Lack of infrastructure hampers trade with Africa

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"A strong infrastructure reduces the costs and improves the ease of doing business and is also the key to long-term industrial competitiveness in global markets. This fact is pointed out in studies, such as those conducted by the Infrastructure Consortium of Africa," says Irina Unkovski, Deloitte Capital Projects Advisory Lead and author of a Deloitte report, 'Infrastructure asset lifecycle: Operational risk mitigation from project inception'.

Access is difficult

"It is a lack of infrastructure, poorly maintained and obsolete assets on the continent that are the causes of low levels of intra-African trade and trade with other regions. The continent may be home to 12% of the world's population, but only generates 1% of the global GDP and only 2% of the world trade. The world is eager to do business with Africa, but finds its markets difficult to access due to poor infrastructure. The demand for modern, well-maintained, key infrastructure is therefore a continent wide priority," notes Unkovski in the report.

The infrastructural challenges facing the continent currently and preventing long-term prosperity are the required US$30bn for the maintenance of present facilities, the shortfall in the number of infrastructure projects being undertaken and the future funding demands for infrastructural developments.

"The annually required spend on infrastructure is about US$90bn. Of this, US$60bn needs to be spent on new infrastructure and US$30bn is required to be spent on the maintenance and rehabilitation of existing dilapidated assets. Although required spend is US$90bn, only about half this amount is being spent on new infrastructure projects and maintenance," adds Unkovski.

Funds are available

Effective project management and allocation of budgets for new projects, as well as maintenance of existing projects, is an important factor in ensuring the viability of infrastructure development. Although budget is available for the maintenance of vital national assets, in many cases, including South Africa, these funds were often not used optimally.

The average annual maintenance budget characteristically varies from between 4% and 8% in the case of bulk water storage projects, to between 10% to 15% for electricity reticulation projects. Replacement, or major rehabilitation, is then required on water storage projects every 30 to 50 years and on electrical reticulation systems every 20 to 30 years.

"Effective maintenance will effectively influence these long-term projects by adding several operational years to their effective lifespans. Costs can also be effectively controlled, and the operational risks associated with the major projects mitigated, if addressed at the outset of an infrastructure project," says Unkovski.

Focus on business strategy

Improving the situation on the continent requires that all facets of a development are considered during the early phase of planning. Planning, financing and execution of the project needs to be attended to with focus on additional facets such as the business strategy, identifying business objectives, doing market analysis and a feasibility analysis.

Mitigation measures must be built into the design and development of an infrastructure asset. Benefits will then range from having a project that is completed on budget and in time. In the long-term, benefits include effective maintenance and optimising the efficiency of the asset and even prolonging its life.

"The advantage of properly considered and integrated project management is that infrastructure assets are properly planned, constructed and maintained. These are all requirements if Africa is to meet its current backlog and build for the future," concludes Unkovski.