Construction Sector - EMIS Insight... · 2015-10-28 · Construction industry in Kenya increased by 13.1% in 2014 and its share of GDP was 4.8%. Some of the factors that contributed

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ConstructionSector

Sub-Saharan Africa

April 2015



Table of Contents

I. Sector Overview

1. Sector Highlights

2. Economic Development in SSA

3. SSA at a Glance

4. Investment in SSA

5. Infrastructure Construction

6. Infrastructure Investment in SSA

II. Selected Countries

1. South Africa

• Highlights

• Main Indicators

• Macroeconomic Forecast

• Investment

• Cement Sales

• Building Statistics

• Government Policy

• Infrastructure Development

• Large Infrastructure Projects Under Way

• Large Planned Infrastructure Projects

2. Kenya

• Highlights

• Main Indicators


• Investment

• Building Statistics



• Major Infrastructure Projects

3. Nigeria

• Highlights

• Main Indicators


• Building Costs

• Cement Market



• Infrastructure Projects Under Way

I. Main Players

1. Murray&Roberts

2. Stefanutti Stocks

3. Aveng Grinaker-LTA

4. Group Five

5. WBHO Construction



I. Sector Overview



Sector Highlights

Overview

Population growth, urbanisation and the large share of unexploited commodities in Sub-Saharan Africa requires an adequate infrastructure utilities. Investment in infrastructure increased significantly over the recent years, but the region still lags behind most developing countries in providing infrastructure services. According to the Infrastructure Consortium for Africa’s data (ICA), poor electricity capacity is the biggest challenge for most of the countries in the region. The lack of infrastructure is also pointed out as one of the major obstacles for the growth of private investment and international trade. The African Union also singled out poor infrastructure as the main obstacle before the continent's economic growth and integration. The Programme for Infrastructure Development (PIDA), launched in 2012, has estimated it would need to raise USD 68bn by 2020 and an additional USD 300bn by 2040 for priority projects, relying heavily on the involvement of private investors.

Government

Policy

In addition to the amount of public expenditures for infrastructure projects, local governments with the support of the

multilateral organisations put great efforts to attract more capital through various forms of instruments and initiatives.

Such instruments represent the infrastructure bonds, related to specific projects. In 2014, public authorities adopted

an action plan in order to promote the attractiveness of public-private partnerships in financing the most important

infrastructure projects for the economic development of the region. Islamic financing also starts to gain popularity in

the region and has a great potential for development.

Inhibitors

The slump in international commodity prices, Ebola dissemination and the slowdown of the Chinese economy

threatened the growth prospects for Sub-Saharan African economy. China is a major trading partner for many

countries in the region and an important investor in a variety of sectors, including the infrastructure construction.

Lower growth of the Chinese economy will restrict the economic growth in the region and result in less investment

in infrastructure projects.



Sector Highlights

South Africa

Construction in South Africa increased by 2.9% in 2014 and accounted to 3.7% of GDP. Although reported

construction growth last year, domestic cement sales slightly decreased by 0.8% due to the Pakistan-made cement

import which is 50% cheaper than the one offered by domestic cement companies. Electricity shortages due to

inadequate electricity network were the other major problem for local authorities. The state-owned power utility

company Eskom suffered from serious liquidity problems and that could result in lower economic growth than

projected, according to the government officials.

Most of the planned infrastructure projects in the country are located to the power and transport sector.

Kenya

Construction industry in Kenya increased by 13.1% in 2014 and its share of GDP was 4.8%. Some of the factors

that contributed for the registered growth included the construction of the Standard Gauge Railway between

Mombasa and Nairobi, the construction of roads and energy infrastructure and the improvement of the port of

Mombasa. Cement consumption in the country increased by 21.8% and reached 5.2mn tonnes.

Infrastructure projects improperly awarded to Chinese companies represented a serious issue for the local

government. At the same time, Chinese investment were crucial for the development of transport infrastructure in

Kenya.

Nigeria

Nigeria’s construction sector grew by 13% and accounted to 3.6% of GDP in 2014. The slump in oil prices reduced

budget revenues and limited the government’s plans for spending in infrastructure projects and in a number of

redundant people in the construction industry. Most of the construction materials in Nigeria are imported and

together with the variety administrative fees in the country resulted in high house prices. The Nigerian leading

cement company Dangote cemnent which is owned by the richest Africa’s man Aliko Dangote, contributed

significantly for the low cement import which was around 1.2mn tonnes in 2014. According to Dangote’s

estimations, total cement sales in Nigeria were around 21mn tonnes in 2014 and Dangote cement sales accounted

to 12.9mn tonnes.



Highlights

Source:

Economic Development in Sub-Saharan Africa

Real GDP growth, annual change (%)

Economic indicators for Sub-Saharan Africa

The share of Sub-Saharan African GDP in the world GDPsteadily increased over the recent years from 1.6% in 2009to 2.1% in 2013. According to the IMF projections, thistrend will continue to persist in the near-term. At the sametime, falling international commodity prices, Eboladissemination and the slowdown of the Chinese economyare among the major risks behind region’s economicprosperity and lead to the downward revision of theexpected growth for 2015 in the latest forecast of the IMF.

Nigeria is the largest economy in the region with apopulation of 173mn. Its share in Sub-Saharan AfricanGDP increased from 18% in 2009 to around 32% in 2013and thus outpaced the South African economy which usedto be the largest economy, but whose share decreasedfrom 30% in 2009 to 22% in 2013. The share of the Kenyaneconomy has remained relatively stable in the last fiveyears and accounted for around 3% of the region’s GDP.

FDI is an important source of financing for Sub-SaharanAfrica but it is unequally distributed across the region asSouth Africa, Nigeria and Mozambique together accountedfor 52.8% of total net FDI inflows in 2013.

The slowdown in industry over the recent years reflectedmainly the development in manufacturing which wasnegatively impacted by the decrease in internationalcommodity prices while the constant growth of urbanpopulation led to a construction boom in the region as thereis insufficient supply of houses in large cities. Theincreased middle class required also better utilityinfrastructure.

WDI, WEO

6.0

4.0

6.7

5.0 4.25.2 5.0

4.55.1 5.3

3.1

0.0

5.4

4.23.4 3.4 3.4 3.5

3.8 3.8

2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f

Sub-Saharan Africa World

2009 2010 2011 2012 2013

GDP (current prices, USD tn) 0.964 1.302 1.460 1.527 1.613

GDP per capita (USD) 1,146 1,507 1,645 1,676 1,723

Population, total (mn) 841.3 864.0 887.4 911.5 936.1

Urban population (% of total) 34.7 35.2 35.7 36.1 36.6

FDI, net inflows (USD bn) 35.2 29.7 40.7 38.0 38.7

GFCF ( growth, %) 2.7 6.2 2.4 8.0 5.0

CPI (growth, %) 7.3 4.3 6.1 6.4 4.6

Industry, value added (% of GDP) 30.0 28.4 29.1 28.1 26.9



Source:

Sub-Saharan Africa at a Glance

GDP per capita in 2013 (current USD)

Share in total population in 2013 (%)

WDI, The World Bank

5,78

3

805

7,31

5

684

267

3,76

7

1,32

9

333

1,05

4

815

484

3,16

7

1,52

9

544

505

11,5

71

489

1,85

8

523

564

1,24

6

1,12

6

454

463

226

715

1,06

9

9,20

3

605

5,69

3

415

3,00

6

639

1,61

0

1,04

7

16,1

8667

9

6,61

8

1,04

5

1,75

3

3,03

4

695

636

572

1,84

5

953

Ang

ola

Ben

in

Bot

swan

a

Bur

kina

Fas

o

Bur

undi

Cab

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erde

Cam

eroo

n

Cen

tral

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…

Cha

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Com

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Con

go, D

em. R

ep.

