Africa’s Upsurge

15 Min Read

y makes its way into the big league of Nations with the highest economic growth potential. Infact according to information released by Price WaterhouseCoopers (PwC) and based on GDP estimates, weighted according to Purchasing Power Parity (PPP) , countries such as South Africa, Nigeria and Egypt will be in the top 32 of world’s most important Economies by 2050.

Most of the major countries in Africa gained independence in the 1950s and 1960s. Others like the Republic of South Africa got independence from the white minority rule as late as 1994 and are yet to find their bearing in order to make any significant progress. Politics (poor governance), corruption, education, health and tribalism have been known to be some of the main causes of Africa’s economic stagnation, but with more and more Africans gaining access to higher education, better health facilities, and growth of democracy, Africa is finally getting ready to take its place on the world stage.

Turbines at the Turkana Wind Farm in Marsabit County on 28th March 2017. With 365 turbines distributed over 40,000 acres, the Kshs70 billion wind farm is set to produce 310MW or reliable, low cost wind power to Kenya’s national grid.

Africa is endowed with alot of natural resources that for a long time has been exploited by the western world while its inhabitants wallowed in poverty. These include Bauxite from Guinea which is the world’s fifth largest producer after Australia, China , Brazil and india, Uranium from Namibia, Niger and South Africa with Namibia and Niger ranking fourth and fifth place respectively in the world production. Gold, with South Africa’s Witwatersrand Basin holding the world’s biggest gold reserve. Gas, which is mainly found in South africa, Mozambique, North African countries such as Egypt, Libya Algeria and in Nigeria. Infact, Africa accounted for 60% the world’s gas discovered in 2013. Other resources include Diamond where Africa accounts for about half of the world’s produce and is mainly found in South Africa, Angola, Botswana, Namibia and the Democratic Republic of Congo. Oil mainly from Nigeria , Libya, Algeria, Egypt and Angola and many others African countries including Kenya where  extraction is yet to begin.

There are many international companies such Tullow oil that are making in -roads to invest in building the necessary infrastructure in preparation for the take addtion, countries like China foron are also investing huge amounts of money in building infrastructure mainly roads, railways and Airports across African, some of them big enough to cover entire regions such as East Africa where they are currently putting up the famous $4 Billion SGR Standard Gauge Rail, 90% of which is funded by China. The SGR has so far been partly completed between Mombasa and Nairobi and is expected to extend to Kampala, Uganda and eventually to Rwanda knitting together swaths of the east African Community’s emerging trade bloc.

These infrastucture once ready will sporadically propell economic development in the continent making Africa the next best frontier for potential investors after Asia. Infact the European Union is making strides in cementing the relationship with some of its existing African partners such as South Africa, Nigeria, Ethiopia and Kenya among others and even inviting them to sit at the negotiating table as was evidenced in the G7 meeting held on the 28th may 2017 in Sicily Italy. “Perhaps the choice to be in Taormina and Sicily says much about how important our relations are with Africa,” Italian Prime Minister Paolo Gentiloni said in his opening remarks.“Today our discussion on Africa will focus on the need for a partnership across all sectors with innovation and development our core objective,” he added.

If the projections by PwC are anything to go by, then South Africa Nigeria And Egypt will be shifting their positions to become some of the worlds strongest Economies with most Western Economies either falling behind or making insignificant progress. PwC Put Nigeria at position 14 from its current position at number 2. Egypt is expectect rise to position 15 from its current position at number 21 with an estimated annual population growth of 1.4% and finally South Africa which is expected to rise to position 27 from its current position 29 with it’s population expected to grow by 0.5% per year by 2050.

The report suggests that most western economies are likely to slow down mainly because of unfavourable demographics as in the case of Italy and Germany which are estimated to move drastically from thier current position 5 to position 9 for Germany and position 12 to position 21 for Italy . The USA will be replaceds by India from position 2 to position 3 even though it will still keep it’s place as one of the largest and most important world Economic powers.

When this happens, eyes will turn to African, with Africans themselves opting to look for opportunies closer to home within the contentinent thereby changing the current trend that is robbing Africa of its finest skilled labour which will be in high demand in order to facilitate the expected growth. Most skilled labour from the western countries with the relevant experties may also end up looking to Africa for well paid jobs.

An SGR train at the Mtito Andei Station on 13th April 2017. The Mombasa – Nairobi Standard Gauge Railway was developed by the Kenya Railways Corporation at a cost of $3.8 billion. 90 % of the financing came from the China Exim Bank and 10% from the Kenyan Government.

Some of the Key Infrastructural Projects in Africa include:

Transport costs are 100 per cent higher in Africa compared to other continents. Only a third of the population have access to electricity—in rich countries this rises to between 70-90 per cent. Just 6% have access to the internet, compared to 40 per cent in other developing nations. Despite its rich water resources food security is a constant thorn in the flesh, but only 5 per cent of agriculture is under irrigation.

