INFRASTRUCTURE INVESTMENT IN AFRICA: Lessons from colonial times for today”s big network modernisation projects

Colonial investments in rail infrastructure transformed Africa''s economic geography, according to research by Rémi Jedwab, Edward Kerby and Alexander Moradi, published in the August 2017 issue of the Economic Journal. Their study suggests that today''s investment boom could have an equally powerful impact.

They note that numerous countries are modernising their infrastructure networks, including Ethiopia''s new 750km railway linking the capital, Addis Ababa, with Djibouti, built at a cost of $4 billion. Chinese capital and firms are playing a leading role, keen to unlock the continent''s resource potential.

In their study, the authors examine the unintended and long-lasting consequences of colonial African railways and the Kenya-Uganda railway in particular. Completed in 1901, the railway connected Uganda to the coast (see Figure 1).

But there was little consideration for Kenya''s development: it was merely a transit territory with the railway taking the cheapest and shortest route and bypassing highly populated areas with fertile soils.

Yet the placement of the line had a strong impact on the future development of Kenya. Towns emerged along the line. As they grew, they became the main cities at independence in 1962 and still are today (see Figure 2).

Nairobi, Kenya''s capital city of around 6.5 million inhabitants is a case in point. In 1901 the place was a swamp, and only became an urban settlement for the refuelling of the trains heading towards Uganda.

Access to a hospital or clinic, a secondary school, a police station or even a post office is defined by the colonial railway investment more than a century ago. While public investments (for example, schools, hospitals and roads) partly contributed to urban ''path dependence'', evidence suggests that railway cities mostly persisted because their early emergence served as a signal where to place future investments.

The railways cities hold their position today despite major economic and political shocks. After independence, the railways fell into disrepair and human capital fled. Asian entrepreneurs and European settlers, bureaucrats and professionals in the railway towns left Kenya. Roads were increasingly built connecting many new towns and villages. Colonial railway locations lost their initial advantage in terms of transport and human capital. Yet they continue to prosper.

What policy implications can be drawn from the results of this study?

• First, infrastructure investments can produce economic change by reducing trade costs and integrating markets.

• Second, new infrastructure can transform the economic landscape in poor, remote regions with high trade costs. But because of urban path dependence, these poor areas are less likely to receive the investment.

''History, Path Dependence and Development: Evidence from Colonial Railroads, Settlers and Cities in Kenya'' by Rémi Jedwab, Edward Kerby and Alexander Moradi is published in the August 2017 issue of the Economic Journal. Rémi Jedwab is at George Washington University. Edward Kerby is at Stellenbosch University. Alexander Moradi is at the University of Sussex.