“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,” said Jonathan Cawood, Capital Projects & Infrastructure Leader for PwC Africa.
Cawood noted that the continent’s abundance of natural resources and recent mineral, oil and gas discoveries, demographic and political shifts, as well as a more investor-friendly environment has beamed investor spotlight on Africa.
In the survey for the report titled ‘Capital Projects & infrastructure in East Africa, Southern Africa and West Africa,‘ 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 – 51 percent of all respondents planning to spend more than half of their budgets on new assets. 58 percent of respondents from West Africa are planning to increase their spending on infrastructure by more than 25 percent, followed by those in East Africa (53 percent) and Southern Africa (40 percent).
By 2025, the amount of money spent on infrastructure in the Africa is projected to reach $180 billion per annum
“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,” says Cawood.
He noted that resolving these quickly and creatively will attract other project developers, owners and investors to enter the African market.
Many projects across sub-Saharan Africa have been affected by the lack of funding or insufficient funding, the report notes, stressing that funding from sources such as sovereign wealth funds, bonds and pensions funds is becoming increasingly important. It however notes that these types of investors are typically more interested in projects that are fully operational and tend to shy away from greenfield projects and their construction risks.
The continent’s resource wealth have been enticing some of these investors such as China, Japan, India and other Asian countries whose investments in infrastructure in Africa is linked to one resource or the other. Local players are also increasing investments.
Interviews were conducted among 95 key players in the infrastructure sector 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. The report highlighted the different stages of development and uniqueness of each country and provides insights into the world of infrastructure delivery across African countries and regions in sub-Saharan Africa (SSA).
More respondents in Southern Africa than other regions expect projects to be fully funded internally or through government funding, the report notes, while those in East and West Africa are counting on a mix of private-sector and government financing.
“The need to improve infrastructure to drive economic development is undisputed. The survey makes it clear that the availability of funding is a common and critical challenge,” said Mohale Masithela, PwC Partner in Capital Projects & Infrastructure Financing.
Mohale however notes that private capital does not track needs, it tracks opportunities. Therefore, to ensure the need for infrastructure to be viewed as an opportunity to provide capital by funders, some of the other challenges identified in the survey such as political risk, policy and regulatory clarity and the availability of appropriately skilled resources must be addressed.”
The report notes that South Africa and Nigeria have the most ambitious infrastructure programmes and together make up almost 60 percent of the money spent on infrasture across SSA. Kenya follows as the third largest in planned spend. Transport and Utilities (including power/energy and water) will account for approximately 70 percent of this spend in Southern Africa.
Having suggested ways by which the continent’s infrastructural needs can be addressed, Cawood notes that infrastructure plays a crucial role in economic growth and poverty reduction, with a 5-25 percent per annum return on investment as an economic multiplier.
He noted that countries that have been most successful in developing and maintaining infrastructure have established programmes of prioritised investment opportunities with a number of features, including clear political support, a proper legal and regulatory structure, a procurement framework that can be understood by both procurers and bidders, and credible project timetables.
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