Water Infrastructure Performance in Sub-Saharan Africa: An Investigation of the Drivers and Impact on Economic Growth

Abstract

There is a strong link between water infrastructure and development outcomes. As such, water infrastructure challenges could have an adverse effect on the economy at large. This study investigates the drivers of water infrastructure performance and analyzes how investment in water infrastructure affects economic growth, focusing on a panel of thirty-one Sub-Saharan African (SSA) countries. An integrative theoretical framework using panel regressions was developed. The result showed that an increase in water infrastructure performance due to a 1% increase in per-capita income growth and trade openness was 0.2% and 0.03%, respectively, and the constraint on water infrastructure performance due to a 1% increase in population density was 0.76%. The result showed that the impact is mostly driven by the effect of per-capita income growth and population density on lower- and middle-income countries. Our results also revealed that one additional increase in water infrastructure investment leads to a higher impact on economic growth. We further complement our study by investigating the policy interventions that the support water infrastructure outcome effect. We found that investment in water infrastructure along with the provision of credit to the private sector is a strong driver of economic growth; however, access to credit beyond a certain threshold—relative to the level of investment in water infrastructure in these countries—investment in water infrastructure would lead to an adverse negative macroeconomic effect. The policy implications of this study are discussed.