Focus Shifts To Holistic Approach - African Business Magazine
Focus Shifts To Holistic Approach

Focus Shifts To Holistic Approach

Commentators have lined up for decades to argue that the lack of basic infrastructure is the biggest impediment to economic development in Africa. The lack of suitable buildings, transport links
and power and water supplies in most parts of the continent makes it virtually impossible for the emergence of modern economies. This may have been the case in the past but now there is unprecedented urgency in most parts of Africa to tackle the infrastructure shortfall headfirst. More encouragingly, as this Special Report reveals, transport and construction projects are increasingly being developed in a coordinated manner, rather than in isolation, and are being designed with future needs firmly in mind.

As the word itself suggests, infrastructure is the framework upon which other economic endeavours must be built. Factories and offices must be developed to host new businesses, just as homes need to be completed to house both employers and employees. Better working and living environments generally produce more productive workers and therefore have economic as well as social advantages.
At the same time, transport links are required to enable the smooth movement of goods and equipment between businesses and countries, and the transit of workers between home and work.

In the past, port, airport, residential housing, road, rail and office projects were often developed in isolation. Individual houses or even entire residential complexes were constructed with little or no thought about how the residents would travel to or from their new homes. Even many middle-class homes in the suburbs of Dar es Salaam, Nairobi or Lagos were built without the required water, wastewater or telecoms infrastructure.

They may have been perfectly fine designs in their own right but city planners are now beginning to take a more holistic approach to urban development that should provide effective infrastructure for decades to come and not just on the day that the project in question is opened by a civil dignitary.

Port and railway schemes are now being constructed in conjunction with each other, while road and even rail links are being included in the most modern new city developments.

It is in the cities that infrastructural development is concentrated. It is in the continent’s urban centres that existing inadequacies are most highly visible and where future demand will be most intensely concentrated because of population growth.

As discussed in African Business’s December 2011 issue, the population of Africa is expected to reach 2bn shortly after 2050, doubling in just over five decades. Every year over this period, the number of African urbanites will grow by 13.5m, partly through migration but mainly because of organic growth, placing an ever greater strain on existing infrastructure.

Standard Bank analyst Simon Freemantle says: “Urban conglomerations allow for greater and more immediate benefit for public spending on key infrastructure projects supporting economic growth. As a result, urban inhabitants have greater access to basic infrastructure services, providing profound support to relevant commercial aspirations. Moreover, with high user volumes, infrastructure projects in large cities become more economically viable, and are thus more likely to be able to attract private funding.”

Rural Africa receives far less attention but already suffers from an unfairly small share of infrastructural investment. While seven out of 10 African urban citizens have access to electricity in some form, the figure falls to just one in 10 in rural areas. There is little prospect of this changing because, as ever in the history of human development, progress is felt first and most sharply in an
urban setting.

Housing opportunities

The challenges inherent in Africa’s infrastructural difficulties can also be viewed as an opportunity for investors. Brotin Banerjee, Tata Housing managing director and chief executive, commented: “Africa is the next big thing waiting to happen, with its huge middle-class population, and we at Tata Housing will look at this option in the future. The concern there is political stability but if this is sorted out, the sky is the limit. Tata Housing will constantly look at opportunities overseas for affordable housing. We have already made a beginning in the Maldives where there is a huge housing shortage in certain areas.”

Chinese companies are also constructing dams, bridges, roads, railways and buildings in most African countries, usually in order to secure greater influence for Beijing but investment is rarely made for altruistic motives.

Massive Chinese investment in the continent is encouraging other Asian government to fund much-needed infrastructural projects on the continent. Japanese International Bank for Cooperation (JBIC) is lending $200m to the Kenyan government to finance the construction of a new container terminal at Mombasa. South Korean and Indian firms are also becoming more active, particularly in East Africa.

However, local firms are making headway in some markets. According to figures from Tanzania’s Contractors Registration Board (CRB), Tanzanian firms now control 40.1% of the domestic construction market, up from 30% in 2006. The pace of construction work is increasing rapidly in some countries. Ethiopian cement consumption currently stands at 8m tonnes a year but the government expects national production capacity to reach 27m tonnes a year by the end of 2015, and private sector firms would not invest in such capacity if they did not believe that there was a market for their output.

Infrastructure fit for purpose

A well-known problem with much African infrastructure is that it was built and designed during the colonial era to serve the needs of colonial governments. Railway lines ran from mineral deposits or other natural resources to the coast for export. They were not generally built to enable the movement of people and goods around the territory in question, nor between that territory and neighbouring areas. The existing pattern of railway lines in Mozambique is typical, with lines running from the west to the east coast ports of Nacala, Beira and Maputo.

However, in December the government announced plans for a north-south railway line that would act as a spine connecting all existing railways in the country. The various west-east lines are currently being upgraded by private companies or increasingly state-owned Portos e Caminhos de Ferro de Moçambique (CFM), usually in order to serve coal exports from the northwestern province of Tete, South Africa or even Botswana.

Constructing a north-south line would therefore enable the creation of a national rail grid that could be used by a variety of businesses, including other mining concerns and agricultural producers. It would also encourage the movement of people. Transport Minister Paulo Zucula has already revealed that a feasibility study has been completed on one part of the line.

While cities usually benefit from infrastructural investment at the expense of rural areas, capital cities also tend to benefit more than other urban centres. There is greater balance in countries such as Kenya, where the main port lies outside the capital, but in neighbouring Tanzania, Dar es Salaam is attracting far more investment in port facilities, road capacity, bridges and new buildings than anywhere else in the country.

Criticism has also been levelled at the government of Ghana for its development policy. Accra is keen to upgrade Tamale Airport to handle international flights, as Kotoka International Airport in Accra has little room for expansion. However, the concentration of infrastructural development in the capital city has aroused opposition from other parts of the country. Rival plans for a new airport at Kumasi have been discussed and shelved over many years but Ghana’s current economic progress suggests that a second international airport will be built somewhere in the country in the near future.

The government of Rwanda is currently offering a contract to construct the country’s new Bugesera International Airport. A total of 33 firms fielded expressions of interest and that list has now been cut down to 11, which are required to submit final proposals by early April.

The selected bidder will be expected to develop the project within four years and operate it for a period before transferring ownership to the government. National airline, RwandAir, has already ordered two B787 Dreamliners in order to launch intercontinental flights from the airport from 2015–16.

Another major project in Rwanda has been delayed. The $300m Kigali Convention Centre, originally scheduled for completion last year, is now expected to open in 2013 because of funding difficulties. The building will host a 292-room, five-star hotel, managed by Radisson Hotels and a large conference centre in the city centre. The government has a 50% stake, while the remaining equity is owned by Rwanda Investment Group (25%) and the Social Security Fund (25%).

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Written by African Business Magazine

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