Notice: WP_Scripts::localize was called incorrectly. The $l10n parameter must be an array. To pass arbitrary data to scripts, use the wp_add_inline_script() function instead. Please see Debugging in WordPress for more information. (This message was added in version 5.7.0.) in /usr/www/users/buildtgtnk/wp-includes/functions.php on line 5535 Who finances mega infrastructure? An African Construction Trends Report update - Building & Decor

Who finances mega infrastructure? An African Construction Trends Report update

by Darren
Who finances mega infrastructure DELOITTE

Development Finance Institutions (DFIs) finance more African mega infrastructure projects than the continent’s governments.

Deloitte’s latest African Construction Trends Report shows that Development Finance Institutions (DFIs) are now the largest financier of infrastructure projects on the continent, having overtaken African governments, who previously fulfilled this role.

These findings are the result of extensive research into mega infrastructure projects with a value of more than $US50, under construction across Africa. International DFIs are involved in 145 of the 301 projects under construction, with a value of more than $US50 billion. DFIs represent 48,17% of the total projects and 33,84% of continent-wide financing.

According to the report, liquidity limitations in a contracting global economy and the commodity crunch are largely responsible for this shift, followed by the amalgamation of the participation of all singular countries’ financing, as well as African DFIs, private domestic investments and China on a stand-alone basis.

This shift from government-led spend to DFIs has led Deloitte to question the longevity and sustainability of the investments.

“The maintenance will one day need to come on the government budget,” explains JP Labuschagne, Africa infrastructure and capital projects  (ICP) leader at Deloitte South Africa. “African economies may be getting the boost that they require to build the infrastructure currently, but how will this investment be maximised and maintained for future benefit?’’

DFIs vs donor funders
Deloitte further highlights the need to be more cognisant of the role of DFIs versus that of donor funders. While donor funding is effectively a handout, not for repayment and often serving as a kick-start for project planning, DFIs are called on to facilitate sustainable project funding.

Donor activities
According to a study conducted by Deloitte five years ago, donor activities across member firm countries were the highest in East Africa and parts of West Africa, with actual disbursements dominated USAID and the World Bank. Infrastructure development was the top addressable sector by these funders, receiving US$8,9 billion in 2011.

“The data in this report also indicates that the development of social infrastructure lags behind other sectors,” says Labuschagne. “This begs further questions as to whether the infrastructure development agenda is being driven by getting people from A to B and keeping the lights on, or catering to the basic needs of residents such as the provision of healthcare, water, sanitation and housing.”

Admitting these questions are not easy to answer, Labuschagne points out that taking a 360-degrees view of infrastructure development in Africa, as in the African Construction Trends Report, assists with understanding the complexities behind building a continent from the ground up.

“What we also know, based on the experience of the Deloitte Africa ICP team, is that this project landscape is a litmus test for national and regional leadership. It is the new circle of influence in which heavyweight political and economic support need to come together, not only in talk but in action, as teamwork is put to the test in realising some of the continent’s hopes for the future.”

Full thanks and acknowledgement are given to Deloitte for the information given to write this article.

Project owners
Governments still own the majority (71%) of projects with a total of 214, are part of the construction of 27% and present in the funding of 16% of these developments. Private domestic owners are next with 38 projects (13%) and Africa DFIs own nine projects (3%). China is the owner of only one project, even though it is the funder of 13 developments and heavily present in the construction of 42 projects (14%).

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