Africa needs $6tn for its infrastructure projects until 2040

Wednesday August 23 2017

Ethiopia’s Grand Renaissance dam on the Blue

Ethiopia’s Grand Renaissance dam on the Blue Nile. PHOTO | FILE 

By VICTOR KIPROP
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African countries will incur at least $4.3 trillion, or $174 billion a year, in financing infrastructure projects to support economic growth over the next 23 years, according to a recent report by G20’s Global Infrastructure Hub (GI Hub).

The Global Infrastructure Outlook calls upon African countries to raise the continent’s infrastructural investments to $240 billion per year ($6 trillion by 2040) in order to match their peers.

According to the study covering infrastructure investment needs globally, Africa’s infrastructure segment remains small, accounting for just six per cent of the global tally. The continent’s needs are 39 per cent more than the forecast investment under current trends.

“Total infrastructure investment in Africa was equivalent to 4.3 per cent of GDP between 2007 and 2015. The continent will need to maintain investment at around this proportion of GDP to accommodate economic and population growth to 2040,” the report says.

In East Africa, the three countries included in the report; Kenya, Ethiopia and Tanzania will cumulatively spend $837 billion on infrastructure projects by 2040.

But the three will require at least $308 billion more to meet their infrastructure spending needs over the period.

Striking differences

Kenya must spend at least Ksh969 billion ($9.3 billion) every year on infrastructure to meet its infrastructure spending needs of $223 billion.

Ethiopia has the highest forecast spending against current spending trends gap of $154 billion, followed by Tanzania at $115 billion followed. To bridge the gaps, the two countries will need to raise their infrastructural spending to 17 per cent (Ethiopia) and 12 per cent (Tanzania) of their Gross Domestic Product.

According to Africa Construction Trends 2016 by Deloitte, there were at least 43 large infrastructure projects in East Africa valued at $27.4 billion, accounting for 15 per cent of the continent’s infrastructure projects.

Deloitte ranked Ethiopia’s $4.1 billion, 6,000MW, Grand Ethiopian Renaissance Dam as the region’s largest infrastructure project followed by Kenya’s $3.8 billion standard gauge railway and Uganda’s $2.2 billion 6,000MW hydropower plant.

Despite increased investments in recent years, the outlook report shows that Africa’s transport sector remains under-invested, accounting for only 27 per cent of the continent’s infrastructure spending, which is way below the global average of 45 per cent.

“The difference is particularly striking for rail, which receives just three per cent of infrastructure investment in Africa, compared to the world average of 12 per cent,” the report said.

Challenge

It also highlighted the challenge of improving the quality of life in many developing nations in order to meet the UN Sustainable Development Goals (SDGs) seeking universal household access to electricity and water by 2030.

The African continent still lags behind in the drive towards universal access to electricity and water despite directing 38 per cent and 20 per cent, respectively, of its infrastructure budget towards the electricity and water sectors over the last decade.

Most notable in this category is Ethiopia which would need to dedicate at least 20 per cent of its GDP to electricity access to meet the SDGs on electricity access.

Tanzania and Kenya will only meet the UN 2030 electricity access goals if they spend 7.7 per cent and 6.8 per cent of their GDP’s in electricity infrastructure.

According to a recent report by the Washington-based Population Reference Bureau, Africa’s population is forecasted to more than double to 2.5 billion by 2050, raising serious questions on the sustainability of the continent.

Only 35 per cent of sub-Saharan Africa’s population has access to electricity, crippled by the high costs and insufficient capacity, a World Bank report released earlier this year.

However, infrastructure funding needs are not entirely unique to developing countries.

“This is not just a challenge for emerging countries that need to create new infrastructure, but also for countries that have aging systems that need to be replaced,” Chris Heathcote the CEO of Global Infrastructure Hub, said.

The cost of providing infrastructure to support global economic growth is forecasted to hit $97 trillion by 2040.