Africa Opts for Transport Projects To Grow Trade

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 NAIROBI – Mu Xuequan Transport projects are taking the bulk of investments in new infrastructure development across Africa as countries develop new trade routes, a new report by consulting firm Deloitte shows.

The report, “Africa Construction Trends Report 2017,” released in Nairobi on Tuesday said the number of projects valuing over 50 million U.S. dollars increased by 5.9 percent compared to 2016, an indication of growing infrastructure investments across Africa.

“The reason why transport projects are more than others and of high value is because countries want to increase connectivity within and across the borders,” said J.P Labuschagne, head of Infrastructure and Capital Projects Advisory in Deloitte.

He said African countries are making a change from the colonial legacy whose structure was to develop roads and railway for purposes of exporting raw materials to Europe.

“African countries now want to build transport capacity which enables them to trade more within and across the borders,” Labuschagne said.

“This is helping to boast regional trade and making it easier to do business in Africa,” said Labuschagne.

Continuous development of roads, railways and ports is partly attributed to the growth of trade within the Common Market for Eastern and Southern Africa (COMESA) from 1.5 billion dollars in 2000 to about 10 billion dollars in 2016, it said.

But COMESA trade ministers meeting in Uganda last year noted that high transport costs remain one of the biggest hindrance to the intra-region trade and agreed to develop a shipping line to serve members, including the land-locked ones.

The Deloitte report finds that China is the biggest funder of the transport projects among Africa’s development partners.

Chinese firms built the standard gauge railway in Kenya and the Ethiopia-Djibouti railway and is set to develop Uganda’s railway, according to the report.

The report reveals that countries like Ethiopia are using about 40 percent of their gross domestic product (GDP) to finance infrastructure projects while others like Kenya are using 20 percent, in a show of intensity of project development across Africa.

The big spenders across the continent are the governments, owning 57 percent to 90 percent of the projects depending on the strength of the private sector, said the report.

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African Economic Outlook 2018 Unveiled At AU Summit in Addis Ababa

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 Although African economies have been resilient to negative shocks, still poor infrastructure is a serious impediment to inclusive growth and development across the continent.

This was one of the major findings of the 2018 edition of the African Economic Outlook (AEO) presented to delegates in Addis Ababa, Ethiopia at the recent African Union Summit.

The AEO – African Development Bank’s flagship analysis of the state of African economies – was presented to key stakeholders on the sidelines of the just- concluded 30th Ordinary Session of the Assembly of the Heads of State and Government of the African Union in the Ethiopian capital.

The Bank’s Chief Economist and Vice-President for Economic Governance and Knowledge Management, Célestin Monga, said the report was presented in January to give policy-makers enough time to reflect on the recommendations for economic planning and transformation. Beyond the observed increase in GDP, Monga called for structural change in Africa.

The Bank is also translating the report into key African languages and engaging with policy-makers and civil society organisations to ensure its operationalisation, he said, according to a release issued by AfDB’s Principal Communication Officer, Olivia Ndong Obiang.

Commissioner for Infrastructure and Energy at the African Union Commission, Amani Abou-Zeid, described the report as highly relevant and useful for Governments and other stakeholders.

The African Economic Outlook puts average real Gross Domestic Product (GDP) growth in Africa at 3.6 per cent in 2017 – a good recovery from the 2.2 per cent recorded in 2016. The 2017 figure is projected to grow by 4.1 per cent a year in 2018 and 2019.

Growth was driven by improved global economic conditions, better macro- economic management, recovery in commodity prices (mainly oil and metals), sustained domestic demand (partly met by import substitution), and improvements in agriculture production.

However, the report noted that Africa is still experiencing jobless growth due largely to limited structural change. Consequently, sustained high growth has not had substantial impact on job creation. About two thirds of countries in Africa have experienced growth acceleration.

“Basically, a growth acceleration period is one in which the average growth rate of GDP per capita over a period of eight years is at least 3.5 per cent per annum,” the report notes.

