China accounted for over Sh1.8 trillion ($20 billion) worth of infrastructure development in East Africa last year, indicating the country’s growing influence in the region’s infrastructure development.

New data shows that the Asian dragon’s share of the region’s Sh5.4 trillion ($60 billion) large infrastructure projects almost doubled from 19 per cent in 2013 to 31 per cent in 2014.

According to the third edition of the annual Deloitte African Construction Trends Report 2014, China continues to bolster its lead in bagging mega-construction tenders in the region.

“In terms of construction, China is still leading and maintains a strong foothold,” stated Mark Smith, head of infrastructure and capital projects at Deloitte East Africa.

In 2013, Europe and the US accounted for 37 per cent of infrastructure construction but this share has since shrunk to 18 per cent in 2014. The report states that the number of mega-construction projects in East Africa declined by 55 per cent with the value of the same shrinking by 10 per cent, from $67 billion (Sh6 trillion) to $60 billion (Sh5.4 trillion).

“Our view is that while there has been a dip in current activity, there are a large number of significant projects in the planning phase that have not yet reached financial close and are thus not yet reflecting in the statistics of projects under construction,” explained Dr Smith (pictured).

In East Africa, transport projects took the bulk of the infrastructure spend accounting for 59 per cent of the projects with energy projects accounting for 37 per cent. Infrastructure in mining and oil and gas accounted for 2 per cent each.

Despite the boom in oil and gas, there is still muted activity in infrastructure projects in this area. Oil and gas projects accounted for 2 per cent (Sh109 billion) of the overall projects surveyed. It is estimated that between $60 billion to $70 billion needs to be invested in oil and gas infrastructure in east Africa.

International development finance institutions funded most projects in the region, bankrolling 37 per cent of projects in 2014 up from 24 per cent in 2013. Government spend also grew to 17 per cent up from 4 per cent in 2013.

Foreign Investments

Africa Direct Foreign Investments (DFIs) accounted for 16 per cent climbed marginally from 11 per cent with China funding 16 per cent of projects. Japan and the United Arab Emirates were new entrants bankrolling two per cent each of the construction projects in the region.

Deloitte, however, states that Kenya’s growing debt has necessitated an adoption of the public-private-partnership (PPPs) model to raise large infrastructure capital.

In 2013, the uptake of private public partnerships was relatively low in the region but the past year has seen a large percentage of the new projects being funded by PPPs. Funding by private domestic firms grew from 16 per cent in 2013 to 22 per cent in 2014.

Source: Standard Digital

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