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Infrastructure crucial for African growth –

THE development of infrastructure remains the standout theme in Africa’s rapid growth trajectory.  In recent weeks roundtables on capital projects and infrastructure spending have highlighted trends in SA and other sub-Saharan African markets across diverse sectors, including, energy, transport, water and agriculture.

PwC released two reports in the period; the first looking at the health of the South African construction industry, the second concerning the challenges and outlook for infrastructure development in East, southern and West Africa.

Meanwhile, DuPont, the global chemicals and engineering group, has pitched in this week with a brainstorming session on the role of infrastructure development in driving innovation in Africa.

Finance Minister Nhlanhla Nene, in a speech to the American Chamber of Commerce last month, said the country’s National Development Plan (NDP) provided a platform for making SA a faster-growing and more inclusive economy.

“The NDP explicitly recognises the importance of both the public and the private sector in addressing these challenges,” he said. “Business is the key partner in ensuring that the NDP becomes a reality. Business can do this by adding value, innovating, fostering technological progress, transferring knowledge and creating jobs.”

But Mr Nene also told his audience that business needs the support of a “capable and effective state” that creates an enabling environment to ensure efficient networks of roads, rail, telecommunications and ports.

PwC capital projects and infrastructure leader in Africa Jonathan Cawood says it will take a concerted effort by governments, private business and nongovernmental organisations to attract “all-important external funding” to the continent. This means managing everything from corruption to political risk, regulatory and legal uncertainties, and the shortage of critical skills.

Richard Ntombela, a sub-Saharan Africa business leader at DuPont, says infrastructure is critical to economic growth. PwC’s sub-Saharan Africa infrastructure report supports this assertion, saying every dollar spent on capital projects generates between 5% and 25% of economic returns.

It also states that Nigeria and SA are the two biggest spenders on infrastructure in the subcontinent. But Mr Ntombela says Africa lacks the “collaboration” that is vital to development, despite having both the knowledge and resources to implement the process.

This means that intra-African trade as a component of the continent’s gross domestic product hovers between an extremely low 8% and 12%. It also means that electricity inputs in Africa comprise about 40% of product costs.

Rajen Ranchhoojee, a partner at global legal practice Hogan Lovells in Johannesburg, who specialises in energy and cross-border corporate transactions, says “Africa probably has a decade to capitalise on the purple patch it is in at the moment”.

He says SA needs to “understand” whether it wants economic growth or to resolve problems of social development. “The cost of manufacturing is far too expensive in SA at the moment … our procurement processes are stunting growth. The more we localise, the more expensive products become,” Mr Ranchhoojee says.

However, he also says that SA’s renewable energy programme is one of the best in the world. Renewable energy pricing is the main evaluation criterion, with non-price criteria that include localisation, black economic empowerment, preferential procurement, community development and job creation.

Forty percent of equity must be held by South Africans, with 12% by black economic empowerment stakeholders. Two-and-a-half percent of revenue goes to communities within a 50km radius of the project, though this is closer to between 5% and 10%, Mr Ranchhoojee says.

Nhlanhla Nene. Picture: TREVOR SAMSON

Nhlanhla Nene. Picture: TREVOR SAMSON

THE development of infrastructure remains the standout theme in Africa’s rapid growth trajectory.  In recent weeks roundtables on capital projects and infrastructure spending have highlighted trends in SA and other sub-Saharan African markets across diverse sectors, including, energy, transport, water and agriculture.

PwC released two reports in the period; the first looking at the health of the South African construction industry, the second concerning the challenges and outlook for infrastructure development in East, southern and West Africa.

Meanwhile, DuPont, the global chemicals and engineering group, has pitched in this week with a brainstorming session on the role of infrastructure development in driving innovation in Africa.

Finance Minister Nhlanhla Nene, in a speech to the American Chamber of Commerce last month, said the country’s National Development Plan (NDP) provided a platform for making SA a faster-growing and more inclusive economy.

“The NDP explicitly recognises the importance of both the public and the private sector in addressing these challenges,” he said. “Business is the key partner in ensuring that the NDP becomes a reality. Business can do this by adding value, innovating, fostering technological progress, transferring knowledge and creating jobs.”

But Mr Nene also told his audience that business needs the support of a “capable and effective state” that creates an enabling environment to ensure efficient networks of roads, rail, telecommunications and ports.

PwC capital projects and infrastructure leader in Africa Jonathan Cawood says it will take a concerted effort by governments, private business and nongovernmental organisations to attract “all-important external funding” to the continent. This means managing everything from corruption to political risk, regulatory and legal uncertainties, and the shortage of critical skills.

Richard Ntombela, a sub-Saharan Africa business leader at DuPont, says infrastructure is critical to economic growth. PwC’s sub-Saharan Africa infrastructure report supports this assertion, saying every dollar spent on capital projects generates between 5% and 25% of economic returns.

It also states that Nigeria and SA are the two biggest spenders on infrastructure in the subcontinent. But Mr Ntombela says Africa lacks the “collaboration” that is vital to development, despite having both the knowledge and resources to implement the process.

This means that intra-African trade as a component of the continent’s gross domestic product hovers between an extremely low 8% and 12%. It also means that electricity inputs in Africa comprise about 40% of product costs.

Rajen Ranchhoojee, a partner at global legal practice Hogan Lovells in Johannesburg, who specialises in energy and cross-border corporate transactions, says “Africa probably has a decade to capitalise on the purple patch it is in at the moment”.

He says SA needs to “understand” whether it wants economic growth or to resolve problems of social development. “The cost of manufacturing is far too expensive in SA at the moment … our procurement processes are stunting growth. The more we localise, the more expensive products become,” Mr Ranchhoojee says.

However, he also says that SA’s renewable energy programme is one of the best in the world. Renewable energy pricing is the main evaluation criterion, with non-price criteria that include localisation, black economic empowerment, preferential procurement, community development and job creation.

Forty percent of equity must be held by South Africans, with 12% by black economic empowerment stakeholders. Two-and-a-half percent of revenue goes to communities within a 50km radius of the project, though this is closer to between 5% and 10%, Mr Ranchhoojee says.

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