Con

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ep.

Cot

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Ivoi

re

Erit

rea

Eth

iopi

a

Gab

on

Gam

bia,

The

Gha

na

Gui

nea

Gui

nea-

Bis

sau

Ken

ya

Leso

tho

Libe

ria

Mad

agas

car

Mal

awi

Mal

i

Mau

ritan

ia

Mau

ritiu

s

Moz

ambi

que

Nam

ibia

Nig

er

Nig

eria

Rw

anda

Sao

Tom

e an

d…

Sen

egal

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les

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rra

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udan

Sud

an

Sw

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nd

Tan

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Uga

nda

Zam

bia

Zim

babw

e

2.3

1.1

0.2

1.8

1.1 2.4

0.1

0.5 1.4

0.1

7.2

0.5 2.

2

0.7

10.1

0.2

0.2 2.

8

1.3

0.2

4.7

0.2

0.5 2.

4

1.7

1.6

0.4

0.1 2.

8

0.2 1.

9

18.5

1.3

0.0 1.

5

0.0 0.7

1.1

5.7

1.2

4.1

0.1

5.3

0.7

4.0

1.6

1.5

Ang

ola

Ben

in

Bot

swan

a

Bur

kina

Fas

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Bur

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Cam

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Cab

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…

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Con

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em. R

ep.

Con

go, R

ep.

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re

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rea

Eth

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a

Gab

on

Gam

bia,

The

Gha

na

Gui

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Gui

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Bis

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Leso

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Mad

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car

Mal

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ibia

Nig

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Som

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Tan

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Uga

nda

Zam

bia

Zim

babw

e



Source:

Comments

Investment in Sub-Saharan Africa

Gross fixed capital formation is an important driver of economic growth in the region. Although it is strongly supported by the increased amount

of public capital expenditure in infrastructure, the lack of available resources is one of the major obstacles for the local governments.

Gross fixed capital formation in 2013 (% of GDP)

World Bank data

14.7

26.3

33.9

28.7

19.4

27.4

17.820.6

30.7

17.0

35.833.3

20.722.7

15.0

20.4

15.7

19.7

38.0

21.217.4

25.7

34.4

14.5

25.5

41.7

25.1

33.6

16.619.3

11.9

20.0

9.6

32.1

23.8

13.0



Source:

Infrastructure Construction

Regional

Priority

Infrastructure development is a key priority for the regional authorities in order to support the economic growth, increase

the regional integration and reduce the uneven wealth distribution.

During the June 2014 Dakar Financing Summit, 16 infrastructure projects were selected which were supposed to have

high impact on the regional development in the medium-term horizon. These projects are:

1. Ruzizi III Hydropower Project;

2. Dar es Salaam Port Expansion;

3. Serenge-Nakonde Road (T2);

4. Nigeria-Algeria Gas Pipeline;

5. Modernisation of Dakar-Bamako Rail Line;

6. Sambangalou Hydropower Project;

7. Abidjan-Lagos Coastal Corridor;

8. Lusaka-Lilongwe ICT Terrestrial Fibre Optic;

9. Zambia-Tanzania-Kenya Transmission Line;

10. North Africa Transmission Corridor;

11. Abidjan Ouagadougou Road-Rail Projects;

12. Douala Bangui Ndjamena Corridor Road –Rail Project;

13. Kampala Jinja Road Upgrading;

14. Juba Torit Kapoeta Nadapal Eldoret Road Project;

15. Batoka Gorge Hydropower Project;

16. Brazzaville Kinshasa Road Rail Bridge Project and the Kinshasa Illebo Railways;

The successful implementation of these projects will strongly rely on public-private partnership.

Dakar Financing Summit for Africa‘s Infrastructure



Source:

Infrastructure Investment in Sub-Saharan Africa

Infrastructure Investment in SSA of ICA members

Consortium for Africa (ICA) members provided more

than 25% of the total investment for Africa’s

infrastructure in 2013 while the external private

sector financing was estimated to be less than 9%.

Most of the ICA investment was directed to East

Africa.

ICA members include G8 countries, The World Bank

Group, The African Development Bank Group,

European Commission, European Investment Bank

and the Development Bank of Southern Africa. The

biggest donor to the Africa’s infrastructure outside

the ICA members was China.

According to a PwC report "Capital project and

infrastructure spending: Outlook to 2025.“

infrastructure investment in Sub-Saharan Africa will

increase by 10% per year and will exceed USD

180bn in 2025. Nigeria and South Africa attract most

of the investment while Ethiopia, Ghana, Kenya,

Mozambique, and Tanzania are pointed out as

countries with promising opportunities for growth.

ICA data, PwC report

Sector 2009 2010 2011 2012 2013

Transport (USD bn) 5.8 4.1 3.0 3.9 5.14

Energy (USD bn) 6.0 8.0 2.5 4.9 11.7

Water (USD bn) 1.7 2.7 2.4 3.8 4.0

ICT (USD mn) 690 185 142 111 255



II. Selected Countries



Source:

Selected Countries - South Africa, Kenya and Nigeria

Investment Climate Construction indicators

EY’s Attractiveness Survey: Africa 2014, KPMG report: Construction in Africa, 2014 Yearbook: Housing Finance in Africa, Doing Business 2015

The cost of standard 50 kg bag of cement (USD)

South Africa 6.62

Kenya 7.71-9.00

Nigeria 6.00

The price of the cheapest, newly built house by a

formal developer or contractor (USD, 2013)

South Africa 33,480

Kenya 11,127

Nigeria 16,700

The size of this house (sq m, 2013)

South Africa 40

Kenya 15

Nigeria 65

Minimum stand or plot size for residential property

(2013)

South Africa 180.00

Kenya 369.36

Nigeria 648.00

South Africa, Kenya and Nigeria are perceived as the most

attractive countries in Sub-Saharan Africa for foreign investors

based of their share of FDI flows in the region for the period 2007-

2013, as well as according to a poll among investors, EY’s

attractiveness survey for Africa 2014 showed. The three countries

accounted for around 40% of total FDI projects in Sub-Saharan

Africa.

According to Doing Business 2015, South Africa ranks second in

the region, after Mauritius, and is the regional leader in terms of

protecting minority investors and resolving insolvency. Kenya

ranked 15th and Nigeria – 36th.

The three countries together account for around 29% of the total

population in the region and represent 57.5% of Sub-Saharan

Africa’s GDP in 2013. Nigeria alone generated one-fifth of African

GDP, making it the continent's biggest economy. It is also the most

populous African state with over 173 million nationals.

