprising contractor might do well to approach these smaller interests and build the infrastructure in smaller increments as opposed to having no jobs at all.

In closing, I would say that both arguments make a great deal of sense.  But in the end, I’d say that there isn’t a one size fits all approach to development and I can see areas where either would work.

That’s my take on it, what do you think?

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Responses

  1. […] Africa’s Infrastructure-Incremental or Entrepreneurial? […]

  2. See Reuters article

    Benin, I love the new look! Wow!!!!

    Anyway I just wanted to share the good news with you, Ghana’s debut eurobond was oversubscribed 4 times!!!!!! The funds will be ploughed back in to massive infrastructure investments.

    I believe I have to eat a lot of humble pie, I have been of the opinion that international financial markets remain ambivalent about Africa but clearly that is not the case for countries who have exhibited a demonstrable track record of performance. This is a huge leap of faith on the part of investors so we must give credit where credit is due and stop harboring endless pessimism that our cries are only heard in the wilderness 🙂

  3. Sijui:

    Thanks for sharing the good news. I knew that international investors liked Ghana, but I didn’t know that they were this serious, you know?. That’s a big vote of confidence, that should be able to fund massive infrastructure investments, as you have said. And the great thing about it is that as long as the economy continues to perform this will be long term investment.

    Thanks again Sijui!

    excerpt from Reuters:

    “We are very happy. This is the first African country other than Egypt, Morocco and South Africa, which has made it on to the international market,” Ghana’s finance minister Kwadwo Baah-Wiredu, in London for the bond sale, told Reuters.”

  4. […] Africa’s Infrastructure-Incremental or Entrepreneurial?… he’s most interested in “picoinfrastructure”, ways that small communities can build data infrastructure for a few thousands of dollars, not the single-digit millions I’ve pointed to in my examples from the mobile phone business. … […]

  5. […] Africa’s Infrastructure-Incremental or Entrepreneurial?… he’s most interested in “picoinfrastructure”, ways that small communities can build data infrastructure for a few thousands of dollars, not the single-digit millions I’ve pointed to in my examples from the mobile phone business. … […]


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