Infrastructure investments set to rise in 2014

Part one looked at the investment bonanza predicted for 2014. Here Sherelle Jacobs continues the report and looks into Africa’s major infrastructure investments, which are set to rise.

Investment in major infrastructure projects is a further trend to look out for with respect to Africa in 2014. Some of the most important works are to take place in Kenya. For example, the Mombasa-Kigali railway is a mega-project which is set to develop over the course of 2014. The line will snake through Kampala, Lake Victoria and end in Rwanda. With work commencing at the end of 2013,construction will be ongoing until its scheduled completion around March 2018. Overall, the project will cost $13.5bn. 

Another important mega project which will get under way in Kenya is a new financial district southeast of Nairobi, Konza City, which is also being referred to as the future “African Silicon Savannah”. The area is set to comprise not just a business district but also housing areas, parks and a university and should mean 100,000 new jobs. The majority of the financing for the project is through land leases to private firms. According to the Konza City website, “the government proposes to lease land to prospective private investors who will build and operate industries in either of the identified areas of investment.”

“Konza Techno City will be a sustainable, world-class technology hub and a major economic driver for the nation with a vibrant mix of businesses, workers, residents, and urban amenities,” according to the site.

Meanwhile, major infrastructure projects in the pipeline in Nigeria include improvement plans for the nation’s airports. China is providing Nigeria with $1.1bn in low-interest loans which is partly being used to finance the construction of new airport terminals in Lagos, Abuja, Kano and Port Harcourt. The projects in Lagos and Port Harcourt should be finished by the end of 2014. The airport projects in Abuja and Kano should be finished by 2015.

Dam projects are also going to be a trend in 2014. For example, China is supporting the financing of an expansion project for the Kariba dam in Zimbabwe. It is hoped that the project will increase Zimbabwe’s energy capacity by 300MW and will, thus, help to plug Zimbabwe’s 1000MW electricity shortfall.

Infrastructure bonds will be an important source of funding for infrastructure projects due to limited financing from banks and private firms. According to Michael Kimondo, Head of treasury operations at Fusion Group in the Frontier Market Network report, “Going forward there is tremendous scope to develop the infrastructure bond market and Africa could take cues from the experience of other emerging countries like Malaysia and Chile where the governments created an investor friendly environment by ensuring political stability, low inflation and capital markets reforms.”

Finally, there are a number of new major listings set to grace African stock exchanges over the course of 2014, which could be of interest to investors eyeing Africa’s capital markets.

For example, there are reports that the Algerian mobile company Ooredoo Algeria intends to list on the Algiers Stock exchange this year. The business conglomerate Dangote Group is also set to list on the London Stock Exchange this year. Although the listing was initially scheduled for 2013, it was postponed to this year. The flotation is likely to attract much interest this year as Dangote is currently going from strength to strength. The firm is continuing to grow, and an improved cement capacity of 50Mta should come onstream by 2015. The firm’s production base should thus increase to include 14 other countries apart from Nigeria. 

In sum then, 2014 should be an exciting year on the investment front in Africa. Interest in natural resources and infrastructure projects in particular will be robust. Other trends to look out for are increased investment originating from private equity and venture capital and particularly fierce focus on Africa’s natural resources on the part of Asian investors. China is also going to be a major investor in several mega infrastructure projects.