Infrastructure spending to more than double to $9 trillion annually by 2025
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Thursday, August 7, 2014
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danielmjema.blogspot.com
PRESS RELEASE
- Nigeria and South Africa dominate the infrastructure market, but other countries like Ethiopia, Ghana, Kenya, Mozambique, and Tanzania are also poised for growth
- A substantial increase in spending in the basic manufacturing sector is expected in sub-Saharan Africa
- Transportation
investment is expected to grow rapidly in South Africa over the coming
decade, in particular in the road and rail subsectors
- Extraction spending in sub-Saharan Africa is projected to increase at 8% annually over the next decade
JOHANNESBURG, South-Africa, August 7, 2014/ -- Global
capital project and infrastructure spending is expected to grow to more
than $9 trillion annually by 2025, up from $4 trillion in 2012,
according to a new report issued by PwC (http://www.pwc.com), ‘Capital project and infrastructure spending: Outlook to 2025’.
Photo: http://www.photos.apo-opa.com/
The
report, for which Oxfords Economics provided research support, analyses
infrastructure spending across 49 of the world’s largest economies
which account for 90 percent of global economic output. It covers five
industry sectors - extraction, utilities, manufacturing, transport and
social – and forecasts their impact on seven major world economic
regions ((Western Europe, Latin America, Asia-Pacific, Middle East,
sub-Saharan Africa, Former Soviet Union and Central and Eastern
Europe). It estimates the scale of current infrastructure investment
and assesses the prospects for future investment from now to 2025.
Overall, close to $78 trillion is expected to be spent globally between
now and 2025 on capital projects and infrastructure.
The
report finds that during 2011-12, the global infrastructure market
rebounded from the global financial crisis, and will continue to grow
between 6-7% yearly to 2025.
The
report shows that that the recovery will be geographically uneven, led
mainly by Asia, as spending overall shifts from West to East. The
Asia-Pacific market will represent nearly 60 percent of all global
infrastructure spending by 2025, driven mainly by China’s growth.
Western Europe’s share will shrink to less than 10 percent from twice as
much just a few years ago.
Long
term underlying trends in demographics, technology, natural resources,
urbanisation and shifting economic power will continue to have an
enormous effect on which areas of spending will grow. These paradigm
shifts, together with a return to global growth are projected to drive
significant spend for infrastructure worldwide for decades to come.
Jonathan
Cawood, PwC Head of Capital Projects and Infrastructure for Africa,
says: “Emerging markets, especially China and other countries in Asia,
without the burden of recovering from a financial crisis, will see much
faster growth in infrastructure spending.
The
pace of urbanisation is also on the increase, with the biggest shift in
urbanised populations likely in China, India, Ghana, Nigeria, and the
Philippines. Urbanisation drives the demand for water, power,
transportation and technology infrastructure.
“Megacities
in both emerging and developed markets- reflecting shifting economic
and demographic trends – will create enormous need for new
infrastructure. These shifts will leave a lasting, fundamental imprint
on infrastructure development for decades to come.
“As
economies develop, the types of infrastructure investment needed
evolve, but not every country makes infrastructure spending a priority.
If you don’t invest when your economy is growing, you may find yourself
very quickly at a point where your runways and roads and ports and rail
lines are choked.”
Overall
infrastructure spending in the sub-Saharan region is projected to grow
by 10% a year over the next decade – exceeding $180 billion by 2025 –
while maintaining its 2% share of the global infrastructure market.
Nigeria and South Africa dominate the infrastructure market, but other
countries like Ethiopia, Ghana, Kenya, Mozambique, and Tanzania are also
poised for growth. Growth prospects in most of the region’s economies
look promising as they were not affected as much by the global financial
crisis of 2008.
A
substantial increase in spending in the basic manufacturing sector is
expected in sub-Saharan Africa. Annual spending in the chemical, metals
and fuels sector is forecasted to increase across the seven major
African economies to $16 billion, up from about $6 billion in 2012.
The
financial crisis of 2008 has not had a major effect on South Africa’s
infrastructure spending. From an estimated $7 billion in 2001,
investment in infrastructure grew relatively consistently to reach $22
billion by 2012.
Transportation
investment is also expected to grow rapidly in South Africa over the
coming decade, in particular in the road and rail subsectors.
Transportation investment will likely grow to just short of $9 billion
by 2025.
Infrastructure
spending overall is forecasted to reach around $60 billion by 2025 for
South Africa, having grown by 10% on average a year. However, South
Africa is likely to lose share of regional spending relative to Nigeria.
Nigeria’s better fiscal position and oil revenues will likely enable it
to outperform South Africa over the coming decade, says the report.
Overall
infrastructure spending in Nigeria is expected to grow from $23 billion
in 2013 to $77 billion in 2025. A more investor-friendly environment
towards oil investment is also likely to boost this projection further.
In
contrast to Asia-Pacific’s success, investment in western economies has
been constrained by the legacy of banking crises, fiscal austerity and a
shallow economic recovery. CP&I spend is shifting to the emerging
economies, particularly Asia. Asia’s share of global CP&I spend is
projected to increase from 28% in 2012 to 39% in 2018 and 47% by 2025.
The
report also shows that spending on utility infrastructure is expected
to be significantly stronger in countries that need to upgrade deficient
energy, water, and sanitation services and in economies that are
rapidly urbanising, such as China, Ghana and Nigeria. The greatest
growth of spending for utilities is expected in sub-Saharan Africa where
an annual rate of 10.4% between now and 2025 is forecasted. Spending
for electricity production and distribution is expected to rise from $15
billion in 2012 to $55 billion, while expenditures for improvements in
water and sanitation services are forecasted to increase from $3.3
billion in 2012 to about $10 billion by 2025.
According
to the report the extraction sector, driven by both oil and gas as well
as non-oil and gas industries, will grow at an annual rate of 5%. Oil
and gas extraction activity and infrastructure spending are expected to
vary across countries and regions. Extraction spending in sub-Saharan
Africa is projected to increase at 8% annually over the next decade. The
bulk of spending is likely to take place in South Africa and Tanzania.
Demographic
shifts will play a major role in determining the type of social
infrastructure a country requires. Aging populations, especially in
Eastern Europe and Japan, will necessitate more healthcare facilities,
while emerging markets are projected to increase investments in both
healthcare, as well as education for their young people. The report
shows that the annual growth rate for social infrastructure spending is
expected to be particularly strong – about 12% in sub-Saharan African
where both schools and healthcare facilities will be in high demand.
In
addition, climate-related disasters are driving growth in preventative
infrastructure spend and in post disaster recovery. Climate change is
also spurring investments in water resources, renewable energy and clean
technologies.
Cawood
adds: “Resources and consumer market potential coupled with trade,
economic and political reforms, increasing urbanisation and shifts in
demographics will drive the majority of investment in Africa. It is
crucial for policymakers, citizens and businesses to understand the
factors that unlock infrastructure investment and development and to act
responsibly and strategically within a long term vision to create the
right conditions for success.”
Habari Zingine
Mjulishe Mwenzako
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