Construction World June 2015

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CONSTRUCTION WORLD JUNE 2015
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COMMENT
EDITOR
Wilhelm du Plessis
ADVERTISING MANAGER
Erna Oosthuisen
LAYOUT & DESIGN
Lesley Testa
CIRCULATION
Karen Smith
TOTAL CIRCULATION:
(Fourth Quarter ’14)
4 710
PUBLISHER
Karen Grant
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Tandym Cape
Figures show how severe this infrastructure
shortfall is: in China 1 MW of power is installed
for every 250 people, while in Ethiopia this
number goes up to 45 000 people for every
1 MW installed. African railway infrastructure
fares even worse. China, despite its population
of 1 357 380 000 people, has railway installed
for 3 700 people per 1 km, while in Ethiopia this
increases to a dizzying 45 000 people for 1 km.
Hampering factors
There is no doubt that infrastructure investment
is a catalyst for economic growth, however, to
attract major foreign investments, Maina says,
the cost of doing business in certain countries
have to dramatically improve, specifically
transport and energy costs. Governments are
the principal agents for such improvement –
as such some government in especially the
Eastern African region have chosen a co-oper-
ative approach to create a more optimal context
to attract investors and to lobby as a collective
unit to get funding.
Some governments, however, maintain the
status quo. Its decision is based on two factors:
independent implementation of infrastructure
projects maximise political mileage and the
East Africa is following a collaborative approach to attract investment
and so realise the much needed infrastructure development in the area.
In a recent report, Brian Maina
– a private equity anylyst with
RisCura, says that in order for
Africa to improve its often dire
infrastructure deficit, African
countries need to collaborate
with neighbours to execute
infrastructure projects.
temptation of benefitting from large scale proj-
ects that supersedes civil interest. In addition,
says Maine, countries within the continent
compete internally and aiding competitor
countries by reducing their cost of doing busi-
ness is a counterproductive system.
Shining example
In East Africa, the collaboration between
Burundi, Djibouti, Ethiopia, Kenya, Uganda,
Rwanda and South Sudan is a case in point.
The collaboration between these countries
have various outcomes and benefits: it provides
access to a bigger market as the combined
populations of the various countries increase
potential markets. On its own a country like
Rwanda with 11 million people cannot be
competitive – but with Kenya and Uganda the
93 million people in this region has more clout.
To achieve this, immigration and infrastructure
plans have to be harmonised says Maina.
The second outcome will be cheaper
(and more competitive) energy costs. At the
moment, Maina says, the Kenyan cost for
one kWh is USD15 cents. In other African
countries it is as little as USD8 cents (Egypt).
Electricity costs in East Africa will be lowered
by cross border transmission lines which will
enable the selling of excess power to neigh-
bours and to access cheaper power. Ethiopia
for instance, will earn revenue from the sale of
electricity that will be generated at the Gibe
III hydroelectric project. The country has the
potential to generate some 45 000 MW of
hydroelectric power – which Maina says will
cost between USD3-10 cents per kWh. Once
realised, the region will be energy competitive.
The third outcome, says Maina, is that the
joint infrastructure projects will give countries
to ability to bring projects to fruition. Various
railways connecting important hubs are
planned or being constructed.
Wilhelm du Plessis
Editor
Twitter: @ConstWorldSA