INVESTMENT DOESN'T ALWAYS LEAD TO BETTER ROADS
The Sub-Saharan Africa road construction market will be worth $51 billion in 2022, up from $41 billion in 2016. This is according to a recent research conducted by industry network the Bitumen Exchange, which noted annual growth rates of 4.1% during 2016 to 2022. Yet as much as 24% of this investment is lost through inefficiency deployment and government systems at loggerheads with the industry, The research used data from infrastructure investors in South Africa, Mozambique, Kenya, Namibia, Cameroon, Ghana, Nigeria, Rwanda, Uganda and Zambia. It was commissioned to consider the most important trends affecting road construction and associated industries Sub-Saharan Africa. The main driver growth will be driven by population growth in urban metros, road expansion into rural areas and a high demand for new trade corridors. Yet the research highlighted that regulation, corruption and inconsistency of policy meant that the unit cost of road construction in dollars per kilometre could be as much as 60% higher than it needed to be. This was also reflected with rehabilitation numbers being as high as 35%. Regional boom curtailed Speaking to delegates on the side-lines at the recent Bitumen Exchange conference in Kenya, the survey was seen to underscore the need for African countries to tackle various regulatory and policy shortcomings, which explain these inefficiencies and impede Africa’s capacity to fully capitalize on the potential of for road construction. Illustrative is the case of one European investor, who said “90% of my time in Africa is taken up trying to get over conflicting regulation on the ground. In Europe that time is taken up raising capital and then deploying it”. Ultimately Africa continues to grapple with consistent regulatory and compliance frameworks to achieve efficient delivery of roads. The quality of road infrastructure and raising capital is important, but the research also showed that the regulatory environment is crucial. So we all agree that developing Africa roads is essential, yet we (governments) must realise it will also be necessary to go through a process of liberalisation of their transport industries in general. This in turn will allow the region to reap the benefits of better road infrastructure.
Tiny steps Despite the doom, since 2005 the industry has made huge progress both at a governmental level and in financing terms. Several road agencies have been created, and as much as 80 per cent of the main road network in Africa is now deemed to be in fair condition. Yet as delegates in Kenya highlighted at the recent Bitumen Exchange conference - certain legal issues must be addressed to ensure the continued evolution. For instance, the challenges to grow the number of projects privately funded are immense. The use of private money as opposed to government finance is a long way from reality. As we highlighted with the 3 Wins Concept - projects require multilateral or Export Credit Agency support to come to fruition, and that they can act as a catalyst to ‘wet’ the appetite of other private sector players.
As a closing note, increasingly regulation around protecting investment through regulated rehabilitation needs to be explored. Too much capital is being wasted because the projects are not properly maintained. We have just conducted some new research into this area and will reveal our findings in the coming months. The Bitumen Exchange Team