Infrastructural Projects in Africa

3y |

Just sample these. Transport costs are 100 per cent higher in Africa. Only a third of the population have access to electricity—in rich countries this rises to between 70-90 per cent. Just 6 per cent have access to the internet, compared to 40 per cent in other developing nations. Despite its rich water resources food security is a constant thorn in the flesh, but only 5 per cent of agriculture is under irrigation.

Such infrastructure gaps continue to weigh down the continent, reducing the dividend from its brisk growth of the last two decades. But some countries—and mega investors too—are making huge progress in reducing the size of the deficit.

It is for this reason that a number of big infrastructural projects have been initiated and built in Africa by International economic and trade partners. They vary from, railway lines, power projects, water dams to roads. This paper will highlight just a few, both complete and ongoing.

  1. The Grand Ethiopian Renaissance Dam

The Ethiopian government is currently constructing the Grand Ethiopian Renaissance Dam (GERD). Once complete, GERD will be the largest hydropower facility in Africa. It will add about 6 000 Mega Watts to the national grid. This is nearly triple the country’s current electricity generation capacity – and represent a potential economic windfall for the government.

The benefits for Ethiopia and for many electricity-importing countries in East Africa are clear. However the implications for downstream countries aren’t all positive – and need to be better understood.

In 2016, about 30 per cent of Ethiopia’s population had access to electricity and more than 90 per cent of households continued to rely on traditional fuels for cooking. Traditional fuels can cause respiratory infections, and according to the World Health Organisation (WHO), acute lower respiratory infection is the leading cause of death in Ethiopia.

Financing

Ethiopia has not succeeded in getting international/outside financing for the project, in part due to its lack of competitive bidding for the project’s construction contract.

The project therefore is 100 per cent sponsored by the Ethiopian government. It says it will sell dam bonds directly to the citizens to realise this.

Most public workers in Ethiopia earn relatively low wages and face a significantly high cost of living.  Hence, they are not likely to be able to sacrifice that much of their salaries to invest in this national project.  Nevertheless, many of them have been observed purchasing the GERD bonds, primarily because of pressure from the government and the belief that participation in this national project is a show of one’s patriotism.

  1. The Trans-Kalahari Railway

Namibia and Botswana took the first steps in 2015 to establish a multi-billion dollar railway project to link Botswana’s rich coal fields to the Namibian coast.

The project, which is still ongoing, is meant to be developed by the private sector in the two countries. Private companies will have to gather capital for the project and not the two governments.

Although several media reports from Botswana have said that the government may have changed its mind about supporting the project, it is said the project is more beneficial to Botswana’s coal exports through Namibia.

Financing

Botswana and Namibia have already signed a bilateral agreement for plans to develop the 1 500-kilometre railway for transporting coal exports to Walvis Bay that will cost US $15 billion.

Once the two countries have resolved all outstanding issues, this will make way for funding initiatives and tenders.

Chinese and Indian demand for the more than 200 billion metric tonnes of coal in Botswana’s central Karoo basin could boost economic growth in the landlocked southern African nation.

 

  1. Lake Turkana Wind Power Project

Kenya with 11 eleven projects, has the greatest number of large infrastructure projects in East Africa equivalent to 26 per cent of the total. Lake Turkana Wind power project, a renewable energy project is one of them.

It aims to provide 300MW of reliable, low cost wind energy to Kenya’s national grid, equivalent to over 20 per cent of the current installed electricity generating capacity.  The wind farm site is located in northern Kenya, approximately 50km the Capital Nairobi.

The Project will comprise a wind farm, associated overhead electric grid collection system and a high voltage switchyard.    The Project also includes rehabilitation of an existing road which covers a distance of approximately 200km.

 

Financing

The total project cost is estimated at US$680 million and includes the cost of the envisaged 400 km transmission line from Lake Turkana to a sub-station near the capital Nairobi, as well as the cost of upgrading 200 km of roads and various bridges.

The project will be financed through equity debt (25 per cent), mezzanine debt (5 per cent) and senior debt (70 per cent). As the mandated lead arranger and senior co-lender, Africa Development Bank (AfDB) will provide a long-term senior loan of USD 150 million.

 

  1. Coastal Railway – Nigeria

This is the largest ever contract awarded to a Chinese company in Africa. The project is worth $12 billion. The deal was signed between the Federal Republic of Nigeria and China Railway Construction Corp (CRCC) in 2014. The railway is 1,402 km in length and upon completion (final phase ongoing), it will link Lagos, the nation’s economic capital, with the eastern city of Calabar, passing through 10 states. It will also link cities with the oil rich state of Niger Delta.

In the last 20 years, Chinese companies have built and upgraded around 4500km of railway in Nigeria.

 

  1. Bagamoyo Port – Tanzania

The project is worth $7 billion. It is funded by China Merchants Holdings International and State Government Reserve Fund of the Oman government. The port is being built in Bagamoyo, a coastal town in Tanzania. Upon completion, it will be able to handle about 20 million containers annually and will be the largest port on the East African coastline, bigger than the Port of Mombasa in Kenya.  Its construction started in October, 2015, but was halted earlier 2017 due to financial constraint facing the Tanzanian government.

This is one of the projects that redefine the meaning of a ‘mega project’ in Africa. It can potentially power 40 per cent of the continent. When completed, this dam will be the largest of its kind, with double the capacity of the Three Gorges dam of China (the current largest in the world).

The ongoing project is estimated to the tune of US$100 billion from the World Bank.

Once Inga III is completed, the DRC will then begin building the Grand Inga Dam which is expected to be completed by 2025.