The Commissioner for Economic Affairs at the African Union Commission, Victor Harrison, endorsed the report, urging African countries to adopt the recommendations for inclusive growth.

“These studies present the behaviour of African economies in the face of difficult external conditions and announce the revival of growth with an estimated rate of 4.1 per cent in 2018. We all know that growth is not yet inclusive in Africa, and unemployment affects more women and young people,” he told the audience.

Harrison urged member states to improve the business climate and stimulate the private sector to participate in the development.

According to the Outlook’s findings, Africa’s infrastructure is still behind those of other regions in quantity, affordability, and quality due to lack of investment. At the same level of GDP per capita, South Asia, East Asia and Latin America have higher access to electricity and water than most African countries.

It observed that Africa needs higher growth and investment rates, but debt levels must be monitored closely. Public debt ratios are rated to be on the rise, stocked by appetite for infrastructure spending.

Details provided by the Outlook indicate that 40 countries in the region recorded increases in external debt from 2013-2016. Nine countries experienced a decline.

Though there are growing concerns about the debt levels in Africa, the report indicates that if used productively, debt may be necessary to unlock long-term growth potential.

“Tackling poverty will need efforts to increase employment elasticity of growth. The employment elasticity of growth of 0.41 in Africa is below the desirable 0.7 for all developing countries. Pressing policy concern is therefore to ensure that growth is reflected in creation of high and quality jobs,” according to the Outlook.

The report notes that Africa could be the next investment frontier and recommends three options for the international financial community to resolve the savings glut: the adaptation of a policy of more negative real interest rates in high-income countries; the use of excess savings to finance public investment in rich countries; and the facilitation of the flow of capital to developing countries.

Estimates show that investment needs for infrastructure will be in the range of US $130 – $170 billion a year.

The problem with the infrastructure-deficit approach is the underlying assumption that one day Africa and the world might be able to resolve it. Yet, throughout history, infrastructure deficit has been a perpetual policy problem and solving this remains a work-in-progress, said the Acting Director for Macro- economic Policy, Forecasting and Research Department at the African Development Bank, Abebe Shimeles.

The Bank proposed that many new financing mechanisms could be implemented in all African countries, taking into account the specific economic circumstances and the productive structures of national economies.

The report urged countries to better leverage public funds and infrastructure investments, while encouraging private-sector participation.

“But the different stages of development of African countries mean that the policy approaches need to be country specific. Universal access to high-quality infrastructure is likely to be a long-term goal,” Shimeles said.

Strategic targeting will be essential. Trying to achieve development with limited resources has led governments to spend too much on too many projects with low economic returns and little impetus for industrial growth and employment creation. But African countries do not need to solve all their infrastructure problems before they can achieve sustained and inclusive growth, the report said.

Instead, African countries should focus on how to best use scarce infrastructure budgets to achieve the highest economic and social returns. One pragmatic approach, the report notes, is the creation of industrial parks.

The AEO also called for infrastructure in special economic zones and industrial parks and the mobilisation of domestic resources through well-targeted subsidies and rigorous collection of fees using technology.

It urges Africa to attract more private funding to infrastructure projects, focusing on risk mitigation; to creating an infrastructure asset class to attract institutional investors; choosing appropriate financing instruments to develop infrastructure.

The African Economic Outlook bridges a critical knowledge gap on the diverse socio-economic realities of African economies through regular, rigorous and comparative analysis.

It is produced annually by the African Development Bank and provides short- to medium-term forecasts on the evolution of key macroeconomic indicators for all 54 regional member countries, as well as analysis on the state of socio-economic challenges and progress made in each country.

