The African continent continues to attract the interest of global investors, developers and operators searching for growth, according to a recent report.

PwC’s ‘Capital Projects and Infrastructure in East Africa, Southern Africa and West Africa’ report pointed out that while there are short-term concerns in some of Africa’s regions, the opportunities abound for infrastructure investment and development.

The infrastructure spend in the region has been projected to reach $180 billion per annum by 2025, it said.

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

Much of their spending would be focused on new development, with 51 per cent of all respondents planning to spend more than half of their budgets on new assets, said the report.

The respondents from West Africa were especially bullish, with 58 per cent planning an increase of more than 25 per cent in spending, followed by those in East Africa and Southern Africa.
 
Jonathan Cawood, Capital Projects and Infrastructure leader for PwC Africa, said: “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.”
 
The 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, telecommunications, and real estate, with the main focus being on economic infrastructure.
 
The report, which highlights the different stages of development and uniqueness of each country, provides insights into the world of infrastructure delivery across African countries and regions in sub-Saharan Africa.

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,” said Cawood.
 
Despite its slow growth, South Africa remains the powerhouse of the region with the most sophisticated infrastructure, state-owned entities, financial services, telecommunications, regulation and greater industrial and sector capacity, said the report.
 
The top three challenges in delivering capital projects across Southern Africa  included the availability of skills (47 per cent), a lack of internal capacity among state organisations to plan, procure, manage and implement capital infrastructure projects (43 per cent), and the impact of political risk and government interference during project lifecycles (40 per cent).

“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,” added Cawood.

Meanwhile, access to funding was raised as a concern, as was policy and the inhibiting regulatory environment.
 
With many governments and their agencies reaching debt ceilings, funding models are gradually changing in Africa and respondents expect public-private partnerships (PPPs) to become more prevalent, it said.

More respondents in Southern Africa than other regions expect projects to be fully funded internally or through government funding. On the other hand, respondents in East and West Africa are counting on a mix of private-sector and government financing.
 
“Stability coupled with greater regional integration and cross-border cooperation is essential for the successful economic development of Southern Africa. The region is clearly on a strong growth trajectory but better project selection and preparation, tighter collaboration and improvement in trust are required to ensure sustained development,” said Cawood.
 
The report pointed out that managing the construction process with the right level of control, oversight and commercial skill is critical.

More than 80 per cent of project delivery failure was due to non-technical issues caused by poor communication, lack of clear roles and accountability and a weak paper trail of decisions, variation orders and reporting, it said. 

Mohale Masithela, PwC partner in Capital Projects and Infrastructure Financing, said: “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. However, private capital does not track needs, it tracks opportunities.

“To ensure the need for infrastructure is 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.”
 
South Africa and Nigeria have the most ambitious infrastructure programmes and together make up almost 60 per cent of the spend across the region, which Kenya follows as the third largest in planned spend, said the report.

The transport and utilities (including power/energy and water) will account for approximately 70 per cent of this spend in Southern Africa, it said.
 
“Infrastructure plays a key role in economic growth and reducing poverty having a five to 25 per cent per annum return on investment as an economic multiplier.  Those 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,” said Cawood.
 
“These country programmes eliminate key frictions such as long project lead times, clarity around funding and procurement strategies and to some extent reduce the risks of political term of office changes,” he added. - TradeArabia News Service