Africa

Details

  • Industry: WEF in Africa
  • Type: Press release
  • Date: 5/2/2013

WEF Africa 2013

WEF Africa 2013 will provide an important platform for regional and global leaders from business, government and civil society focussed on integration and sustainable growth.

Setting up project success in Africa 

WEF Africa 2013 – From Cairo to the Cape, major new infrastructure projects are now being planned, developed and delivered with the promise of unlocking stranded natural resources, enhancing prosperity and improving the lives of the continent’s billion citizens.

There should be little doubt that Africa has now entered a new era ‒ one marked by rapid economic growth, enhanced quality of life and growing stability. At the foundation of this new era will be a brilliant array of new infrastructure. As this special report on Africa has illustrated, the continent is now enjoying an unprecedented level of investment in infrastructure. From Cairo to the Cape, major new infrastructure projects are now being planned, developed and delivered with the promise of unlocking stranded natural resources, enhancing prosperity and improving the lives of the continent’s billion citizens. Most will be large and complex. All will require the investment of scarce financial and human capital.

 

While developing major transformational projects in Africa will likely be the key to unlocking this new era, it can also come with significant risks. The reality is that – for the most part – this new era is still fledgling. Many of Africa’s countries lack the funding or skills and capabilities to execute on the full scope of development that must be undertaken. Cost overruns, construction delays and red tape are common. If the continent is to achieve its full infrastructure potential, all players – both private and public, domestic and foreign – will need to focus on ensuring they select the right projects and execute them correctly. The alternative only leads to wasted resources and lost benefits.

 

Clearly, this truism is not unique to Africa. Even in developed markets where governments have a long history of identifying, defining and delivering major infrastructure projects, the record of success is patchy at best. In Africa, however, many of the symptoms that can plague a major project are often more keenly felt. It is critical for Africa’s governments and project owners to take particular care when making the project ‘go/no-go’ decision. In many cases, these decisions seem to have been made on the basis of inadequate or incomplete information. As a result, options are often not properly investigated, leading to project selections and designs that are far from optimal for everyone involved. In large part, this lack of information boils down to an unwillingness to invest at the early stages of the project design phase. Feasibility studies are either overly optimistic or altogether absent, business case development and contracting is often rushed to meet political objectives, and environmental and social impact studies are frequently glossed over. This is a shame, particularly given the scarcity of capital and skilled resources available to Africa’s governments.

 

The bottom line is that infrastructure project owners and investors must accept that it takes a significant investment simply to bring a project to a point where an informed decision can be made. In a typical case, this may require 2 to 5 percent of the eventual capital cost to be put on the line before a fully informed ‘go/no-go’ decision can be made. Given the lack of experience in large infrastructure projects in Africa, it is essential that governments and developers go into them with eyes wide open. Africa simply cannot afford to waste capital and skills constructing infrastructure assets that do not provide the very best returns.

 

Contact

Contact
Jeff Shaw
Partner,
Management Consulting,

Major Projects advisory 
Tel: +27 (0)11 647 8388
jeff.shaw@kpmg.co.za