East Africa Infrastructure Report Q3 2012
Business Monitor International, June 2012, Pages: 77
The East Africa Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on East Africa's infrastructure industry.
Kenya BMI View: Despite strong growth indicators, Kenya's infrastructure sector still faces significant obstacles in 2012. Improving domestic economic conditions are forecast to send inflation lower over the course of the year thanks to tight monetary policy, but the rising cost of building materials and bank loans is set to impede demand for new developments. The industry nonetheless looks relatively robust,
thanks to a year-on-year real growth forecast of 8.3%, bringing construction industry value to US$1.9bn for 2012.
Key developments in the sector include:
- Chinese oil and gas company Sinopec International Petroleum Company has been awarded a US$140mn contract to install steam pipelines and control systems at two Kenyan geothermal power plants. The pipelines will transport steam from geothermal wells to Kenyan power company KenGen's Olkaria I and Olkaria IV facilities in the Rift Valley. The power plants will be fully operational by mid-2014.
- The International Finance Corporation (IFC) announced plans to make a maximum investment of US$3.5bn in Sub-Saharan Africa in 2012, primarily in the infrastructure sector. IFC has planned to direct up to US$600mn towards four projects, including the Kenya-Uganda railway and three power projects in Kenya. US$100mn is expected to be disbursed as a loan to Kenya's Equity Bank in order to increase lending to small- and medium-sized enterprises.
- The African Development Bank has announced that it will provide a US$186.7mn loan to Kenya for the construction of the Turbi-Moyale section of the Mombasa-Nairobi-Addis Ababa Road Corridor Project, reports roadtraffic-technology.com. The loan will finance the final phase of the project, which involves the construction of a 320km bitumen road, including the 122km Turbi-
Moyale section in Kenya.
Kenya faces many obstacles in its quest to become a mature post-ethnic democracy, with the country seeing a proliferation of violence following the disputed election of 2007. Kenya's High Court has ruled that elections will take place in March 2013 instead of August 2012, unless the coalition government collapses before then. Domestic developments in the run up to the 2013 elections will continue to dominate the agenda at the expense of regional and international issues, and will be fundamental to setting the country's future direction.
Although the Kenyan economy faces a great deal of uncertainty in 2012, we forecast that growth will come in at 4.9% - higher than the 4.1% growth estimated for 2011. Improving domestic economic conditions and the robustness of regional trade partners underpin this expectation. The most salient threat to our outlook comes from the weather, although elections and a worse-than-expected fallout from the eurozone debt crisis also present risks.
Sudan And South Sudan BMI View: Sudan’s economy faces a tough year in 2012 and this will impact the country’s construction industry. Poor governance and taxation, combined with disruption to oil output, will hinder the development of projects. As a result, BMI expects construction industry value to stand at US$3.7bn for 2012, with a year-on-year (y-o-y) contraction of 19.5%. However, the sector will recover over the forecast period, rising to US$8.8bn by 2021.
Key developments in the sector include:
- The Ethiopian and Kenyan governments have signed an agreement for the construction of a standard gauge railway line between Lamu Port and Addis Ababa. A road is also expected to be constructed between the port and Isiolo in Kenya. The Lamu Port-South Sudan-Ethiopia
(LAPSSET) project aims to help facilitate trade in the region.
- Three African heads of state attended the ground-breaking ceremony for the Lamu Port-South Sudan-Ethiopia-Transport and Economic Development Corridor (LAPSSET) project in Lamu on March 2 2012. The LAPSSET project includes the construction of a 1,710km railway line, an 880km highway and a 2,240km oil pipeline. It aims to improve transportation for both people and products between the three countries.
- Government officials of South Sudan and Kenya signed a deal for the construction of a pipeline to link South Sudan's oil fields with the Kenyan port of Lamu, the Kenyan government revealed in a statement on January 24 2012. South Sudan is to construct and own the pipeline, which is to be established through the Kenyan territory, with the two nations to discuss and agree on transit charges. Through the pipeline, South Sudan is seeking to end its dependence of exporting oil through Sudan.
A cabinet reshuffle and the killing of an influential rebel leader in an air strike are being cited by the government as evidence that it is broadening its base and winning the battle against insurgents. However,
its popularity remains limited and armed opposition is at its strongest for years.
Tensions with Kenya and the rejection of an EAC membership bid are leaving Sudan's government increasingly isolated in the region diplomatically, while a comprehensive post-secession settlement with South Sudan appears increasingly far off.
Tanzania BMI View: Tanzania’s infrastructure sector continues to perform, buoyed by impressive investment in new ports, railways and power infrastructure. Disinflation in Tanzania over the course of 2012 is also set to boost economic indicators; however, higher oil prices and an electricity tariff hikes mean that the rate of decline will be slower than we had previously expected..The largest impediments to project growth remain the extensive regulatory risks and associated costs. Nonetheless, we forecast the construction and infrastructure industry value to stand at US$2.2bn in 2012, representing year-on-year growth of 10.4%
Key developments include:
- The European Investment Bank (EIB) has announced that it will invest EUR50mn
(US$65.92mn) in the expansion of Tanzanian airports, reports airport-technology.com. The finance will be used to modernise the airports at Bukoba, Kigoma, Shinyanga, Sumbawanga and Tabora. The modernisation programme is intended to ensure that the airports meet international safety standards, as well as helping to meet a projected increase in passenger demand. The programme is jointly financed by the World Bank and is due to be completed by mid-2014.