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AfDB Calls for Investment in Infrastructure To Drive Inclusive Growth in Africa

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The African Development Bank (AfDB) has called for massive investment in infrastructure to drive inclusive growth in Africa. AfDB made the call in the presentation of Economic Outlook (AEO) 2018 to African Union Summit delegates in Addis Ababa, made available to the News Agency of Nigeria (NAN) on Saturday in Abuja. The Bank said the continent was still experiencing jobless growth in spite of increased Gross Domestic Product (GDP).

“As a leading African institution, the bank is the first to provide headline numbers on Africa’s macroeconomic performance and outlook.” It said African economies had been resilient to negative shocks, adding that poor infrastructure was a serious impediment to inclusive growth. The bank said the African Union Commission (AUC) report urged African countries to adopt recommendations from the summit.

Chief Economist and Vice-President for Economic Governance and Knowledge Management of the banks, Célestin Monga said the report was presented in January to give policymakers enough time to reflect on the recommendations for economic planning and transformation. The outlook quoted Monga saying the bank would be translating the report into key African languages and engaging with policymakers and civil society organisation’s to ensure its operationalisations.

Beyond the observed increase in GDP, Monga called for structural change in Africa. The outlook stated that Commissioner for Infrastructure and Energy at the African Union Commission, Amani Abou-Zeid, described the report as highly relevant and useful for governments and other stakeholders.

Abou-Zeid said AEO puts average real GDP growth in Africa at 3.6 per cent in 2017, a good recovery from the 2.2 per cent recorded in 2016. He said the 2017 figure was projected to grow by 4.1 per cent a year in 2018 and 2019. Monga said that growth was driven by improved global economic conditions, better macroeconomic management, recovery in commodity prices mainly oil and metals, sustained domestic demand and improvements in agriculture production. He however said “Africa is still experiencing jobless growth due largely to limited structural change.’’ He added that consequently, sustained high growth had not had substantial impact on job creation.

Monga quoted the report, saying “about two thirds of countries in Africa have experienced growth acceleration. “Basically, a growth acceleration period is one in which the average growth rate of GDP per capita over a period of eight years is at least 3.5 per cent per annum,” the report notes.

The outlook stated the Commissioner for Economic Affairs at the AUC, Mr Victor Harrison endorsed the report, urging African countries to adopt the recommendations for inclusive growth. “These studies present the behaviour of African economies in the face of difficult external conditions and announce the revival of growth with an estimated rate of 4.1 percent in 2018. We all know that growth is not yet inclusive in Africa and unemployment affects more women and young people,” he said. Harrison urged member states to improve the business climate and stimulate the private sector to participate in the development.

According to the outlook’s findings, Africa’s infrastructure is still behind those of other regions in quantity, affordability, and quality due to lack of investment. “At the same level of GDP per capita, South Asia, East Asia and Latin America have higher access to electricity and water than most African countries. It observed that Africa needs higher growth and investment rates, but debt levels must be monitored closely. Public debt ratios are rated to be on the rise, stocked by appetite for infrastructure spending,’’ he said.

The Outlook indicated that 40 countries in the region recorded increases in external debt from 2013 to 2016, adding that nine countries experienced a decline. The report stated that though there were growing concerns about the debt levels in Africa, indicating that if used productively, debt may be necessary to unlock long-term growth potential. “Tackling poverty will need efforts to increase employment elasticity of growth. The employment elasticity of growth of 0.41 in Africa is below the desirable 0.7 for all developing countries. Pressing policy concern is therefore to ensure that growth is reflected in creation of high and quality jobs,” the Outlook stated.

The report notes that Africa could be the next investment frontier and recommends three options for the international financial community to resolve the savings glut.

It said the adaptation of a policy of more negative real interest rates in high-income countries; the use of excess savings to finance public investment in rich countries; and the facilitation of the flow of capital to developing countries.

The report estimates show that investment needs for infrastructure would be in the range of US 130 to 170 billion dollars a year. It also called for infrastructure in special economic zones and industrial parks and the mobilisation of domestic resources through well-targeted subsidies and rigorous collection of fees using technology.