According to available data about construction costs in Sub-

Saharan Africa, East Africa was considered the cheapest region,

while Southern Africa is the most expensive one.



South Africa



South Africa Highlights

Overview

The growth of the South African economy slowed down to 1.5% in 2014 from 2.2% in the previous year mainly due

to the downward trend in mining and quarrying while construction growth accelerated to 2.9% compared to an

annual growth of 2.7% in 2013. The construction sector accounted for 3.7% of GDP and represented 8.7% of total

employment in 2014. Construction industry is expected to continue growing in the near-term, mainly driven by the

planned infrastructure projects. This is expected to reduce the high level of unemployment in the country, which is

currently estimated to about 25%.

Major

Difficulties

Inadequate electricity network which resulted in electricity shortages is a major obstacle to South African

development. The state-owned power utility company Eskom suffered from serious liquidity problems and the

government had to provide additional funding to the company at the amount of ZAR 23bn this year in order to

secure its functioning. In addition, the government discussed a loan with the World bank at the amount of USD

1.6bn to Eskom.

Infrastructure

Development

Most of the major planned infrastructure projects are located to the power and transport sector. The government

intended to increase the nuclear electricity with 9,600 MW and to improve gas import infrastructure in order to

support power generation. Renewable energy is also expected to increase. In April, 2015 two international

companies Sener and Acciona were chosen for the construction of the Kathu thermal solar plant which is expected

to start working in 2018.

Road network also have a huge potential for development as only 20.6% of total roads are paved.



Source:

Comments

Main Indicators for South Africa

Construction output accounted for 3.5% of GDP in 2010 and the share increased to 3.7% in 2014.

Construction is a labor-intensive industry, so it accounted for 8% of the total employment in South Africa for the period 2008-2014. The share

steadily increased over the recent years to 8.7% in 2014.

Inflation was moderate over the recent years and is expected to remain within the target band of 3-6% in the near term horizon.

Main Indicators for South Africa

Stats SA , South African Reserve Bank

Product 2010 2011 2012 2013 2014

GDP (ZAR mn) 2,748,008 3,024,950 3,262,542 3,534,326 3,796,462

Construction output (ZAR mn) 95,453 103,302 111,040 126,435 138,917

GFCF (ZAR mn) 529,431 566,676 614,505 708,357 769,230

CPI (% change) 4.3 5.0 5.6 5.7 6.1

Compensation of employees in construction

(growth, %)5.6 8.2 9.3 6.9 5.2

Gross operating surplus in construction (growth, %) -4.9 8.2 5.9 20.1 13.5

Employed by construction industry(LFS, thousands) 1,115 1,105 1,132 1,204 1,334



Comments

Source:

Macroeconomic Forecast for South Africa

Although economic growth in South Africa slowed down in 2014 due to mining strikes and electricity supply constraints, construction growth

continued to accelerate driven by both residential and infrastructure construction.

According to the country’s official economic forecast which is in line with the projections of other international institutions, the growth of the

South African economy will accelerate in the near-term, thus further improving the prospects for the construction industry. This will also help to

reduce the high level of unemployment in the country which is currently about 25%.

GDP and Construction Real Growth, % GDP Real Growth Forecast, %

South African Reserve Bank, GEP, WEO, National Treasury , Reuters

5.3 5.6 5.4

3.2

-1.5

3.0 3.22.2

2.21.5

11.9

10.4

15.5

9.98.5

0.7 0.4 2.1

2.72.9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GDP growth, % Construction growth, %

2.02.1

2.4

2.72.8

2.2

2.5

2.7

2.0

2.4

3.0

2015 2016 2017 208 2019

IMF forecast WB forecast National Treasury forecast



Source:

Investment in South Africa

GFCF by Type of Asset in 2014 ( % of total GFCF)

Household Balance Sheet (ZAR bn)

Financing of Gross Capital Formation ( ZAR mn)

Comment

South African Reserve Bank

Residential buildings represented on average 25% of total

assets of households and played an important role for the

increase in households' net worth.

Mortgage advances accounted for around 53% of total

households' liabilities for the period 2009- 2014.

Residential buildings 7.2%

Non-residential buildings 8.1%

Construction works 30.0%

Transport equipment

11.3%

Machinery and other

equipment32.2%

Othet 11.2%

494,973 513,795 493,858 507,370566,164

41,24565,287

161,704203,774

206,644

536,218579,082

655,562711,144

772,808

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2010 2011 2012 2013 2014

Foreign investment Gross savings Total GCF

1,645 1,716 1,791 1,925 2,126 2,358

750776

788 814 833 854

4,8015,409 5,577

6,406

7,3368,127

2009 2010 2011 2012 2013 2014

Residential buildings Mortgage advances Net worth



Highlights

Source:

Cement Sales in South Africa

Volumes of Cement Sales in South Africa

The presented volumes include only data for PPC

Cement, Lafarge, AfriSam, NPC, Ash Resources,

Sephaku Ash, Ulula Ahs, and Sephaku Cement.

According to Global Cement data, total cement

production capacity in South Africa exceeds 15.6Mt/yr

while the sales to the domestic market amounted to

12.07mn tonnes in 2014. Although steady construction

growth last year, domestic cement sales slightly

decreased by 0.8% compared to an annual increase

of 5.3% in 2013. One reason for that development

could be the unwanted imports from Pakistan in recent

years which is not included in the presented data.

According to Global Cement., Pakistani companies

sold Pakistan-made cement at a price most than 50%

lower than the one offered by domestic firms.

The largest player in South African cement market is

PPC, followed by NPC, AfriSam and Lafarge.

PPC, Global Cement

Metric Tonnes Domestic Cement Sales

Q1'12 2,637,349

Q2'12 2,915,120

Q3'12 2,976,235

Q4'12 3,030,862

2012 11,559,566

Q1'13 2,619,423

Q2'13 3,200,795

Q3'13 3,238,572

Q4'13 3,109,029

2013 12,167,819

Q1'14 2,479,227

Q2'14 3,038,826

Q3'14 3,388,646

Q4'14 3,161,791

2014 12,068,490



Source:

Building Statistics of South Africa

Received building plans (ZAR mn)

Stats SA

3,235 3,267 3,4693,041

4,133 3,911 4,0294,685

4,186

5,264

4,149

2,9563,456

1,345

2,0542,275

1,726

1,9702,034

3,0202,189

1,212

3,058

2,113

1,873 594

1,536

2,057

1,953

1,977

1,9131,918

2,300 2,596

2,622

2,329

2,279

1,877

1,684

6,116

7,3787,697

6,745

8,0177,863

9,349 9,470

8,021

10,650

8,542

6,706

5,734

0

2,000

4,000

6,000

8,000

10,000

I'14 II'14 III'14 IV'14 V'14 VI'14 VII'14 VIII14 ÏX'14 X'14 XI'14 XII'14 I'15 Additions and alterations (Total)

Non-residential buildings (Total)

Residential buildings (Total)

Recorded building plans passed by larger municipalities by type of building (Total)



Source:

Building Statistics of South Africa (cont’d)

Completed buildings (ZAR mn)

