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AfricaMoney | August 23, 2017

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Infrastructure spend in Sub-Saharan Africa to grow 10% a year over next decade

Infrastructure spend in Sub-Saharan Africa to grow 10% a year over next decade

Nigeria and South Africa dominate the capital project and infrastructure market in the region but other countries like Ethiopia, Ghana, Kenya, Mozambique, and Tanzania are poised for growth as well. (Image: Report)

Infrastructure spending in Africa is expected to grow considerably over the coming decade, according to the report on ‘Capital Project and Infrastructure Spending: Outlook to 2025′ issued by PwC.

The report notes that infrastructure spending in Sub-Saharan Africa will grow on an average of 10% a year over the next decade, exceeding USD 180 billion by 2025.

This comes as welcome news to Mauritius, as the regional financial hub can serve as a great platform for structuring investments to the African continent.

“Infrastructure accelerates annual growth convergence rates by as much as 13% while increasing per capital annual growth rate by almost 1%,” Mthuli Ncube, chief economist and vice president of the African Development Bank, said in a blog post for the World Economic Forum.

Growth prospects in most of the region’s economies look bright as well as the policy environment for growth has been improving across the continent, since African economies were not affected as much by the global economic crisis as other regions.

Nigeria and South Africa dominate the capital project and infrastructure market in the region but other countries like Ethiopia, Ghana, Kenya, Mozambique, and Tanzania are poised for growth as well.

Nigeria’s share is expected to grow substantially over the next decade on the account of better government finances and the fastest rate of urbanisation on the continent.

The West African economy is among the emerging markets which should boost spending for vital infrastructures sectors such as water, power and transportation.

The country’s infrastructure spending is expected to grow from USD 23 billion in 2013 to USD 77 billion in 2025, outstripping South Africa at USD 60 billion.

Globally, the report highlighted that infrastructure spending is expected to grow tremendously from USD 4 trillion per year in 2012 to more than USD 9 trillion per year by 2025, and this represents a global spending close to USD 78 trillion between 2014 and 2025.

The report noted that spending across the 49 countries considered for the study fell from USD 3.4 trillion in 2008 to USD 3.2 trillion in 2009, but has since recovered to around USD 4.2 trillion in 2013, led overwhelmingly by emerging markets, especially in the Asia-Pacific region.

The annual growth rate will rebound from the low single digits of recent years to 6% in 2014 and 7.5% by 2016.

The report shows that the recovery will be geographically uneven, led mainly by Asia, as spending overall shifts from West to East.

The Asia-Pacific market will represent nearly 60 per cent of all global infrastructure spending by 2025, driven mainly by China’s growth, while Western Europe’s share will shrink to less than 10 per cent from twice as much just a few years ago.

Also, according to the report, the demographic changes will vary by region and country, affecting both the amount and type of infrastructure spending.

For instance, Western Europe and Japan will require additional healthcare facilities because of their aging populations while countries in Sub-Saharan Africa, the Middle East, and many parts of Asia-Pacific will require more schools for their youth as the share of their youthful population rises.

Economic growth, job creation, and delivery of vital services such as clean water supply, will be boosted by accelerated infrastructure spending.

The report also drew attention to World Economic Forum data, which shows that every dollar spent on a capital project – in utilities, energy, transport, waste management, flood defense, telecommunications – generates an economic return of between 5% and 25%.

The report, for which Oxfords Economics provided research support, analysed infrastructure spending across 49 of the world’s largest economies which account for 90 per cent of global economic output.

It covered five industry sectors – extraction, utilities, manufacturing, transport and social – and forecast their impact on seven major world economic regions – Western Europe, Latin America, Asia-Pacific, Middle East, Sub-Saharan Africa, former Soviet Union and Central and Eastern Europe.

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