Africa Brief

Emerging trends that will change the world of Infrastructure – The African Context

A January 2015 special edition of KPMG’s FORESIGHT publication discussed ‘10 Emerging Trends for 2015: Trends that will change the world of infrastructure over the next 5 years’. Below are some comments from an African perspective related to these 10 factors:

Governments take action to unclog the pipeline

National and local governments have become more interventionist in the area of infrastructure financing due to a desire to accelerate public service delivery. The majority of Eurobonds issued by African sovereigns (e.g. Kenya, Rwanda and Zambia) over the past four years have been specifically sold to raise funds towards infrastructure spending. This was, until recently, not a traditional avenue on the continent for funding infrastructure.

Political and regulatory risks rise up the agenda

The Arab Spring that swept North Africa during 2011-12 caught many onlookers by surprise. Unlike the open conflict seen in many of Africa’s troubled states, the simmering tensions in Egypt and Libya were for too long seen as non-threatening to national stability. The aftermath of the political changes inspired by the Jasmine Revolution has forced stakeholders in many African countries to consider more acutely the underlying and sometimes not-so-visible political challenges in Africa.

Market reforms: status quo is not fit for purpose

The deregulation of several large public utility sectors has widened the scope for investment in delivering previously monopolised private goods. The Nigerian electricity industry, for example, has been unbundled into generation and distribution companies and a single transmission company – the state holds the transmission rights while generation and distribution are fully privatised.

The shifting role of multilaterals and development banks

Regional development banks have a role to play in shaping infrastructure markets from the planning stages to the ribbon cutting ceremony. The BRICS (Brazil, Russia, India, China and South Africa) grouping launched its New Development Bank (NDB) during July 2014 as a vehicle to support infrastructure investment and promote sustainable economic development in countries with financial constraints not catered for by e.g. the World Bank and International Monetary Fund (IMF).

Big complexities start to impede big projects

Moving megaprojects from the drawing board to the ground is challenging for a multitude of reasons with skills challenges at the project management level a key issue. While global construction firms have internationally experienced project managers at their disposal their on-the-ground knowledge of African conditions might be limited. Even in South Africa, with its construction giants venturing ever deeper north into the continent, skills development remains a pressing concern.

Striking the right balance between necessity and opportunity

More and more countries are introducing infrastructure-specific development plans though with varying focus points – some are too concerned with economic infrastructure compared to social infrastructure. The World Bank has pledged US$1.2bn to members of the five-nation East African Community (EAC) towards improving inland waterways and sea port facilities as part of an effort to boost regional integration. In a 2015-25 strategy paper, the bloc stated that it needs as much as US$100bn over the next decade to develop roads, ports, railways, transmission lines and oil & gas infrastructure.

Striving for better asset performance

The privatisation (or part sale) of state assets as attractive for governments with troubled service delivery records as the sale of public holdings could see a cash injection for the fiscus and also see public entities perform better with the involvement of private enterprise. Botswana, for example, launched a broad privatisation drive in 2000, and most recently the Botswana Telecommunications Corporation Limited (BTCL) was set be floated on the local stock market during H1 of 2015.

Resource scarcity drives investment

The management of scarce resources such as water is receiving reinvigorated attention due to the greater awareness of climate change globally. Investment in water infrastructure is gaining interest in not only arid nations but also those states with more abundant resources that could be commoditised into export revenues (in Lesotho, for example). Elsewhere, innovative technology is being used to reduce water usage in e.g. household toilets.

Please feel free to download KPMG Africa’s Construction and Infrastructure Report 2015

 

David Okwara

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