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Report highlights challenges facing infrastructure investment in Africa


A total of 286 construction projects were launched in Africa in the first half of this year worth a combined total of $324 billion, according to a new report.

The Deloitte African Construction Trends report said each of the projects on which ground was broken up to 1 June was valued at $50m or more.

However, the report said the number of projects qualifying for inclusion “fell by 5% year-on-year, while the value of included projects decreased by 14%, due in large part to the headwinds that countries are experiencing on account of a weak global macroeconomic environment and low commodity prices across the board”.

In a preface to the report, Deloitte Africa infrastructure and capital projects leader Jean-Pierre Labuschagne said: “Africa has seen a downturn in both the number and value of projects included this year, in contrast to previous years... many governments and the low number of projects highlighted that the private sector is struggling to maintain their spending on infrastructure and capital projects.”

“New pressure or factors such as drought, security concerns and rapid urbanisation coupled with falling government revenues is making it difficult to maintain the spending in infrastructure required by many countries,” Labuschagne said.

To qualify for inclusion in its 2016 report, Deloitte said infrastructure construction projects had to be valued at over $50m and must have broken ground, but not yet been commissioned, as of 1 June.

In regional terms, West Africa had the most number of projects (92) this year, which amounted to the most in terms of value at $120bn, the report said. There were 42 projects in North Africa, with a combined value of $76.1bn, 43 projects in East Africa ($27.4bn), 24 projects in Central Africa ($7bn) and 85 projects in Southern Africa ($93.4bn). “South Africa continues to account for the largest amount of infrastructure and capital project activity in Southern Africa with 48.2%,” the report said.

Kenya, “as the regional powerhouse” in East Africa, had 11 projects in 2016, representing the greatest number of large infrastructure projects (25.6%) in the region, the report said. In East Africa “Kenya is closely followed by Ethiopia and Uganda, each with nine projects, and then Tanzania with eight projects”.

“The suspension of the Bagamoyo port project (worth $11bn) has seen a significant decrease in the value of ongoing projects in East Africa,” the report said. Bagamoyo, “which would become the largest port in East Africa, was suspended by Tanzania’s new government, choosing instead to focus more intensely on the previously delayed ports of Dar es Salaam and Mtwara”.

The Simandou iron ore project, despite being the only large-scale project in Guinea, “is worth 16.7% of the total value of projects in West Africa”, the report said. “In July (after the cut-off date for inclusion into this report) the developers announced that they would be shelving Simandou as the cost of developing the mine could not be justified given the current overcapacity in the global iron ore market.”

The greatest number of projects across Africa, which the report said was similar to last year, were in the transport sector (33.6%), followed by real estate (22.4%), energy & power (21%) and shipping & ports (8.4%). “Not surprisingly, the share of mining projects more than halved to 2.8% while oil & gas decreased to 4.5%,” the report said.

“Despite the share of projects decreasing, oil & gas remains a valuable sector, accounting for more than a quarter of total project value,” the report said. “Worryingly, there remains very little large-scale investment in the water sector (1.3% of total investment) and even less in healthcare (0.3%), education (0.1%) and social development (0.1%). The report said: “Water plays an important role, which cuts across a number of sectors in an economy.”

Foreign direct investment to East Africa grew over the last year despite an overall fall across the continent from $87bn to $66.5bn, according to a separate report published recently by Analyse Africa. Analyse Africa said 705 projects were backed by foreign investors throughout Africa in 2015, with infrastructure taking about 44% of the inflows.

Last April, World Bank Africa acting chief economist and author of the bank’s Africa Pulse report, Punam Chuhan-Pole, said: “With external conditions likely to remain less favourable than in the past, African countries need to accelerate the pace of structural reforms aimed at boosting competitiveness and diversification.”

Chuhan-Pole said: “In most countries this will mean improving the business climate, reducing the cost of cross-border trade, reforming the energy sector to ensure affordable, reliable, and sustainable energy services, and making the financial sector more inclusive.”

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