The importance of a country's soft infrastructure

by Elayne Wangalwa 0

Hard infrastructure has played a key role in fostering African economies, however soft infrastructure is vital for the progress of nations.

Soft infrastructure refers to all the institutions which are required to maintain the economic, health, and cultural and social standards of a country, such as the financial, education and health care systems. 

According to the World Bank, 93 billion US dollars is needed annually for sub-Saharan Africa’s infrastructure. However, many African countries are lagging behind the world in soft infrastructure that has enabled governments in developing and emerging economies to bridge the developmental gaps in areas like healthcare and education.

“Everybody knows about Africa’s infrastructure deficit but very little attention has been paid to soft infrastructure. Hard infrastructure has the immediate catalytic effect on the growth rate we know that is an essential component to GDP being infrastructure investment so we understand that. Soft infrastructure is the intangible stuff and it does not show up immediately in the growth rate so it is more about the quality of growth and the sustainability of growth,” Ronak Gopaldas, head of country risk at RMB told CNBC Africa.

According to Gopaldas, soft infrastructure which is more about government and organisation policies, banking systems, cultural and social events, education and welfare of the people is presenting new opportunities for growth and innovation.

(READ MORE: World Bank offers Angola $1 billion to fund infrastructure)

“There is the role of the public sector as well as the role of the private sector. So from the government’s side obviously we look to things like good governance, prioritisation and investment in soft infrastructure, a decent regulatory framework,” he said.

Gopaldas believes that the private sector should be the frontiers in ensuring soft infrastructure is given the same priority as hard infrastructure.

“Inequality is unsustainable so we have got a situation in Africa were most of our economies are growing in excess of 6 per cent but over 60 per cent of the population lives under two dollars a day so we are not having inclusive growth and that is fundamentally a problem because over the long run unless it is addressed you will have political and social instability so it is not sustainable. It is critical we address the issue of soft commodity,” Gopaldas explained.