It urges Africa to attract more private funding to infrastructure projects, focusing on risk mitigation; to creating an infrastructure asset class to attract institutional investors; choosing appropriate financing instruments to develop infrastructure. (NAN).

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Africa Needs $130BN for Infrastructure Development Annually – AFDB

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The African Development Bank has revised previous estimates by more than 30% in its African Economic Outlook report for this year.

ABIDJAN – The African Development Bank says that the continent needs at least US$130 billion for infrastructure development each year. It has revised previous estimates by more than 30% in its African Economic Outlook report for this year.

The document was launched at the bank’s headquarters in Abidjan on Wednesday.

“We’re guided by the trajectory of a growing Africa, a more resilient Africa and an Africa that must absolutely develop with what it has.”

African Development President Akinwumi Adesina has made a compelling case for infrastructure projects saying they are among the most profitable investments any society can make.

He announced the Bank would organise the Africa Investment Forum in Johannesburg later this year to come up with the money.

At the same time, the banks’s chief economist Céléstin Monga says the report also proposes a menu of financing instruments all countries on the continent can tap in to.

It’s estimated a 4.1% GDP growth for Africa this year.

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Business Aviation Taking Off in Asia, But Infrastructure May Stymie Growth

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The business aviation market in mainland China has been challenging in recent years, partly due to the government’s austerity measures, but the consensus in the industry is that China’s business aviation market is starting to take off again and that Southeast Asia is experiencing some good growth too.“We are well past that [the austerity measures]. China was recovering in 2016 and I certainly expect that the annual figures for 2017, once released, will show healthy fleet growth for business jets in China,” says Jeff Lowe, managing director of the Asian Sky Group consultancy based in Hong Kong.

He says buyers in China still prefer the larger business jets, but they are becoming more astute. “We’ve seen a shift in the buyers and their requirements. More and more of the requirements are driven by the corporate need versus, maybe if you go back five years, where it was more driven by personal needs. So many of the long-range aircraft are being purchased, because there is a long-range need. Many Chinese corporate users, conglomerates, state-owned enterprises are all expanding overseas and that means requirements for long-range aircraft. There’s many Chinese development projects in Africa, Europe and in South America,” says Lowe.

In terms of Southeast Asia’s business aviation market, Lowe says: “We’re not seeing any startling growth in any Southeast Asian country. But they are continuing to grow, although it’s single-digit growth rather than double-digit.” He says the regulations pertaining to business aviation in Asia-Pacific still need to be improved, as does the airport infrastructure.

Sarah Kalmeta, who sits on the Asian Business Aviation Association (AsBAA) board of governors, says there need to be more business aviation airports in the Asia-Pacific region. There are very few business aviation airports in this region as compared, for example, to the U.S., says Kalmeta, who is based in Hong Kong and is also regional director of operations for Asia-Pacific at Universal Weather and Aviation.

She says business jet operators in the region are often having to use commercial airports, which are increasingly congested and subject to slot constraints.

Kalmeta points to IATA’s forecast, which predicts that from 2015 to 2035 Asia-Pacific will account for more than half of the world’s new passenger traffic. She also says IATA forecasts that by 2023 most of the major capital city airports in Asia will have reached their full design capacity. Some airports have already reached their design capacity, such as Jakarta airport, she adds.

Another issue the business aviation community continues to face is that civil aviation regulators in the region tend to be more focused on commercial airline operators, says Kalmeta. There is still much work to be done to educate regulators about the merits and value of business aviation, she adds.

The business aviation sector is posting healthy growth figures in Asia-Pacific, says Kalmeta, “but it is really about us making sure we have the infrastructure in place and get the right framework in place with the civil aviation regulators, so we can continue to grow in future.”

She also says AsBAA is very active in promoting the business aviation sector to students, as part of its AsBAA Discovery program, so the industry can attract the workforce of the future. Kalmeta says AsbAA has been working with tertiary institutions in the region on this initiative.

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