Governments’ focus on infrastructure development in Africa

Governments’ focus on infrastructure development in Africa

Infrastructure development is a key driver of progress across the African continent and a critical enabler for productivity and sustainable economic growth. It contributes significantly to human development, poverty reduction, and the attainment of the Millennium Development Goals (MDGs). Investment in infrastructure accounts for over half of the recent improvement in economic growth in Africa and has the potential to achieve even more.

According to a report by the Global Infrastructure Outlook, under current trends scenario, the total infrastructure investment forecast for Africa to 2040 is projected to be US $4.3 trillion, or US $174bn per year. If African economies were able to raise their performance to match that of their best performing peers the total investment need would be US $6.0 trillion, or US $240 bn per year a difference of almost 40%.

Indeed most African countries including Kenya, Uganda, Nigeria and Ghana have structured their recent national budgets towards the attainment of MDGS by allocating large chunks of their annual expenditures to key infrastructural sectors like transport, energy, and housing.

However, some countries like South Africa have cut their infrastructural spend in favour of other sectors which they see a priority at the moment. In the 2018/19 Fiscal Year (FY) national budget the South African government announced a 12% cut in infrastructure expenditure compared to the previous financial year. This is owing to its commitment to delivering free higher education to its citizens.

Budget allocations to key developmental sectors
Transport

Only one-third of Africans living in rural areas are within two kilometers of an all-season road, compared with two-thirds of the population in other developing regions. Furthermore, road networks are in deplorable states in many farming communities which is a great setback when it comes to transporting goods to market. Also, the current poor rail systems has meant that the cost of transporting goods to and from the interior is quite high; making export goods very expensive.

In their 2018/19 FY budgets, most African governments have prioritized Rail transport as a means to solve the transportation problem. They have allocated billions of dollars to completion of ongoing rail projects and also commencing of ones that are in the planning stages.

According to Kenya’s National Treasury Cabinet Secretary Mr. Henry Rotich, to enhance movement ofKenyans, and reduce the cost of transportation of goods, the Kenyan government has allocated a total of US $741.8m for the construction of Phase 2A of the SGR from Nairobi to Naivasha.

Another East African country Uganda, has also given rail transport significance the 2018/19 FY. In his budget speech, Ugandan Finance minister MrMatiaKasaija said that the Ugandan Government remains committed to development of the Standard Gauge Railway. 8% of the right of way for the SGR has been acquired with 228 Project Affected Persons in Tororo having been paid.

“In the next financial year additional land on the Eastern route will be procured to facilitate the Standard Gauge Railway right of way. In addition, 42 Railway wagons will be rehabilitated, bad spots along Port Bell – Kampala and Kampala – Malaba line will be repaired. Marking of the railway reserve boundaries will also be undertaken,” he added.

In West Africa the Nigerian government has allocated US $448.7m Counterpart funding for Railway projects including the Lagos-Kano, and Calabar-Lagos. Part of the money will be used to kick-start the abandoned Itakpe-Ajaokuta-Warri Rail Line. This service will start with 7 standard gauge coaches.

In addition to that, the government has also commenced the extension of the Lagos-Ibadan Standard Gauge Rail Line to connect Apapa and Tin Can Port Complexes. This project will significantly ease the congestion at the ports and enhance both export and import operations.

Rail transport also features in Nigeria’s neighbor Ghana’s budget for the FY 208/19. In his budget speech Ghana’s Minister ofFinance Mr. Ken Ofori-Attasaid that work has commenced on the 85km Akosombo- Tema railway line from the Tema Port to link the Volta Lake via the Akosombo Port, as part of a multi-modal transport system to facilitate the transfer of containerized cargo by rail to and from the Tema Port.

This will be continued in 2018. Also, feasibility Studies for the development of Boankra Inland Port and Eastern Railway Line using PPP was completed and approval granted. A market sounding event will be organized for the project to solicit investor interest. “In 2018, the Ministry’s Railway Master Plan developed in 2013, will be reviewed and new rail line extensions incorporated to guide railway development with a focus on rail safety. In addition, the Ghana Railway Act, 2008 (Act 779) will be reviewed and the Ghana Railway Development Authority re-structured to decouple the Infrastructure development from the Regulatory functions,” he added.

Energy

Access to electricity is key to Africa’s future. It is the springboard to increased prosperity and a better quality of life. Without it, children struggle to study, ideas won’t be transformed into thriving businesses and the continent will never completely plug into the global economy. However, the Energy Deficit in Africa is clear for all to see, with 620 million people and two thirds of households without access to power.