- State-run Tanzania Electric Supply Company (TANESCO) reached a deal to acquire a gasfired power plant and associated assets in Mtwara from Wentworth Resources'
subsidiary Wentworth Power Limited. The company is paying US$13.5mn in cash for a 100%
stake in the 18MW plant and the assets. The plant, which receives gas from Wentworth's Mnazi Bay Concession area, already sells its power to TANESCO in the Mtwara and Lindi regions of Southern Tanzania.
- The Tanzanian Ports Authority (TPA) is to increase its capacity by expanding two ports, at a cost of US$1.523bn, reports sandandgravel.com. The TPA plans to extend its operations into new markets in South Sudan and landlocked countries such as Uganda, DR Congo and Zambia.
US$1.123bn has been earmarked for the expansion of the facilities at Mwambani and Dar es Salaam ports, while a further US$400mn will be provided by the Chinese government for the dredging and construction of two new berths at the latter facility. The two ports will have the capacity to handle 1mn 20ft units a year by end-2013.
Tanzania's constitution-making process continues to be a volatile affair, and we maintain our view that this is an illustration of the transforming political landscape. We believe Tanzania will continue to enjoy broad political stability over our forecast period, with little to suggest that the ruling Chama Cha Mapinduzi party's authority will be threatened. That is not to say that the 2012-21 period will be without challenges, the most prominent of which will be the high levels of corruption and country's dependence on foreign aid.
We believe that real GDP growth in Tanzania will slow to 5.5% in 2012, down from an estimated 6.2% in 2011, as high inflation and weakness in the tourism sector weigh on the country. We believe that investment will be a bright spot as Chinese-funded infrastructure projects get under way, and that Tanzania's resilient consumer will once again hold up relatively well. The major risk to the economy comes from the weather, as poor rains would render our forecasts overly optimistic.
BMI Industry View 5
Kenya 5
Sudan And South Sudan 6
Tanzania 7
SWOT Analysis 9
Kenya Infrastructure Industry SWOT 9
Sudan and South Sudan Infrastructure Industry SWOT 10
Tanzania Infrastructure Industry SWOT 11
Market Overview 12
East Africa Competitive Landscape 12
Table: Number Of International Contractors In East Africa 12
Building Materials 15
Global Overview 15
Regional Overview 18
Cement Forecasts 22
Kenya 22
Table: Kenya Cement Production and Consumption Data, 2009 - 2016 22
Table: Kenya Cement Production and Consumption Long Term Forecasts, 2014 - 2021 23
Industry Forecast Scenario 24
Kenya 24
Table: Kenya Construction And Infrastructure Industry Data, 2008 - 2016 24
Table: Kenya Construction And Infrastructure Industry Long Term Forecasts, 2013 - 2021 24
Construction And Infrastructure Forecast Scenario 25
Sudan And South Sudan 29
Table: Sudan Construction And Infrastructure Industry Data, 2008 - 2016 29
Table: Sudan Construction And Infrastructure Industry Long Term Forecasts, 2013 - 2021 29
Construction And Infrastructure Forecast Scenario 30
Tanzania 32
Table: Tanzania Construction And Infrastructure Industry Data, 2008 - 2016 32
Table: Tanzania Construction And Infrastructure Industry Long Term Forecasts, 2013 - 2021 33
Construction And Infrastructure Forecast Scenario 33
Transport Infrastructure 35
Regional Transport Infrastructure Outlook and Overview 35
Major Projects Table – Transport 37
Kenya 37
Table: Major Projects - Transport 37
Sudan And South Sudan 40
Table: Major Projects - Transport 40
Tanzania 40
Table: Major Projects - Transport 40
Energy and Utilities Infrastructure 42
Regional Energy And Utilities Infrastructure Overview 42
Major Projects Table - Energy And Utilities 46
Kenya 46
Table: Major Projects - Energy And Utilities 46
Sudan And South Sudan 48
Table: Major Projects - Energy And Utilities 48
Tanzania 48
Table: Major Projects - Energy And Utilities 48
Residential And Non-Residential Construction And Social Infrastructure 50
Regional Residential/Non-Residential Building Outlook and Overview 50
Major Projects Table – Residential/Non-Residential Construction and Social Infrastructure 54
Kenya 54
Table: Major Projects - Residential/Non-Residential Construction and Social Infrastructure 54
Tanzania 55
Table: Major Projects - Residential And Non-Residential Construction And Social Infrastructure 55
Risk/Reward Ratings 56
Regional Overview 56
Table: Regional Infrastructure Risk/Reward Ratings 57
Kenya’s Risk/Reward Ratings 59
Sudan and South Sudan’s Risk/Reward Ratings 61
Tanzania’s Risk/Reward Ratings 62
Global Overview 64
Methodology 71
Industry Forecasts 71
Construction Industry 72
Data Methodology 72
New Infrastructure Data Sub-sectors 72
Construction 73
Capital Investment 74
Construction Sector Employment 75
Infrastructure Risk/Reward Ratings 75
Table: Infrastructure Business Environment Indicators 76
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