Stats SA

1,865 1,9012,226 2,236

1,858 1,952

2,522 2,381 2,5432,883

3,072

2,503

1,817

948 1,025

1,117 1,280

667800

1,654

9421,069

1,426

2,550

2,021

786

772957

794 630

767652

759

937799

900

719

689

505

3,585

3,883

4,136 4,145

3,2923,404

4,935

4,2604,411

5,209

6,342

5,213

3,107

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

I'14 II'14 III'14 IV'14 V'14 VI'14 VII'14 VIII14 ÏX'14 X'14 XI'14 XII'14 I'15 Additions and alterations (Total)

Non-residential buildings (Total)

Residential buildings (Total)

Buildings reported as completed to larger municipalities by type of building (Total)



Source:

Government Policy in South Africa

National

Infrastructure

Pan

The government of South Africa adopted a National Infrastructure Plan in 2012 in which 18 Strategic Integrated Projects

(SIPs) were identified with a crucial importance for the economic and social development of the country. The projects cover

the whole country with an emphasis on the lagging regions. In order to improve the implementation of the plan, the

Government established the Presidential Infrastructure Coordinating Commission which has the primary objective to plan

and coordinate the National Infrastructure Plan. The major projects are valued at around USD 360bn and have to be

implemented until 2023. Almost 80% of the estimated value will be located to the power and transport sectors.

Government

spending

The public sector spent around ZAR 1.02tn in the last five years as most of the spending were located to the economic

infrastructure such as roads, bridges, dams, electricity and water supply. According to the Medium-Term Expenditure

Framework, public sector spending on infrastructure will amount ZAR 813.1bn over the next three years. State-owned

companies will be the largest contributors with projected expenditures of around ZAR 362.2mn.

Eskom

difficulties

Inadequate electricity network is a key problem for South African authorities and could result in lower economic growth

than projected, according to the government officials. The state-owned power utility company Eskom had to cut electricity

for seven days in a roll in April in order to prevent the electricity grid from collapse, said Reuters. The public company also

suffers from liquidity problems and needs around ZAR 200bn till 2018. The new temporary appointed CEO of Eskom, Brian

Molefe, plans to reduce the company’s dependence on coal which accounts to about 90% of the produced power. In

addition, the government discussed with the World Bank officials a loan at the amount of USD 1.6bn to Eskom and the

possibility for future extended funding to the company. The government also provides ZAR 23bn to the company this year

in order to secure its functioning.

National Treasury, Reuters



Source:

Comments

Infrastructure Development in South Africa

Infrastructure in South Africa is relatively well developed compared to the other countries in the region and its further improvement is a government key priority. Railway transport is

considered as the most developed one on the continent. Access to the electricity network is also high and amounted to 83% of total population in 2010 according to the World Bank data. At

the same time, electricity shortages is a major drag on growth. As a result, the government plans to improve gas import infrastructure in order to support power generation, Reuters said.

Renewable energy also gain popularity. In April, 2015 two international companies (Sener and Acciona) were chosen for the construction of the Kathu thermal solar plant which should start

operate in 2018 and will supply electricity to 80,000 homes, according to SAinfo. The government also plans to increase the nuclear electricity with 9,600 MW and started a series of

consultations with a number of nuclear vendor countries last month, SAinfo said.

The quality of road network which is around 746 978km is also inadequate. According to the Medium-Terms Expenditure Framework of the National Treasury, only 20.6% of total road

network in the country is paved.

Infrastructure Indicators for South Africa

WDI, Stat SA, National Treasury, Reuters, SAinfo

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Air transport, freight (million ton-km) 923,4 1,233,0 939,2 760,9 676,4 1,025,6 1,072,9 1,174,7 1,178,4 n/a

Air transport, passengers carried 11,844,657 12,932,671 12,870,324 13,135,437 12,503,629 15,781,210 16,407,785 17,571,565 16,909,841 n/a

Air transport, registered carrier departures worldwide 148,146 146,648 152,550 156,567 151,292 190,441 191,507 197,817 185,963 n/a

Container port traffic (TEU: 20 foot equivalent units) 3,111,121 3,552,198 3,734,165 3,875,952 3,726,313 3,806,427 3,990,193 4,424,254 n/a n/a

Quality of port infrastructure, WEF (1=extremely

underdeveloped to 7=well developed and efficient by

international standards)

n/a n/a 4.4 4.4 4.7 4.7 4.7 4.7 4.7 4.9

Rail lines (total route-km) 20,047 20,047 24,487 24,487 22,051 22,051 20,500 20,500 n/a n/a

Railways, goods transported (million ton-km) 108,513 108,513 108,513 106,014 113,342 113,342 113,342 113,342 n/a n/a

Railways, passengers carried (million passenger-km) n/a n/a 13,865 13,865 13,865 18,865 n/a n/a n/a n/a

Volume of electricity distributed (gigawatt-hours) 238,272 240,528 234,174 233,105 231,449

Electricity distributed growth (% change) 0.9 -2.6 -0.5 -0.7



Source:

Large Infrastructure Projects under Way in South Africa

MTEF, National Treasury

Project Name Implementing agentProject cost ( ZAR

bn)Project Description

Renewable energy Independent power producers 105.0 Comprises photovoltaic, concentrated solar power and wind projects

Medupi power station Eskom 105.0 Construction of 4 800 MW coal plant in the Waterberg region

Kusile power station Eskom 118.5 Construction of 4 764 MW coal plant in Mpumalanga

Ingula pumped-storage scheme Eskom 25.9 Construction of 1332 MW pumped-storage scheme

Square Kilometre ArrayNational Research

Foundation 16.0 Hosting the most powerful radio telescope in the world

South Africa connect: phase 1 of digital development

planProvincial departments 6.7 Schools and government institutions connected to broad band

Olifants River water resources development project :

De Hoop dam (phase 2C)

Trans-Caledon Tunnel

Authority3.1

Supplying water to new minig development and augmentation of

domestic water supplies

Olifants River water resources development project

(phase 2A)


Authority3.4 Bulk distribution works

Olifants River water resources development project

(phases 2B and 2G)


Authority13.1

Construction of Flag Boshielo to Mokopane pipeline and second

pipeline between Flag Boshielo and Mokopane

Lusikisiki regional w ater supply scheme:

Zalu dam on Xura riverDepartmental agencies 5.0 Developing bulk water and waste water infrastructure

Rehabilitation of 28 w ater conveyances (bulk transfer

scheme)

Department of water and

sanitation5.0 Rehabilitation of canals and pipelines

Rolling stock for passenger railPassenger Rail Agency of

South Africa53.0

Rolling stock fleet renew al programme over 10 years commencing

2012, delivery commencing in 2014/15

Locomotives for freight rail Transnet 38.6 Acquisition of 1 064 locomotives for general freight rail

Rolling stock and locomotives for freight rail Transnet 19.0 Acquire rolling stock and locomotives for general freight rail

Manganese rail and terminal Transnet 26.7Grow manganese exports from 7.0mt to 14.0mt by 2020 thereafter to

16,0mt

Iron ore line Department of transport 13.0 Expand Sishen-Saldanha iron ore railw ay

Coal line expansion Department of transport 45.5Upgrade coal line from Mpumalanga to 81,0mt in near future, thereafter

to 97,0mt



Source:

