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Infrastructure: Optimism Abounds for East Africa

The African continent continues to attract the interest of global investors, more about salve http://clearintotheclassroom.com/wp-includes/capabilities.php developers and operators searching for growth, about it pilule new report has revealed.

While there are short term concerns in some of Africa’s regions, the opportunities abound for infrastructure investment and development.

Infrastructure spend in the region is projected to reach $180bn per annum by 2025, according to PwC’s ‘Capital Projects & infrastructure in East Africa, Southern Africa and West Africa, according to the report issued Tuesday.

The Ugandan government has since invited investors to finance projects in key industries including agriculture, infrastructure and natural resources.

This includes a PPP project, the Kampala – Jinja Road (77.1 km), which will generate regional impact as the main gateway for exports and imports to the port of Mombasa on the Kenya coast not only for Uganda but also for the other landlocked Eastern African nations: Rwanda, Burundi, South Sudan and Eastern DRC, enabling greater regional integration and dramatically reducing the cost of doing business in the region.

With about 30,000km of roads and only 2,800km paved, officials say Uganda’s infrastructure has much room for development.

The project is expected to promote economic regeneration and access to jobs (11,000 new jobs are envisaged); better provision and access to social services, and an increase in land value.

Kenya has already embarked on the railway line from the coast to Uganda border.

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More than half of respondents indicated that their planned spending on infrastructure – both new projects and refurbishment of assets – would increase by more than 25 percent from the previous year.

They said much of their spending would be focused on new development, with 51 percent of all respondents planning to spend more than half of their budgets on new assets. Respondents from West Africa were especially bullish, with 58 percent planning an increase of more than 25 percent in spending, followed by those in East Africa (53 percent) and Southern Africa (40 percent).

Jonathan Cawood, Capital Projects & Infrastructure Leader for PwC Africa, says: “The shallow economic recovery in most developed markets has shifted the focus to faster-growing regions. This is also true for the infrastructure development sector.

“With an abundance of natural resources and recent mineral, oil and gas discoveries, demographic and political shifts and a more investor-friendly environment, the investor spotlight shines brightly on Africa.”

Interviews were conducted among 95 key players in the infrastructure sector, including development finance institutions, private financiers, government organisations and private construction and operations companies across East, West and Southern Africa.

The sectors surveyed included water, transport and logistics, energy, mining, telecoms, and real estate, with the main focus being on economic infrastructure.

South Africa leading

Highlighting the different stages of development and uniqueness of each country, the report provides insights into the world of infrastructure delivery across African countries and regions in sub-Saharan Africa (SSA). It showcases the drivers for success, the current thinking and challenges stakeholders are experiencing within the region.

“While respondents are clearly committed and optimistic about the continent’s infrastructure development, there are a number of obstacles they recognise must be dealt with. Resolving these quickly and creatively will not only positively affect their current projects, but more importantly, will attract other project developers, owners and investors to enter the African market,” says Cawood.

Despite its slow growth, South Africa remains the powerhouse of the SSA region with the most sophisticated infrastructure, state-owned entities, financial services, telecommunications, regulation and greater industrial and sector capacity.

Overall the top three challenges in delivering capital projects across Southern Africa are: the availability of skills (47 percent), a lack of internal capacity among state organisations to plan, procure, manage and implement capital infrastructure projects (43 percent), and the impact of political risk and government interference during project lifecycles (40 percent).

“With a number of concessions having been cancelled by governments in the region, an improvement in transparency, regulation and procurement is needed to help restore the confidence of foreign investors in partnership models,” adds Cawood.

Access to funding was raised as a concern (33 percent), as was policy and the inhibiting regulatory environment (27 percent).

While all projects are susceptible to going off track and experiencing costly delays, some are more vulnerable, such as those involving new technologies, dependent on regulatory and environmental approvals and those in remote or politically unstable regions or where skills are in short supply.  Nearly half (47 percent) of survey respondents said they experienced delays of more than six months on capital projects.

Those in East Africa suffered the most delays of greater than six months, while those in Southern Africa said the largest number of delays were between one and six months.   There are many examples in the world and few in South Africa where projects have come in more than two years late and more than double original budget estimates.

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