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Angola: Africa's Infrastructure Spending Drops

2017/08/20

Africa's infrastructure investment spending decreased in 2016 compared 2015, according to Deloitte 2016 African construction trends statement.

In 2016, 286 projects worth 50m and additional were being built in Africa, down from 301 in 2015. The fall in in general capital price was $51bn — from a total of $375bn in 2015 to a total of 324bn in 2016.The statement, released on Tuesday, said there were 109 projects worth a total of $140bn in Southern Africa in 2015. For 2016, project numbers had fallen to 85, worth $93bn.

Africa has seen a downturn in both the number and price of projects included this year, in contrast to previous years,” said Jean-Pierre Labuschagne, Deloitte Africa infrastructure and capital projects leader.

“World economic headwinds, low increase and lower commodity prices have all contributed to this,” he said. The international consulting group said there was an uneven focus on infrastructure and capital project development. Projects included human settlements and associated water, sewerage, roads, electricity, schools and health infrastructure, and not just large construction works such as energy, dams, mines, ports and oil and gas facilities.

The statement identified gross fixed capital formation on a continental and regional level, and compared data collected over the last four years.

Regionally, West Africa had 92 projects — the major number and worth the majority at 120bn. SA had the major number of projects at 41 for a single country, followed by Nigeria with 38. “Several large mining projects on the continent have been suspended,” Labuschagne said. These included three iron-ore projects worth a total of $30bn.

Meanwhile, the rout in oil prices had seen nations, inclunding Nigeria and Angola, scrambling for foreign currency. This had led to Angola suspending the building of the $8bn Lobito oil refinery.

The focus of this year’s statement was the water sector.

There was underinvestment in the provision of water on the continent, Labuschagne said. Water costs and human rights issues plagued the sector, inclunding related food and energy security concerns.

“It does not have great returns for the private sector, and is completely politically charged,” he said.

“We feel this is particularly relevant, as the need for investment in this sector is far outstripping the actual investment … and is a growing cause for concern in the light of the increase of megacities on the continent and the political and social pressure this will potentially place on governments.”

The three existing African megacities of additional than 10 million people each — Cairo, Lagos and Kinshasa — would be joined by six additional cities over the next 10 years: Abidjan, Dar es Salaam, Johannesburg, Khartoum, Nairobi and Luanda, Labuschagne said.

Meanwhile, the EU Chamber of Commerce and Industry of Southern Africa, said on Tuesday EU investors feared for the next of SA’s acclaimed renewable energy plan.

“There is an urgent need for the outstanding purchase power agreements with Eskom to be signed,” Stefan Sakoschek, regional director of the EU chamber, said.

“Unfortunately … the current delays in the signing, awarding, and implementation of the IPP [independent power producer] contracts and the lack of communication [by Eskom] have raised doubts about the resilience of SA’s renewable energy targets,” he said.

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