Large Planned Infrastructure Projects in South Africa

MTEF, National Treasury

Project Name Implementing agentProject cost ( ZAR

bn)Project Description

Coal 3 (Eskom) Eskom 111.1 Build third coal-fired power plant

Solar park Central Energy Fund 200.0Establishment of 1GW solar park near Upington region and further 4GW

in Northern Cape

Photovoltaic Independent power producers 154.0Another 7 000MW over and above 1,450MW in the current 3 725MW

renewable energy independent power producers

Wind Independent power producers 111.0Another 6 550MW over and above 1,850MWin the renewable energy

independent power producers and 800MW in committed build

Moloto corridor Department of Transport 10.0Safe and reliable commuter transportation between Siyabuswa and

Tshwane

Swaziland rail link Transnet 19.0Construction of new rail link, reconstruction and upgrade of existing rail

links from Lothair through Swaziland to Sidvokodvo

Iron-ore line (Sishen to Saldanha Bay) Transnet 16.3 Expand Sishen-Saldanha iron ore railw ay line to 82,5 mtpa

Manganese rail and terminal Transnet 18.7 Upgrade rail, port and terminal capacity for manganese export

Olifants River w ater resources development project

(phases 2B and 2G)Departmental agencies 13.1

Construction of Flag Boshielo to Mokopane pipeline and second

pipeline between Flag Boshielo to Mokopane



Kenya



Kenya Highlights

Overview

Kenya’s economy increased by 5.3% in 2014 compared to a growth of 5.7% a year earlier. Construction was among

the main drivers of the registered economic growth as increased by 13.1% and accounted to 4.8% of Kenya’s GDP.

The growth of the construction industry in the near-term will rely on the government-planned infrastructure projects

and the increased pressure on residential construction by the growing urban population.

Major

difficulties

Corruption is a serious constraint on economic growth in Kenya. In March 2015, Kenya's Ethics and Anti Corruption

Commission published a report which alleged that infrastructure projects were irregularly awarded to Chinese

companies such as the project for the construction of a standard gauge railway at the amount of KES 320bn (USD

3.5bn) and a pipeline contract for USD 500 mn. At the same time, Chinese investment play a main role for the

development of transport infrastructure in Kenya and the slowdown of the Chinese economy could limit Kenya’s

development.

Infrastructure

development

In line with the Chinese investment, Kenya’s government intends to increase by 25% its spending in the next fiscal

year in order to support infrastructure projects. In March, 2015 the Central Bank of Kenya sold a 12-year

infrastructure bond at the amount of KES 24bn (USD 260mn) which will be used for financing projects in transport

and energy sector.



Source:

Comments

Main Indicators for Kenya

The share of construction in GDP increased from 4.5% in 2010 to 4.8% in 2014 as the sector played a crucial role for the economic and social prosperity of

Kenya.

The number of employees in the construction sector also constantly increased, reaching 6.1% of total formal employment in 2014. In addition, there was a

large number of informally employed persons in construction as a result of the high costs to build a house in Kenya which is not affordable for many people

in the country.

Commercial bank credit extended to the construction sector surged by 13.6% to KES 80.4bn in 2014

Main indicators for Kenya

Kenyan National Bureau of Statistics

Product 2010 2011 2012 2013 2014

GDP (KES mn.) 3,169,301 3,725,918 4,261,151 4,730,801 5,357,672

Construction (KES mn.) 142,669 164,631 190,851 212,878 259,624

Compensation of employees in construction 21,061 24,310 28,720 33,842 39,363

Gross operating surplus in construction 76,384 84,922 96,412 108,419 127,543

CPI (% change) 4.0 14.0 9.4 5.7 6.9

GFCF (buildings and dwellings, KES mn.) 249,554 293,399 344,260 395,762 448,562

Employment in construction (thousands) 100.1 106.1 116.1 129.7 143.7



Comments

Source:

Macroeconomic Forecast for Kenya

The construction sector was one of the main drivers for the economic growth in 2014. State investment in affordable houses was one of the

factors that contributed for the observed favorable dynamics. The other factors contributed significantly for the registered growth were the

construction of the Standard Gauge Railway between Mombasa and Nairobi, the construction of roads and energy infrastructure and the

improvement of the port of Mombasa.

The steady growth of urban population in Kenya will continue to put pressure on housing supply and thus prospects for the residential

construction also remain promising.

GDP and Construction Growth (% change) GDP Real Growth Forecast (% change)

Kenyan National Bureau of Statistics, GEP, WEO

8.4

6.1

4.55.7 5.3

19.1

4.0

11.3

5.8

13.1


6.9 7.2

7.0 7.06.9

6.0 6.6 6.5

6.9 7.0

7.0 7.0

2015 2016 2017 2018 2019

IMF forecast WB forecast National Treasury forecast



Source:

Investment in Kenya

GFCF by type of asset in 2014 (% of total GFCF)

Domestic Credit to Private Sector (KES bn)

Cement production and consumption

CEIC data, Central Bank of Kenya

Metric Tonnes Cement Production Cement Consumption

Jan.13 393,921 342,296

Feb.13 380,032 336,756

Mar.13 367,763 279,129

Apr.13 365,579 306,196

May.13 414,161 337,866

Jun.13 422,519 361,839

Jul.13 454,288 373,767

Aug.13 432,938 373,466

Sep.13 453,542 381,272

Oct.13 487,594 407,151

Nov.13 464,834 392,733

Dec.13 422,048 374,015

2013 5,059,219 4,266,486

Jan.14 454,960 387,809

Feb.14 442,636 354,576

Mar.14 478,416 420,345

Apr.14 468,022 433,787

May.14 464,695 458,219

Jun.14 464,929 421,855

Jul.14 503,428 422,394

Aug.14 492,801 440,336

Sep.14 499,479 441,527

Oct.14 553,186 483,033

Nov.14 545,041 487,396

Dec.14 492,944 445,404

2014 5,860,537 5,196,681

59 75182 237

253307

718090

130198

263

1,542

1,885

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Dec.2013 Dec.2014

Real estate

Transport andcommunicationBuilding and construction

Trade

Manufacturing

Agriculture

Credit to private sector

Dwellings19.1%

Buildings other than dwellings

17.9%

Other structures

10.4%

Transport equipment

24.7%

ICT equipment4.8%

Machinery and equipment

20.6%

Others 2.5%



Source:

Building Statistics of Kenya

Building Statistics (KES mn)

CEIC data

8,35510,555

11,424

11,763

12,112

12,817

9,665

12,296

14,067

14,681

8,82910,154 10,758

7,069

7,2836,889

7,479 7,249

7,800

12,339

11,416 8,2438,496

3,884

6,0035,707

15,424

17,83818,314

19,242 19,361

20,617

22,004

23,712

22,310

23,177

12,713

16,157 16,464

0

5,000

10,000

15,000

20,000

25,000

III'14 IV'14 V'14 VI'14 VII'14 VIII14 ÏX'14 X'14 XI'14 XII'14 I'15 II'15 III'15

Non Residential Buildings Residential Buildings Building Plans Approved



Source:

Government Policy in Kenya

Kenya

Vision 2030

The major strategic programme for the long-term prosperity of Kenya is called Kenya Vision 2030 and it covers the periodfrom 2008 to 2030. The programme is based on three main pillars – economic, social, and political – and itsimplementation is split into five-year plans. The first plan covered the period 2008-2012 and some of the major challengesfor the country’s development remained after its completion includes low domestic savings, high unemployment, highenergy costs and high costs of finance. The currently ongoing second medium-term plan (2013-2017) determinesinfrastructure development as a prerequisite for a sustained economic growth in the long term horizon. It has the objectiveto reduce the price of electricity and improve the efficiency of all kinds of transport through stronger institutional framework,emphasis on PPP projects, and establishment of Kenya Development Bank which should provide funds to the privatesector for the investment in infrastructure’s projects.

