This edition of Deloitte’s Africa Construction Trends Report cumulates and compares data from the last four years, delivering insights on both a continental and regional level. The latest edition includes a special feature on water projects in Africa.

The report examines the driving forces behind infrastructure and capital projects on the continent, looking at both external and internal drivers that are shaping the new macroeconomic and financial realities that a number of countries are facing. The data within this annual research by the firm pinpoints the trends around ownership, funding and construction of large-scale projects while also identifying the trends in the sectoral spread of projects.

Africa has seen a downturn in both the number and value of projects included this year, in contrast to previous years. Global economic headwinds, low growth and lower commodity prices have all contributed to this.

The ‘Africa rising’ story has been under pressure and the result is an uneven focus on infrastructure and capital project development. The benefits of infrastructure investment are well known and unpacked further in this report with an analysis of gross fixed capital formation. However, many governments and the low number of projects highlighted that the private sector is struggling to maintain their spending on infrastructure and capital projects. New pressure or factors such as drought, security concerns and rapid urbanisation coupled with falling government revenues is making it difficult to maintain the spending in infrastructure required by many countries.

In keeping with Deloitte’s trend of focusing on an issue believed to be important, this year’s report looks at the water sector. Water plays an important role, which cuts across a number of sectors in an economy. An example of this is the water-food-energy nexus briefly addressed in this report. This is especially relevant as the need for investment in this sector is far outstripping the actual investment in this sector and is a growing cause for concern in the light of the growth of mega cities in the continent and the political and social pressure that this will potentially place on governments.

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African Construction in Focus

The 2016 edition of our Africa Construction Trends Report includes 286 construction projects in Africa that had broken ground by 1 June 2016 and are valued at US$50m or above.

Collectively, these projects are worth US$324bn. The number of projects qualifying for inclusion fell by 5% year-on-year, while the value of included projects decreased by 14%, due in large part to the headwinds that countries are experiencing on account of a weak global macroeconomic environment and low commodity prices across the board.

As a region, West Africa had the most number of projects with 92 projects and also the most in terms of value at US$120bn. However, South Africa was the single country with the largest number of projects (41) followed by Nigeria (38). North Africa saw a significant jump in the number of projects.

The number of projects in North Africa increased by 44.8% while the value of projects increased by 195%, signifying an increase of confidence in the region as much of the turmoil following the Arab Spring in 2011 has calmed down and the political situation in a number of countries like Egypt and Algeria has stabilised.

The number and value of projects in East and Southern Africa decreased. Although the number of projects in West Africa increased, the value of projects only increased marginally. The value of projects in Central Africa decreased by 80%, due to the suspension of the two largest projects in the region, the MbalamNadeba Iron Ore Project in Cameroon and the Zanaga Iron Ore Project in the Republic of the Congo.

Similar to last year, the greatest number of projects fall into the Transport sector (33.6%), followed by Real Estate (22.4%), Energy & Power (21%) and Shipping & Ports (8.4%). Not surprisingly, the share of Mining projects more than halved to 2.8% while Oil & Gas decreased to 4.5%.

Despite the share of projects decreasing, Oil & Gas remains a valuable sector, accounting for more than a quarter of total project value.

Worryingly, there remains very little large-scale investment in the Water sector (1.3% of total investment) and even less in Healthcare (0.3%), Education (0.1%) and Social Development (0.1%).

Governments continue to own the largest share of projects, with 209 projects (73.1%), followed by Private Domestic companies (33 projects) and the United Kingdom (6 projects).

Funding and ownership is defined as the country where the financier or owner of the project is domiciled. In line with ownership, Governments are increasing their funding of projects, funding a total of 81 projects (28.3%) in the period under review.

Private Domestic firms fund 40 projects and international Development Finance Institutions (DFIs) fund 39 projects, followed by China with 36 projects and African DFIs with 28 projects.

The share of total projects that are being funded by International DFIs has decreased, while the share of funding provided by China has increased.

Private Domestic companies are constructing 76 projects, while Chinese companies are busy with 64 projects. Italian firms are building 18 projects and French companies 14, while Portuguese and South African firms each are building 10.

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The unprecedented magnitude of current African infrastructure development plans and private sector growth initiatives require significant capital management skills. With a presence in 34 countries and service to 51 countries, Deloitte is well positioned and understands the nuances of doing business in Africa. Their pan-African infrastructure and capital projects (I&CP) team functions as an integrated team with dedicated professionals based in South Africa, Zimbabwe, Kenya, Tanzania, Uganda, Ghana, Côte d’Ivoire, France, the United Arab Emirates and Nigeria, serving governments and private sector clients across the continent.