Elevating Sub-Saharan Africa: The Effect of Infrastructure Investment in Alleviating Poverty

Magolie, Joshua

Elevating Sub-Saharan Africa: The Effect of Infrastructure Investment in Alleviating Poverty

Thesis / Dissertation

2024

Publisher

University of Cape Town

Department

Graduate School of Business (GSB)

Faculty

Faculty of Commerce

Abstract

This study investigates the effect of infrastructure development on poverty reduction in 35 SubSaharan African countries from 2005 to 2015. This timeframe was chosen as it encapsulates the final 11 years of the United Nations' Millennium Development Goals era, recognised as one of the most significant anti-poverty initiatives in history. Notably, Sub-Saharan Africa was the only region to fall short of its poverty reduction target under Goal 1: Eradicate extreme poverty and hunger. This study is thus underpinned by Sub-Saharan Africa's failure to meet its poverty reduction goal, coupled with the recognised imperative that infrastructure is indispensable for economic and social development. Assessing the results from the battery of panel data estimation techniques, the study unequivocally demonstrates that investment in infrastructure led to poverty reduction. Specifically, transport infrastructure had the most significant impact, followed by water and sanitation, and electricity infrastructure. The robustness of the findings was verified through Wald, Hausman, and Heteroskedasticity tests. The study provides valuable insights for policymakers, recommending increased investment in transport, water and sanitation, and electricity infrastructure across Sub-Saharan Africa. It advocates for the promotion of Public-Private Partnerships to mobilise private capital and alleviate the fiscal burden on governments. Furthermore, it suggests leveraging funds from local pension funds to finance infrastructure development. Additionally, policymakers are urged to create an environment conducive to infrastructure investment by ensuring stability in macroeconomic policies and strengthening and enforcing anti-corruption laws.