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Mega infrastructure projects slowdown in East Africa: Deloitte Report

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about-deloitte-iconHuge capital infrastructure projects in the East African region dropped significantly in 2014 as activity increased in the rest of the continent, a new report released by Deloitte has indicated.

According to the third edition of the annual Deloitte African Construction Trends Report 2014, only 51 projects were identified in the region, compared to 93 recorded the previous year, a 55 per cent drop. The total value of the projects slid from US$67.688 billion to US$60.671 billion.

The rest of the continent recorded an increase in value of projects that were executed during the year.

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“While there seems to have been a dip in current activity, there are a large number of significant projects in the planning phase that have not yet reached financial close and are thus not yet reflecting in the statistics of projects under construction,” explained Dr Mark Smith, the Head of Infrastructure & Capital Projects at Deloitte East Africa.

“This remains critical for Africa’s economic growth momentum, particularly to bolster the manufacturing sector and facilitate trade within the continent,” Dr Smith added.

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Kenya contributed the bulk of large capital infrastructure projects implemented in East Africa in 2014, followed by Uganda, Ethiopia, Tanzania and Rwanda respectively.

The transport sector accounted for 59 per cent of all the projects in Kenya, representing a growth of 17 per cent, while 37 per cent of projects were focused on energy and power capacity development.

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The Oil and Gas boom in the region continued, despite this not yet manifesting in mega projects breaking ground. It is estimated between US$60 billion to US$70 billion needs to be invested in infrastructure in the oil and gas sector.

Overall, the value of mega projects under construction across Africa in 2014 stood at US$326 billion, a 68 per cent growth from US$222 billion the previous year. Whereas the number of projects dropped to 257 from 322 evaluated in 2013, the average value rose to US$1.27 billion from US$689 million the previous year.

The Southern Africa region contributed the biggest share of the projects, accounting for 46 per cent of all the projects in the continent, valued at US$145 billion. It was followed by West Africa, East Africa, Central Africa and North Africa.

In 2014, 27 per cent of the total projects collected were above the US$1 billion mark in value, an 11 per cent jump. The African Construction Trends report monitors progress on capital intensive infrastructure on the continent, with a focus on projects valued at more than US$50 million and had to have broken ground by at least 1 June 2014.

Over half of the projects executed during the year were owned by the government with the emergence of Australia, the United Arab Emirates (UAE) and India as owners. This reflects interest in Africa by foreign investors and fund managers, the report concluded, as well as improved political and economic stability on the continent. There was also an increase in the proportion of projects implemented as Public-Private Partnerships (PPPs).

International Development Finance Institutions were the top financiers of majority of the projects, while new foreign investors emerged including private Israeli companies, public owned funds and organisations from UAE as well as private Australian companies. The level of government funding increased by a significant 15 per cent, while foreign institutions showed reduced appetite for funding this year, with a 9 per cent drop in this investor category.

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Susan Mwenesi
Susan Mwenesi
Interested in business, technology and all things startups in Africa!

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