The “Africa rising” story is under pressure with a dramatic fall in infrastructure spending on the continent, according to the Deloitte 2016 African construction trends report.
In 2016, 286 projects worth 50m and more were being built in Africa, down from 301 in 2015. The fall in overall capital value was $51bn — from a total of $375bn in 2015 to a total of 324bn in 2016.
The report, released on Tuesday, said there were 109 projects worth a total of $140bn in Southern Africa in 2015. For 2016, project numbers had fallen to 85, worth $93bn.
“Africa has seen a downturn in both the number and value of projects included this year, in contrast to previous years,” said Jean-Pierre Labuschagne, Deloitte Africa infrastructure and capital projects leader.
“Global economic headwinds, low growth and lower commodity prices have all contributed to this,” he said.
The international consulting group said there was an uneven focus on infrastructure and capital project development.
Projects included human settlements and associated water, sewerage, roads, electricity, schools and health infrastructure, and not just large construction works such as energy, dams, mines, ports and oil and gas facilities.
The report identified gross fixed capital formation on a continental and regional level, and compared data collected over the last four years.
Regionally, West Africa had 92 projects — the largest number and worth the most at 120bn. SA had the largest number of projects at 41 for a single country, followed by Nigeria with 38.
“Several large mining projects on the continent have been suspended,” Labuschagne said. These included three iron-ore projects worth a total of $30bn.
Meanwhile, the rout in oil prices had seen countries, including Nigeria and Angola, scrambling for foreign currency. This had led to Angola suspending the building of the $8bn Lobito oil refinery.
The focus of this year’s report was the water sector.
There was underinvestment in the provision of water on the continent, Labuschagne said. Water costs and human rights issues plagued the sector, as well as related food and energy security concerns.
“It does not have great returns for the private sector, and is quite politically charged,” he said.
“We feel this is especially relevant, as the need for investment in this sector is far outstripping the actual investment … and is a growing cause for concern in the light of the growth of megacities on the continent and the political and social pressure this will potentially place on governments.”
The three existing African megacities of more than 10million people each — Cairo, Lagos and Kinshasa — would be joined by six more cities over the next 10 years: Abidjan, Dar es Salaam, Johannesburg, Khartoum, Nairobi and Luanda, Labuschagne said.
Meanwhile, the EU Chamber of Commerce and Industry of Southern Africa, said on Tuesday EU investors feared for the future of SA’s acclaimed renewable energy plan.
“There is an urgent need for the outstanding purchase power agreements with Eskom to be signed,” Stefan Sakoschek, regional director of the EU chamber, said.
“Unfortunately … the current delays in the signing, awarding, and implementation of the IPP [independent power producer] contracts and the lack of communication [by Eskom] have raised doubts about the resilience of SA’s renewable energy targets,” he said.
source: Business Day