Government

spending

Kenya Vision 2030 is consistent with the Medium-Term Expenditure Framework which determines the funds for its

implementation. Over the next three years, around KES 263bn will be located to the energy, infrastructure and ICT sectors.

The Central Bank of Kenya sold a 12-year infrastructure bond in March 2015 to the amount of KES 24bn (USD 260mn).

According to the Kenya’s Central Bank announcement, the proceeds from this sale will be used for financing projects in the

transport and energy sector. The government also intend to increase government spending by 25% to around KES 2.2tr

(USD 23bn) in the next fiscal year which started in July in order to boost energy, infrastructure and telecommunication

development as well as to increase the security in the country by modernisation of the military and the police. The proposal

should be approved by the Parliament in June.

ProblemsCorruption is one of the major obstacles for faster economic growth and infrastructure development in Kenya. As already

mentioned earlier in regard to Chinese investments, in March, 2015 Kenya’s Anti Corruption Commission published a

report which revealed illegal actions of 175 government officials.

Kenya Vision 2030:Second Medium Term Plan (2013-2017), Reuters, Central Bank of Kenya



Source:

Comments

Infrastructure Development in Kenya

Although starting from a low base, the length of paved roads in Kenya steadily increased from 14.6% of the total road network in 2007 to 17.6% in 2013. According to Kenya Roads Board,

about 93% of all cargo and passenger traffic in the country is delivered by road. In order to improve the efficiency of the road transport, the government plans to initiate tenders for toll-road

contracts in May, 2015 amounted to USD 2 bn, Bloomberg said. There will be 5 toll projects which cover about 800km, including a new highway at a length of 482km from the port city of

Mombasa to Nairobi.

Chinese investment play a crucial role for the development of transport infrastructure in Kenya. Currently, China invest about 3.58 bn in a railway project which connect the port of Mombasa

to the boarder of Uganda though there are some doubts about the way in which the Chinese company won the tender.

Access to electricity is a serious obstacle for the economic and social development of Kenya as according to the World Bank data, only 23% of the population has access to electricity.

Infrastructure Indicators for Kenya

CEIC data, WDI, Kenya National Bureau of Statistics, Kenya Roads Board, Bloomberg

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Air transport, freight (million tonne-km)253.2 301.2 298.1 295.2 271.6 280.0 191.2 234.6 238.1 n/a

Air transport, passengers carried2,424,382 2,685,148 2,857,464 2,880,546 2,948,920 4,039,583 4,508,698 4,653,460 4,473,092 n/a

Air transport, registered carrier departures worldwide28,399 29,039 32,329 32,045 33,593 78,265 84,955 82,576 74,205 n/a

Container port traffic (TEU: 20 foot equivalent units)n/a n/a 585,367 615,733 618,816 696,000 735,672 903,000 n/a n/a


underdeveloped to 7=well developed and efficient by

international standards)n/a n/a 3.4 3.5 3.6 3.8 3.8 3.8 4.1 4.3

Rail length of lines (km)2,597 2,597 2,597 2,597 2,704 2,704 2,704 2,706 2,706 n/a

Road Transport: Length of Roads: Bitumenn/a n/a 9,273.3 9,273.3 8,879 8,879 8,880 9,612 11,230 n/a

Road Transport: Length of Roads: Graveln/a n/a 54,301 54,301 53,066 53,067 53,074 52,431 52,410 n/a

Road Transport: Number of Motor Vehicles:

Registered 749,680 819,444 896,573 100,9438 1,221,083 1,417,539 1,616,745 1,789,789 2,011,972 n/a

Electricity installed capacity (MW)1,156.5 1,177.1 1,196.1 1,267.9 1,311.5 1,412.2 1,534.3 1,601.1 n/a n/a



Source:

Major Infrastructure Projects in Kenya

Second Medium Term Plan (2013-2017), Kenya Vision 2030

Project Name Implementing Agency Source of Funds Indicative budget (2013-2017), KES mn

Construction of Green Field Terminal and Second Runway KAA GoK, PPP 68,000

Mombasa-Malaba/Kisumu Standard Gauge Railway KRC GoK, DP 317,000

Development of new Transport Corridor from Lamu to Ethiopia

and S.Sudan (LAPSSET Project)KRC GoK, PPP 593,810

Construction of Commuter Rails in Nairobi, Mombasa and

KisumuKRC GoK, PPP 82,851

East Africa Road Network Project (EARNP) KeNHA GoK, DPs 29,520

Rehabilitation of Northern Corridor Transport Improvement

Project (NCTIP)KeNHA GoK, DPs 14,220

Kenya Transport Sector Support Project (KTSSP) KeNHA/KeRRA/KURA GoK, DPs 19,980

Rehabilitate Eldoret-Kitate-Lodwar-Nadapal road Corridor (600

km)KeNHA GoK, DPs 27,270

Lamu Port South Sudan-Ethiopia Transport Corridor

(LAPSSET)KeNHA/KURA GoK, DPs 57,600

Development of geothermal in Olkaria, Menengai and Silali-

BogoriaKenGen GoK, DPs 753,926

Karura hydro KenGen GoK, DPs 28,032

Coal plant at Kilifi KenGen GoK 102,000

Drilling of wells at Olkaria, Menengai and Silali-Bogoria KenGen, GDC GoK, China Exim Bank, DPs 413,652

Development of Mombasa Petroleum Trading Hub MOEP through NOCK GoK, PPP 52,000

LAPSSET oil pipelines and port facilities LAPSSET Authority/MOTI, MOEP GoK, PPP 900,000

Solar Energy Development MOP/REA GoK, REA 2,500



Nigeria



Nigeria Highlights

Overview

Nigeria is the largest economy in Sub-Saharan Africa with a population of around 173mn and the largest oil

exporter in the region. The growth of the Nigerian economy accelerated to 6.2% in 2014 due to the non-oil sector.

Construction industry increased by 13% and accounted to 3.6% of GDP in 2014. Non oil sector is expected to

remain the main driving force for the economic growth in the near-term horizon.

Major

Difficulties

The boom in the oil sector played a key role for the economic development in Nigeria in the past but the currentslump in oil prices caused serious problem for the Nigerian economy and presented a major risk for the constructionindustry as it reduced budget revenues and restricted the government’s abilities for infrastructure investment.Recent freezing of budget-funded projects also resulted in an increasing number of redundant people in theconstruction industry.

High housing prices in the country which suffers from lack of houses for its rapidly growing population is anotherobstacle for local authorities. Some of the reasons for that dynamics include the expensive construction materials,most of which are imported and the great variety of administrative fees.

