Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180- billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood.
This is one of the findings of PwC’s Capital Projects & Infrastructure report on East Africa, Southern Africa and West Africa, released earlier this month.
Interviews were conducted with 95 respondents in the infrastructure sector, including development finance institutions, private financiers, government organisations and private construction and operations companies across the region.
Despite the growth expected in infrastructure spend in sub-Saharan Africa, Africa will spend only 2% of the total expected global infrastructure budget of $9-trillion a year by 2025, says Cawood.
He also notes that Nigeria and South Africa are responsible for 68% of all infrastructure spend in the sub-Saharan region in 2013. Kenya is placed third, at 10%, followed by Ghana at 8%, Ethiopia at 6%, Tanzania at 5%, and Mozambique at 3%.
However, the PwC report found that, within this group of seven countries, only Nigeria and Ethiopia have room left to accrue more debt.
Yearly spend in the sub-Saharan Africa chemicals, metals and fuels sector is forecast to increase across the seven major regional economies to $16-billion by 2025, up from $6-billion in 2012.
The PwC study also found that electricity production and distribution should see growth in yearly spend from $15-billion in 2012, to $55-billion by 2025.
The report notes that only 290-million people (31% of the population) have access to electricity in the region, with the spend on fuel for backup power across Africa at $1-billion in 2013.
Currently, 48 countries in the region produce 84 GW of power, which is roughly the same as Spain’s output.
Also, only 10% of sub-Saharan Africa’s hydropower potential is being used.
Other interesting statistics are that poor transport and logistics infrastructure increases the costs of goods by 60% for landlocked countries in Africa. Also, less than 8% of Africa’s trade is between African countries, compared with 30% to 60% in other global regions.
Another rather poor number is the fact that cargo waiting-time at ports in sub-Saharan Africa is 20 days, compared with the global norm of three to four days.
Cawood notes that the region could ratchet up infrastructure performance by proper maintenance, as well as improving efficiency at existing infrastructure.
In general, there is “a growing sense of longer-term planning by governments” in the region, he adds. More than 75% of respondents, and the capital projects surveyed, form part of an overall infrastructure master plan and country strategy.
“The African growth story is real. We have gone past the hype cycle,” says Cawood.
However, to keep the African renaissance alive and well, the sub-Saharan region requires economic growth above 5% a year; on-time and within-budget procurement; a lack of external shocks, such as the Ebola crisis in West Africa; and a growing attraction for private capital, as government budgets fall far short of meeting infrastructure needs, he adds.
He says the PwC study shows that the four main challenges in delivering capital projects across sub-Saharan Africa are accessing funding; the existence of a project-friendly policy and regulatory environment; political risk and government interference; and a lack of capacity and skills in the marketplace.
Access to finance is less about money, however, he explains, and more about finding projects that are financially viable, with a clear revenue stream and a local market ready to consume the project’s output.