The greatest obstacle to growth and potential market entry in Africa is the lack of infrastructure development. The major hubs of trade in East and West Africa, Kenya and Nigeria, are key to the successful development of the region. Future infrastructure development in Kenya and Nigeria may be a key determining factor in any company’s expansion strategy in the continent, seeking to choose between the lucrative markets of East and West Africa.
With regard to infrastructure spending in the continent, countries such as South Africa, Kenya, Nigeria, Ghana, and Mozambique are making significant investments. In Kenya, Nigeria, and Ghana, massive amounts are allocated to the development of transport infrastructure, specifically rail, with Ghana estimated to have ongoing and planned rail project investments of just over $70 billion. Rail development in the continent will be crucial to overcome logistical delays and congestion in major urban areas. Globally, rail development has slowed. However, in Africa, it will be essential for the sustainable growth of manufacturing, agricultural, and extractive industries.
Severe energy shortages in many countries have also ensured significant investment into electricity production. The massive $80 billion, 40,000 MW Grand Inga hydropower project in the Democratic Republic of the Congo (DRC) will be a major accomplishment and provide the much-needed electricity for Southern Africa, if fully developed. Such projects are not without potential issues, and very slow progress has been made towards initiating them. Lack of political stability in the DRC, coupled with difficulties in obtaining public-private financing on a large scale with multiple partners, will pose a challenge.
Much of the infrastructure spending growth will not only be driven by internal demand in Africa, but rely on extractive industries, especially mining and oil and gas. Oil prices being currently low, there will be delays in many oil and gas development projects. However, as prices stabilise, demand from India and China will cause Mozambique to grow at a furious pace post 2020.
It is estimated that a $90 billion infrastructure investment is needed annually through 2025 to alleviate the current infrastructure deficit in Africa. This means that there is significant potential for new private investment, as many African countries are seeking new means of project funding.
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