According to the Africa Construction Trends report we released today, Africa’s infrastructure spending has dipped slightly, following tough economic conditions and lower growth forecasts. This is important because lower spending in this sector impacts future economic development on the continent.
In total, Africa’s large construction projects are currently worth a collective $324 billion, slightly down on last year’s $375 billion. For our analysis, construction projects must have broken ground by 1 June 2016 and be valued at US$50m or higher. This year, 286 projects made the cut, compared to 301 previously.
As a region, West Africa had the most projects – 92 – and recorded the most value, at $120bn, with the number of projects rising sharply from 79 previously. In 2015, West Africans projects were collectively valued at $116bn. Despite the region’s strong showing, South Africa was the single country with the largest number of projects, with 41, followed by Nigeria with 38.
North Africa saw a significant jump, with the number of projects in this region surging 45% over the previous year and value increasing by 195% as the political situation stabilises. In total, 42 projects were recorded in 2016, from 29 in 2015, with a combined value of $76bn from $26bn previously.
East Africa and Southern Africa recorded a decrease in the number of projects accompanied by a decline in overall value. In East Africa, only 43 projects were recorded from 61 previously, with value dropping from $58bn to $27bn. Southern Africa recorded 85 projects from 109 previously, valued at a cumulative $93bn from $140bn previously. In Central Africa, the region’s two largest projects were suspended, resulting in value decreasing by 80% to US$7bn, from US$36bn previously.
These construction trends reflect lower growth forecasts globally for 2016 and 2017, with the International Monetary Fund predicting 3.1% and 3.4% respectively. Of sub-Saharan Africa’s big four economies – Nigeria, South Africa, Angola and Kenya – one is rapidly contracting (Nigeria) whilst two, South Africa and Angola, are static. Only Kenya is bucking this trend, with growth of close to 6%.
In addition, lower commodity prices over the past 24 months have acted as a drag on infrastructure spend, with some forecasting that prices will only recover by 2020. As a result, spending in the extractive industries, such as mining and oil & gas, have declined sharply in the last 18 months. Delayed mining projects have impacted the tax revenue available to governments, which in turn has a knock-on effect on infrastructure spending.
Read the full report.
For more information contact J-P Labuschagne, Deloitte Africa lead for Infrastructure and Capital Projects.