Such infrastructure gaps continue to weigh down the continent, reducing the dividend from its brisk growth of the last two decades. But some countries—and mega investors too—are making huge progress in reducing the size of the deficit.

It is for this reason that a number of big infrastructural projects have been initiated and built in Africa by International economic and trade partners. They vary from, railway lines, power projects, water dams to roads. This paper will highlight just a few, both complete and ongoing.

The Grand Ethiopian Renaissance Dam : The Ethiopian government is currently constructing the Grand Ethiopian Renaissance Dam (GERD). Once complete, GERD will be the largest hydropower facility in Africa. It will add about 6 000 Mega Watts to the national grid. This is nearly triple the country’s current electricity generation capacity – and represent a potential economic windfall for the government.

Ethiopia has not succeeded in getting international/outside financing for the project, in part due to its lack of competitive bidding for the project’s construction contract. The project therefore is 100 per cent sponsored by the Ethiopian government. It says it will sell dam bonds directly to the citizens to realise this.

Most public workers in Ethiopia earn relatively low wages and face a significantly high cost of living.  Hence, they are not likely to be able to sacrifice that much of their salaries to invest in this national project.  Nevertheless, many of them have been observed purchasing the GERD bonds, primarily because of pressure from the government and the belief that participation in this national project is a show of one’s patriotism.

The Trans-Kalahari Railway: Namibia and Botswana took the first steps in 2015 to establish a multi-billion dollar railway project to link Botswana’s rich coal fields to the Namibian coast. The project, which is still ongoing, is meant to be developed by the private sector in the two countries. Private companies will have to gather capital for the project and not the two governments.

Although several media reports from Botswana have said that the government may have changed its mind about supporting the project, it is said the project is more beneficial to Botswana’s coal exports through Namibia.

Financing: Botswana and Namibia have already signed a bilateral agreement for plans to develop the 1 500-kilometre railway for transporting coal exports to Walvis Bay that will cost US $15 billion. Once the two countries resolve outstanding issues, this will make way for funding initiatives and tenders. In addition, China and India’s demand for the more than 200 billion metric tonnes of coal in Botswana’s central Karoo basin could boost economic growth in the landlocked southern African nation.

Lake Turkana Wind Power Project : Kenya with 11 eleven projects, has the greatest number of large infrastructure projects in East Africa equivalent to 26 per cent of the total. Lake Turkana Wind power project, a renewable energy project is one of them. It aims to provide 300MW of reliable, low cost wind energy to Kenya’s national grid, equivalent to over 20 per cent of the current installed electricity generating capacity. The wind farm site is located in northern Kenya, approximately 50km from the Capital, Nairobi. The Project will comprise a wind farm, associated overhead electric grid collection system and a high voltage switchyard. The Project also includes rehabilitation of an existing road which covers a distance of approximately 200km.

Financing: The total project cost is estimated at US$680 million and includes the cost of the envisaged 400 km transmission line from Lake Turkana to a sub-station near the capital Nairobi, as well as the cost of upgrading 200 km of roads and various bridges. The project will be financed through equity debt (25 per cent), mezzanine debt (5 per cent) and senior debt (70 per cent). As the mandated lead arranger and senior co-lender, Africa Development Bank (AfDB) will provide a long-term senior loan of USD 150 million.

Coastal Railway – Nigeria: This is the largest ever contract awarded to a Chinese company in Africa. The project is worth $12 billion. The deal was signed between the Federal Republic of Nigeria and China Railway Construction Corp (CRCC) in 2014. The railway is 1,402 km in length and upon completion (final phase ongoing), it will link Lagos, the nation’s economic capital, with the eastern city of Calabar, passing through 10 states. It will also link cities with the oil rich state of Niger Delta.In the last 20 years, Chinese companies have built and upgraded around 4500km of railway in Nigeria.

Bagamoyo Port – Tanzania: The project is worth $7 billion. It is funded by China Merchants Holdings International and State Government Reserve Fund of the Oman government. The port is being built in Bagamoyo, a coastal town in Tanzania. Upon completion, it will be able to handle about 20 million containers annually and will be the largest port on the East African coastline, bigger than the Port of Mombasa in Kenya.  Its construction started in October, 2015, but was halted earlier 2017 due to financial constraint facing the Tanzanian government.

Grand Inga lll Hydropower Project Dam, DRC: This is one of the projects that redefine the meaning of a ‘mega project’ in Africa. It can potentially power 40 per cent of the continent. When completed, this dam will be the largest of its kind, with double the capacity of the Three Gorges dam of China (the current largest in the world). The ongoing project is estimated to the tune of US$100 billion from the World Bank.Once Inga III is completed, the DRC will then begin building the Grand Inga Dam which is expected to be completed by 2025.