Capital Equipment News

The 2017 edition of Deloitte’s Africa Construction Trends report, which looks at the regions and sectors that have been the driving force for construction across Africa, finds that governments own between 57% and 90% of tracked projects per region.

Government Projects“Investment in infrastructure tends to increase business confidence and lowers transaction costs, making it easier for companies to move people and goods, and to provide services. Governments that invest in enabling infrastructure are seen as more proactive and tend to attract more investors, ultimately making them more likely to achieve economic and export diversification objectives,” says J-P Labuschagne, Deloitte Africa Infrastructure & Capital Projects Leader.

The report draws attention to the fact that infrastructure projects on the African continent include 303 projects valued at US$50 million or above, that have broken ground since 1 June 2017. In total, these projects are worth US$307 billion.

Governments remain the single largest developers of infrastructure projects – a common thread emanating from this report and it is supported by the fact that governments own between 57% and 90% of tracked projects per region. Moreover, it shows the varied impact of the private sector across the various regions.

As a region, Southern Africa has the largest number of projects with 93 projects while West Africa remains as the region with the largest share of projects in terms of value, worth US$98,3 billion. South Africa is the single country with the most projects (44 projects) while Nigeria has the most projects by value (worth US$69,1 billion).

The report highlights that large-scale investment into social development projects remains low with only 1,2% of total investment going to the water sector and even less into education. Between 2016 and 2017, there were two fewer energy and power projects in Africa and three fewer healthcare projects. The transport sector – accounting for more than half of projects this year – continues to be the largest sector, with 27 road and bridge projects currently underway.

“It would be prudent for governments across Africa, to increase investor confidence by committing to more large-scale development projects. The social implications extend further than simply providing much-needed services for communities as projects of this nature are viewed in a positive light across sectors,” says Labuschagne.

Research globally shows that an alarming number (9 out of 10) of megaprojects (value of at least US$1 billion) run either over budget or over time. It should be noted that countries with stronger regulatory and institutional governance frameworks tend to have a lower risk of project overruns.

Emerging markets, with weaker governance institutions, tend to have significant time and cost overruns. At the time of writing the report, only seven of Africa’s top 20 projects under construction are likely to be completed on time. Government-owned projects are the worst offenders, with 83,3% of projects delayed. Three-quarters of private-owned projects are on time. This shows a consistent pattern of overruns compared to global projects.

“The unprecedented magnitude of current African infrastructure development plans and private sector growth initiatives require significant capital management skills. With a presence in 34 countries and service to 51 countries, Deloitte is well positioned and understands the nuances of doing business in Africa and being a trusted advisor across the continent,” says Labuschagne.

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