A key challenge with access to power in Africa is the lack of an efficient grid network outside of urban areas and the large populations living in hard to reach rural areas. In their 2018/19 budgets, the governments have prioritized electricity transmission to ensure universal access. They have allocated billions of dollars in the distribution of electricity to remote areas of their countries.

To connect more Kenyans to affordable electricity, the Kenyan government has set aside, US $58.5m for rural electrification and connection of public facilities; US $66.5m for Last Mile Connectivity; US $9.9m for the national street lightning programme; US $54.6m for Eastern Electricity Highway Project (Ethiopia – Kenya Interconnector); US $9.9m for substation installation, US $9.9m for installation of transformers in constituencies; US $9.9m for Connectivity Subsidy; US $125m for Loiyangalani – Suswa transmission line, land compensation and counterpart funding; and US $30.7m for Nairobi 220KV Ring.

In neighboring Uganda, the Finance minister mentioned that, it is now critical to invest in the power transmission and distribution network to supply power to industries and other consumers.

The energy mix will also be further diversified to scale up provision of renewable energy such as solar to off-grid areas. “In the next financial year, priority will therefore be given to expansion of the transmission and distribution networks to industrial zones and rural growth centers to support our industrialization programme. We shall, in addition, replace parts of the dilapidated network that accounts for about 30% of power losses,” he added

In his budget speech Nigerian President Muhammadu Buhari acknowledged that the country’s Power Sector Reforms still remain a work in progress. “Although we have increased generation capacity significantly, we still have challenges with the Transmission and Distribution Networks.

The key bottleneck now is the Distribution Network where the substations cannot take more than 5,000 MW. This is constraining power delivery to consumers. We are working with the privatized Distribution Companies to see how to overcome this challenge,” he said.

To sustain the continued expansion of generation capacity and enhance evacuation, the Nigerian government has approved a Payment Assurance Guarantee Scheme which enabled the Nigerian Bulk Electricity Trader (NBET) to raise US $1.9bn. This assures the Generation Companies of up to 80% payment on their invoices. With regards to monetary allocations in the 2018/19 FY, the government has allocated US $26.8m counterpart funding for earmarked transmission lines and substations, US $9.4m for Kashimbilla transmission, US $19.6m for rural electrification access program in federal universities and US $535.4m to the power Sector Recovery Progamme.

Ghana also plans to connect a total of 1,796 communities to the national grid in 2018 with the Aboadze-Prestea and Prestea-Kumasi 330kV Transmission Lines about 70% complete and the Kumasi-Bolgatanga 330kV Transmission Line about 50% complete under the Transmission System Improvement Projects, GRIDCo.

Housing

Africa is rapidly urbanizing and will lead the world’s urban growth in the coming decades. Currently, Africa is the least‐urbanized continent, accommodating 11.3 percent of the world’s urban population, and the Sub‐Saharan region is the continent’s least‐urbanized area. However, the region’s cities are expanding rapidly; by 2050, Africa’s urban population is projected to reach 1.2 billion, with an urbanization rate of 58 percent.

Nevertheless Housing is a major problem in urban areas where most people live in slums with poor sanitation. Affordable housing is a synonymous term in the African housing sector as most look to provide low cost housing for their ever growing urban population.

For instance, access to adequate and affordable housing remains a key concern in Kenya. It is estimated that the country’s urban centres face a shortage of 200,000 housing units annually and this shortage will rise to 300,000 units by the year 2020 on current policies. At the moment, only about 50,000 new housing units are being constructed every year. Nevertheless, in the 2018/19 FY, the government has allocated US 64.5m to Provision of Affordable and Decent Housing for all Kenyans.

In his speech, Mr. Kasaijamentioned that the Ugandan government remains committed to reducing the housing deficit through the provision of safe and affordable housing. In this regard, the second phase of the Security Agencies Housing Project comprising 368 housing units for the Ghana Navy was completed and ready for commissioning.

Moreover, the Nigerian government has allocated US $10.8m to the federal government mass housing project by Federal Housing Authority (FHA), and US $73.6m allocated to Federal Government National Housing Programme nationwide; while the Ghanaian government has allocated US $19m to the housing sector

According to the report by Global Outlook, in dollar terms, electricity is forecast to receive around $1.6 trillion of investment between 2016 and 2040 under current trends, roads are receiving between US $700 billion and US $900 billion. The gap between the current trends and investment need scenarios is proportionately largest for roads, where the investment need forecast is almost twice the current trends forecast.

Total infrastructure investment in Africa was equivalent to 4.3% 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. This rises to 5.9% under the investment need scenario.

 

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