Infrastructure key African challenge this Century

While infrastructure development is a global challenge, the African challenge is a particularly acute one in the twenty-first century, with the continent’s governments facing severe pressure to deliver on economic growth whilst simultaneously ensuring infrastructure rollout. It is estimated that US$40 trillion will be required to address infrastructure needs between now and 2050 globally. In sub-Saharan Africa alone, addressing energy infrastructure needs will require US$250 billion over the next 15 years. The global recession has also impacted on how governments prioritise their infrastructure allocations in relation to competing priorities created by the global economic downturn. While infrastructure funding is a key concern globally, a number of other sectors have emerged as demanding government attention.

These were some of the views to emerge at the inaugural Infrastructure Dialogue forum convened by financial advisory services firm KPMG, with participants drawn from the public sector, the private sector and the infrastructure development support sector.

The common global challenges around infrastructure development centre on rapidly growing populations and the concomitant need to care for people with longer life spans through the provision of energy and water and the global trend of rapid urbanisation. In Africa, the challenges are heightened by an historical lag in infrastructure development, the nature of the continent’s geography, and institutional, regulatory and administrative arrangements. This has been estimated to cost African infrastructure development at least twice the costs in the developed world, said De Buys Scott, the head of the KPMG South African Global Infrastructure Project Group (GIPG).

“Some estimations place the costs even higher than that. Currently,Africa is spending about half of what it should be spending on infrastructure development,” he said.

According to the World Bank, Africa currently spends US$45 billion per annum on infrastructure, when it should be spending about US$93 billion.

Drawing on models implemented in the UK, deputy Lord Mayor of London, David Wootton, was optimistic that constructive lessons could be drawn from the British experience in public-private partnerships (PPPs), however.

“The UK PPP model is people-focused and was invented to deliver government services to the people while also giving government more control over ensuring value for money. The key focus is on long-term outcomes,” he said.

The success of the UK model of PPPs hinges on a combination of political support, building public confidence, the use of experienced advisors and reassurance of the taxpayer through impartial public audits of projects. In order to expedite the bedding down of PPPs, it is important to understand that all government processes are systematic, and careful and therefore slow, said Wootton.

It does help to standardise tender and procurement procedures so that bottlenecks can be eased.

In a set of global surveys conducted by KPMG over the past three years, it emerged that there was remarkable consensus between government and the private sector that government efficacy was a key barrier to delivery, said Klaus Findt, Chief Operating Officer of GIPG Africa.

“These global surveys show that more than 80% of respondents in the public and private sectors identified government efficiency as a key barrier to delivery.”The global demand for scarce infrastructure development resources also makes the cost of development high. These resources range from skills to equipment to materials to implement projects, further compounding funding pressures on infrastructure projects.

Transnet acting CEO, Chris Wells, illustrated the dilemma by pointing out that there are no continental locomotive manufacturers or producers of requisite high-gauge quality steel inAfrica to modernise its rail transport system and these have to be imported. Local assembly, however, created opportunities for the local economy. He also expressed Transnet’s objective to project and meet infrastructure needs before they become a necessity. “Countries that have superior infrastructure, have superior GDP growth,” he said.

While Transnet has been meeting needs through its own balance sheets thus far, he anticipated that the downturn combined with resource scarcity would impact on GDP growth, thus affecting funding for future plans for the parastatal.

A welcome development in the South African context was the announcement recently by economic development minister, Ebrahim Patel, that SA’s projected infrastructure spend had been increased to about a trillion rand, observed Yunus Suleman, Chair of the KPMG Policy Board.

(Article supplied by KPMG, is a global network of professional firms providing Audit, Tax and Advisory services)

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