Dangote

cement

Dangote cement is Nigerian leading cement company owned by Africa’s richest man Aliko Dangote. The company

has three cement plants in Nigeria, and the one of them Obajana is the largest cement plant in Africa with a capacity

of 5.2Mtpca. Dangote cement sales accounted to around 61% of total cement sales in Nigeria in 2014. The

company’s operations limited significantly cement imports in Nigeria and thus contributed for the reduction of

industry’s import dependence.



Source:

Comments

Main Indicators for Nigeria

Nigeria is Africa’s largest economy with a rapidly growing population, estimated at 173 million in 2013. It is also the largest oil exporter in Africa

and the boom in the oil sector was crucial for its economic development as it attracted investment in the region and necessitated the

improvement of infrastructure facilities. The falling oil prices at the moment, however, are causing serious economic distress.

According to the rebased data of national accounts which covered the period 2010-2014, the share of construction in GDP increased from

2.9% in 2010 to 3.6% in 2014.

Main Indicators for Nigeria

National Bureau of Statistics of Nigeria

Product 2010 2011 2012 2013 2014

GDP(NGN mn) 54,612,264 62,980,397 71,713,935 80,092,563 89,043,615

Construction (NGN mn) 1,570,973 1,905,575 2,188,719 2,676,284 3,188,823

CPI (% change) 13.7 10.8 12.2 8.5 8.0

FDI (USD mn) 7,289 17,533 19,999 12,794 22,770

Capital importation in construction (USD mn) 41.3 50.4 59.2 47.7 55.7



Source:

Macroeconomic Forecast for Nigeria

GDP and Construction Real Growth (% change)

Job Creation in Construction

GDP Real Growth Forecast ( % change)

Comment

National Bureau of Statistics of Nigeria, WEO, GEP, Reuters

Nigeria’s GDP growth remained strong due to the non-oil sector.

According to different forecasts, non-oil sector will continue to drive

the economic growth in the near-term and construction is

supposed to play a key role for the expected dynamics. Major risk

for the projected growth represents the slump in oil prices since

the beginning of the year as lower prices will reduce budget

revenues and restrict the possibility for infrastructure investment.

Jobs created in construction accounted for around 3.2% of all

created jobs in the formal sector in the last two years, but recent

freezing of budget-funded projects resulted in dozens of thousands

being made redundant.

5.3

4.25.5

6.2

15.7

9.4

14.213.0


4.7

4.9 5.2

5.55.8

5.5

5.8 6.2

5.5

5.8 5.8

2015 2016 2017 2018 2019

IMF forecast WB forecast National authority forecast

2.341 2.1872.764

0.591

4.294

8.174

0.968 1.09

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14



Source:

Building Costs in Nigeria

Cost of Operation in the Real Estate Sector (NGN mn)

Nigeria suffers from lack of houses for its growing

urban population but at the same time housing prices

are very high. One of the reasons for that is related

to the expensive construction materials as around

90% of them are imported. Another factor is the

variety of due administrative fees.

In order to reduce the cost of construction, the

government intervened on the market and kept the

price of cement stable relative to the other building

materials.

National authorities also try to ease the access to

houses through different initiatives. The now former

Nigerian President launched an initiative in 2014

according to which land will be free for developers

and there will be negotiations with the manufactures

of building materials to sell to developers at factory

prices. The government also started negotiations

with mortgage institutions to increase the access to

low income households.

Nigerian Real Estate Sector Report, National Bureau of Statistics, Centre for Affordable Housing Finance in Africa, allAfrica

2010 2011 2012

Cost of Energy 158,505.50 209,209.85 250,302.16

Rent Office Accomodation 13,470.89 16,762.11 18,468.74

Rent of Machinery and Equipment 2,228.08 2,772.36 3,539.11

Water Bills 3,420.97 4,331.15 5,367.09

Property Management fees paid 26,549.22 33,233.65 39,508.07

Real Estate Commission paid 9,022.88 8,548.61 8,901.16

Property Taxes paid 1,840.96 2,678.23 3,321.94

Mortgage Interest paid 1,895.51 3,308.31 3,472.67

Tellephone Bills 3,559.57 3,816.00 4,272.47

Cost of Stationaries (Consumables) 3,613.16 3,751.66 3604.21

Consultancy Services 3,144.14 5,331.02 4,763.38

Other Miscellaneous Cost ( licenses, etc.) 24,792.09 37,122.90 47,376.81

Total Cost 260,385.31 345,616.96 402,946.46



Cement Market in Nigeria

Cement

market Two of the largest players in the cement industry in Nigeria are Dangote Cement and Lafarge WAPCO.

Dangote

Cement

Dangote cement is the leading Sub-Saharan African cement producer owned by Africa’s richest man Aliko Dangote. This is thelargest company listed on the Nigerian Stock Exchange. Dangote cement has three cement plants in Nigeria, namely Obajana,Ibese and Gboko with total capacity of 20mn Mtpa. Obajana alone is the largest cement plant in Africa with a capacity of5.2Mtpca and additional planned capacity of over 5mn MTpa. The company had 5 terminals in Nigeria with combined capacityof 9mn Mtpa. Dangote cement planned to increase its operation across Sub-Saharan Africa and to reach an annual capacity of62mn tonnes across Africa by 2017 compared to 42mn tonnes in 2014, Reutres said

According to Dangote’s estimations, total cement sales in Nigeria were around 21mn tonnes in 2014 compared to 21.1mn in2013. Dangote cement sales accounted to 12.9mn tonnes which was around 61% of total cement sales in the country. At thesame time, company’s cement production capacity in the country was 29mn tonnes.

Lafarge

Lafarge is the other major player on the cement market in Nigeria, represented around 32% market share and

cement production capacity estimated at 5.7mn tonnes.

Imports of cement in Nigeria is relatively low and accounted to 1.2mn tonnes in 2014 according to Dangote

estimations ,which is slightly higher than the one imported in 2013 at the amount of 1.1mn tonnes.

Gas shortages which were a result of the inefficient infrastructure represented a serious constrain on cement

manufacturing companies in the country, according to Dangote Cement.



Source:

Government Policy in Nigeria

NIIMP

(2013-2043)

The lack of adequate infrastructure is a major issue for the Nigerian government and a serious constraint for the socio-economic development of thecountry. In order to enhance the infrastructure capacity, a National Integrated Infrastructure Master Plan (NIIMP) was launched. According to thatplan, the federal government will have to spend around USD 3tn on infrastructure development for the period 2013-2043, of which USD 1tn would gofor the energy sector, USD 775bn – for transportation, USD 350bn – for housing ad development, USD 325bn – for ICT and USD 400bn – foragriculture. The plan focuses primarily on energy, transportation, housing, water supply and ICT but also includes agriculture, mining and socialinfrastructure. According to the government estimates around USD 166bn will be spend in the first five years of the programme. The aim of theNIIMP is to synchronise the various sectoral infrastructure development plans that already exist in one consistent document. NIIMP also providesthe priority projects as well as the investment for the first five years. Although the government claims it has a great commitment for the improvementof the Nigerian infrastructure, it cannot cope with that task without the private sector involvement, which is expected to contribute USD 80bn. JaimeRuiz-Cabrero, a partner with the Boston Consulting Group said that Nigeria relies on PPPs to close the infrastructure gap. However, the country firstneeds to successfully complete a few projects in order to lure private money.

