African Infrastructure on the rise
According to the IMF, Africa is home to 5 of the top 10 fastest growing economies in the world. The world’s second largest continent’s growth potential stimulates domestic and foreign infrastructure investments in order to achieve self-sufficiency and global competitiveness. The latest African Construction Trends Report by Deloitte kept record of a total investment of over $222 Billion in over 322 projects.
The projects under the scope of the study are infrastructure construction projects, with a value of over $50 million, that are in progress but not been commissioned yet. These projects do not include private mining ventures and social infrastructure including housing, roads, schools, clinics, water and sewage reticulation.
Geographical distribution: Until June 2013, over 322 different collected construction projects were underway throughout the whole continent. The African continent exhibits a vivid example of heavy infrastructure investments; especially in the southern region with over $83 Billion invested in 124 projects. Development is strongly concentrated in Southern and East Africa with 38% and 29% of the total projects respectively. West Africa held 21% of the projects, whereas North and Central Africa are left behind with 7% and 5% respectively.
Financing: The total investment in infrastructure construction projects underway has been estimated at more than $222.77 Billion. 36% of all funding is provided by Development Finance Institutions; International Development Finance Institutions contributed by 16% and Africa’s DFIs by 13%. Other notable financing sources are domestic governments, accounting for 8%; European and US-based stakeholders with 15%; Chinese stakeholders with 10%; private domestic investors with 11%, and foreign institutional investors who account for 7% of the total investments.
Ownership: In terms of ownership, 56% of projects are owned by governments, while 4% of total projects collected are under Public Private Partnerships (PPPs). Foreign investors from Europe and US hold 17% of the projects’ ownership.
Contracting: Contracting is mainly dominated by foreign actors. 37% of the projects being built in Africa are held by Europe/US based contractors; while 12% are held by the Chinese. The remaining projects are handled by private domestic companies and contractors from countries such as Japan, South Korea, Brazil, Australia and South Africa.
Key Sectors: Top sectors in African infrastructure development highlighted in the report (rated by investment value) are energy and power, at 36%, and transport at 25%. This is followed by mining, real estate, water, oil and gas.
Given Africa’s infrastructure needs, infrastructure investments will continue to drive the continent’s economy growth for many years to come. Hence; more investments should be attracted in order to keep up with the rapidly growing construction site that is Africa.
Oussama MOKSSIT, Analyst, Infomineo.
• International Monetary Fund data and statistics
• Deloitte –African Construction Trends 2013 Report (http://deloitteblog.co.za/wp-content/uploads/downloads/2013/11/African-ConstructionTrends-2013.pdf)