As the pandemic has hit African economies hard, the IMF predicts a strong recovery that will catalyze increased investment in projects
With $2.4 billion in major projects planned or underway, including approximately $1.1 billion in projects in progress, Africa offers substantial opportunities for project companies and investors.
The continent is home to many high-growth emerging markets with growing populations and large infrastructure needs. The G20 Global Infrastructure Outlook program estimates that Africa needs around $6 billion in infrastructure investment between 2018 and 2040.
But Africa’s project plans also have many challenges to overcome, from political instability to poor infrastructure and lack of funding. The G20 estimates that Africa’s infrastructure needs face an investment gap of around $1.7 billion.
Covid-19 added to the challenges. The World Bank estimates that amid the Covid-19 crisis, Africa’s economy contracted in 2020 by -3.4% to $2.36 billion.
With government priorities focused on health care, there was less bandwidth to develop infrastructure. Travel restrictions meant that clients and private sector contractors found it difficult, if not impossible, to recruit staff locally. Equipment imports have also become more time-consuming and expensive.
Africa’s population is expected to reach around 1.35 billion in 2022, up from 605 million in 1990
But Africa is poised for a strong recovery, with the IMF predicting real GDP growth of 4% in 2022. This rebound is expected to spur increased project investment.
Population growth stimulates investment in infrastructure; in 2021, Africa’s population grew by 2.4%, according to the IMF, and this is expected to continue.
The five largest project markets on the continent – Egypt, Nigeria, South Africa, Tanzania and Algeria – account for more than half of all projects on the continent.
Several of the “big five” economies are major exporters of oil and gas, and project activity often follows global oil price trends.
On a regional basis, North Africa accounts for more than 30% of the value of all projects in Africa, with approximately $711.9 billion worth of projects planned or underway.
Africa has recorded an average of about $85.7 billion per year in project contract awards since 2011, although the value of awards has varied significantly from year to year. The pandemic led to a 21% decline in rewards in 2020 to $91.9 billion. It was still the fifth busiest year in Africa for the awards in the past decade.
For more information and sample pages from MEED Insight’s Africa Projects 2022 report, please click here