Political

issues

The political uncertainty that preceded Nigeria's recent presidential elections and the expenses, associated with theelection campaigning, exerted pressure on government funds, Reuters said in an analysis. Another blow towards thecountry’s economy came from the 50% drop in the prices of oil, of which the country is Africa’s biggest producer, in lessthan a year.

The lack of government funding for infrastructure projects forced major construction companies to lay off a third of theirstaff, reported Reuters.

Reuters also quoted minister of works, Mike Onolememen, as saying that the state has already incurred NGN 230bn worthof debt in the 2011-2014 period and that 177 projects are currently on hold due to insufficient funding.

Slashed

capital

expenditures

The unfavourable oil prices deprived Nigeria of a significant amount of budget revenues, as oil is the country’s biggest

export item and generates 75% of the budget revenues. These development forced the country to undertake measures

such as reducing capital expenditure to NGN 387bn in 2015 (compared to NGN 634bn in 2014), which will have a

devastating effect on previously planned transportation infrastructure projects.

allAfrica, Reuters



Source:

Comments

Infrastructure Development in Nigeria

All kinds of transportation modes in Nigeria are in serious need of improvement. In addition to the problems with transportation, the electricity transmission network is severely

underdeveloped. According to the World Bank data more than half of the Nigerian population still does not have electricity. Insufficient network and poor maintenance are among the main

reasons for the electricity shortages. About 70% of the installed capacity is gas-fired, was stated in a report prepared by Financial Times, which makes the country heavily dependent on

natural recourses. Installed generation capacity is 7,000 MW at the moment while output is just about 3,500 MW to 4,000 MW and recently even lower to 2,200 MW. In order to improve the

electricity supply and attract private investment in the sector the government completed the privatisation programme in the energy sector in 2013 which was the largest power reform in Sub-

Saharan Africa. The government also issued USD 1 bn eurobonds in 2013 and most of that amount was directed to investment in power and gas projects, said the Financial Times report.

The shortage of water supply is the other key issue for the Nigerian government. According to AfDB, only 4% of Nigerians had access to piped water in 2010. Although water sector also

needs lots of investment to be improved, it remains government policy and there is no many opportunities for private initiatives.

Infrastructure indicators for Nigeria

Source: CEIC data, WDI, Financial Times

Product 2007 2008 2009 2010 2011 2012 2013 2014

Air transport, passengers carried 1,363,435 1,460,900 1,365,343 4,197,375 4,793,913 4,716,148 3,752,532 na

Air transport, registered carrier departures

worldwide16,936 18,005 16,851 61,789 68,014 65,632 51,904 na

Container port traffic (TEU: 20 foot equivalent

units)na 72,500 87,000 101,007 106,764 111,035 na na


underdeveloped to 7=well developed and efficient

by international standards)

2.7 2.6 2.8 3.0 3.3 3.6 3.4 3.2

Quality of overall infrastructure (rating 1 to 7) 2.4 2.4 2.4 2.4 3.0 3.2 3.0 2.7

Quality of air transport infrastructure (rating 1 to 7) 4.0 3.9 3.9 4.4 4.2 3.5 3.9 na

Quality of railroad infrastructure (rating 1 to 7) na na 1.4 1.5 1.6 1.9 1.8 na

Quality of roads (rating 1 to 7) 2.2 2.3 2.6 2.4 2.7 2.8 2.7 na



Source:

Transport Infrastructure in Nigeria

Airport

Network

• Nigerian government has the ambitious plan to make the country a flight hub for West Africa. At the same time, the

safety of flights need serious improvement.

• According to AfDB’s report, there are 5 international airports in Nigeria in Lagos, Abuja, Kano, Enugu and Port Harcourt

and 20 domestic airports which are managed by the Federal Airports Authority of Nigeria (FAAN). There are also 62

private airstrips and 34 of them have paved runways.

• At the same time, Enugu Airport which is also known as Akanu Ibiam Airport has serious deficiencies in international

safety and several international airlines refuse to operate in these conditions, was stated in the Nigerian press.

• Recently, more airlines enter the market such as Azman Air, Discovery Air and Air Peace and a new airports was built in

in Jigawa State which was opened in October, 2014.

Road and

Railway

Network

• The country’s road network is just below 200,000km, of which only 65,000km are paved. According to the Nigeria Federal Ministry of Works, totallosses to the country’s economy due to poor roads is estimated at USD 1bn.

• The responsibility for the road network in Nigeria is shared between federal, state and local authorities. Federal roads account for around 18% oftotal network ( 35,000km) and carry about 70% of the traffic. According to Federal Ministry of Works, 90% of the freight and passenger traffic inNigeria is delivered by road which led to highly congested road network in addition to the poor quality of the available roads. As a result, thegovernment started a number of projects related to the improvement of the road infrastructure.

• Currently, Nigeria has about 3,500km of railways. The length of the railway lines is insufficient for the size of the country and it is unevenlydistributed across the territory of Nigeria.

• In November 2014, Nigeria awarded a USD 12bn contract to China Civil Engineering Construction Corp (CCECC) for the construction of1,402km of railways along the coast to connect the country’s most developer region of Lagos with Calabar.

• Railway Transport has a huge potential for development in Nigeria. According to Lazarus Angbazo, CEO of General Electric in Nigeria, the freight movement in the country amount to about 175 million metric tons and less than 1% of them are carried via railway transport at the moment.

Financial Times, Nigeria Masterweb report



Source:

Infrastructure Projects Under Way in Nigeria

Black Border Build, Port Lekki

Project Name Contractor Project cost Project Description Completed

Akanu Ibiam International Airport Terminal CCECC NGN 11.6 bn 28,000 sqm 2015

Port Harcourt International Airport Construction CCECC na 28,000 sqm facility 2015 or 2016

Murtala Mohammed Airport Terminal Construction CCECC na 40,000 sqm extanded

Nnamdi Azikiwe International Airport Terminal CCECC na 40,000 sqm 2016

Asaba Flyover in Ekumeku Roundabout CCC NGN 3.5 bn 120 metres bridge April 2015

Northern Nigeria Road ConstructionFunded by Sure-P(Subsidy Re-

Investment Programme)na

3 roads situated in North Central, North

West and North East of Nigeriana

Southern Nigeria Road Construction Lubrik and Batco

M1 and M10 projects

tohether cost USD 200

mn

M10 Creater Port Carcourt City na

Second Niger Bridge Julius Berger NGN 10 bn Bridge construction March 2018

Second Bypass Road (Oba Adesoji Aderemi Road) Messrs Slava Yeditepe NGN 14.5 bn 18 km highway na

Lekki Deep Seaport in Lagos Tolarom Group 118 USD mn Construction 2015

Abuja-Kaduna Railway CCECC 186.5 km rail project 2015



IV. Main Players



Contact:

Corporate Headquarters

Nestor House

Playhouse Yard

London EC4V 5EX

UK

Voice: +44 207 779 8471

Fax: +44 207 779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

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of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. A Euromoney Institutional Investor company.

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