Trade Transformation in Africa (2): The Infrastructure Agenda
Continent’s Gap Would Require $112 Billion Per Year Over Next Decade to Fix
One major factor that has continued to stigmatize the continent of Africa is lack of infrastructure. The African Development Bank (AFDB) reported that Africa has an infrastructure gap that would require approximately $112 billion per year over the next decade to fix. This situation explains why both intra-and extra-African trade has been negatively impacted over the years. The development of infrastructure in the transport sector including rail systems, roads, new maritime routes and ports expansion, are crucial to trade facilitation and economic growth.
Now, it appears this critical issue is receiving some attention following an aggressive push from all stakeholders including multilateral agencies. Many African countries have started addressing this challenge as we have seen turnkey projects being undertaken across the region through different partnership vehicles and financial models. According to Deloitte’s Africa Construction Trends (ACT) report of 2017, 303 projects valued at $307 billion are currently ongoing in the continent with Transport and Power sectors dominating.
Sub-Saharan Africa is experiencing unprecedented magnitude of infrastructural development in the transportation industry especially railways. In East Africa – Djibouti, Ethiopia, Kenya and Tanzania have launched major transportation programs linking ports expansion to modern rail systems and road networks to facilitate easy access to market.
To reference a few of these key projects, under the East African Railway Master Plan, the Standard Gauge Railway (SGR) system connecting port of Mombasa to Nairobi will eventually be extended to Uganda, Rwanda, South Sudan and Ethiopia. This megaproject is currently transforming logistics in the sub-region.
Ports expansion is an important part of Africa’s infrastructure program with new projects and upgrade of existing ports valued in the billions. Djibouti has a geostrategic location that provides easy connectivity to several global markets. The country has embarked on a maritime infrastructure modernization plan of over $650 million to enhance its gateway status.
Tanzania is deepening existing berths and committing another $10 billion in the construction of a new port that will be operational by 2020. Mozambique has already invested $800 million out of a budget of $2 billion to increase capacity and efficiency of its Maputo port. Ghana is spending about $1.5 billion to upgrade and expand its Tema port to enhance annual handling capacity by 2019 and become the largest container facility in West Africa.
Apart from on-going projects that are largely funded and handled by China, opportunities abound for investors from other regions of the world. The construction market is booming and this trend is projected to continue since the 2040 vision for Africa’s transport sector focuses on integrating the continent through transport infrastructure.
Due to the complex nature of megaprojects, the number of smaller value projects has increased. Deloitte further reported that out of the 303 projects currently running in Africa, 193 of them fall within the range of $50 million to $500 million. Many of these projects are structured through Public-Private-Partnership (PPP) arrangement and this shows how private sector engagement can expedite infrastructural transformation.
To further accelerate the infrastructure agenda, the African Development Bank is launching a unique Africa Investment Forum where bankable projects will be presented to investors. The first business meeting which will strictly focus on discussing viable projects across the continent is scheduled for November in South Africa. This presents an opportunity for U.S. investors and other international infrastructure development companies to understand the dynamics of doing business in Africa and leverage the current momentum.
Kemi Arosanyin is a Global Trade contributor and the director for the Africa Trade Expansion Program at the World Trade Center Miami. She writes, speaks, and advises on trade and investment in sub-Saharan Africa.
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