KPMG International’s Infrastructure 100: World Markets Report, highlights key trends driving infrastructure investment around the world. A global panel of industry experts identifies 100 of the world’s most innovative, impactful infrastructure projects showing how governments are coming together with the private sector to overcome funding constraints to finance and build projects that can improve quality of life – both solving immediate needs and planning for future societal demands.
The report looks at infrastructure based on the dynamics of four key markets: Mature International Markets (like Canada, Australia, and UK), Economic Powerhouses (including the US and BRIC countries), Smaller Established Markets (like Chile, Sweden, New Zealand, Korea and South Africa), and Emerging Markets (including a number of economies in Africa). The panel of independent industry experts evaluated over 400 diverse and compelling projects to ultimately select the final 100, based on:
Scale – How does the scale of the project relate to similar developments in its class?
Feasibility – Is the project plan feasible and sustainable?
Complexity – How challenging or complex is it to get stakeholder support?
Innovation – Is there a particular challenge the project overcomes?
Impact on society – Does it improve quality of life or promote economic growth?
With a total estimated value of over US$1.73 trillion, the 100 projects illustrate a range of infrastructure investment, some with a potentially transformative impact that could change the face of nations. Many of the projects are designed to drive economic growth by connecting people and resources to global and local markets (40% of projects featured); others will help provide better access to reliable power and clean water (30% of projects); while others are focused on improving society through things like healthcare and education.
Noteworthy is that eleven of the 100 projects showcased in this report are in Africa, which is up from the six African projects that featured in the previous report – a testament to the rate of development of world class projects on the continent.
De Buys Scott, Head of Infrastructure Advisory: Global Infrastructure Major Projects, says, “The fact that twelve percent of the projects represented in this report are in Africa is a clear indication that the continent is attracting more interest, which is leading to significant and long-term investment and, subsequently more sustainable development – as each of the eleven African projects will play a crucial role in long-term socioeconomic growth on the continent.”
Meeting the funding challenge
However, the Infrastructure 100 also brings to light affordability concerns and the need for governments to make difficult choices about where to spend with funding in short supply. Balancing the aspirations of a nation with the need for true social benefit is not an easy challenge.
“Each country has its own approach to developing and funding infrastructure, yet all share the universal challenge of creating the right conditions to attract investment so desperately needed,” says James Stewart, KPMG’s Chairman of Global Infrastructure. “Private capital continues to play a critical role, but investors need economic and political stability before committing. Consistency and sustainability are the keys, in setting policy, the right regulatory environment and establishing a steady deal flow through project pipelines.”
Scott further adds, “In reality and due to historic underdevelopment on the continent, unfortunately there will always be a funding gap in Africa. The long-term opportunity and the aim, however, should be to shrink the gap and, this will only be achieved through more projects. Demonstrating the world that it is possible to do these major projects on the continent – and having a proven track record of successful projects – is the strongest source of motivation to entice further investment and/or access to funding and, will significantly contribute to closing the gap. This is why collaboration between public and private sector and the funding/investor communities – particularly around joint ventures or public-private-partnership opportunities – is so critical to unlocking the continent’s growth potential.
Attracting private investment
The report illustrates the critical role of private investment in meeting the infrastructure challenge, with different investment dynamics in each market category. For instance, that smaller established markets such as South Africa, tend to favour domestic financing, with international financiers restricted by the lack of major projects, competitive local capital and currency risk. However, the report notes an increasing need for these markets to consider collaborative, cross-border infrastructure projects that deliver regional economic growth and bring the scale of major projects that international investors are seeking.
“The North-South Africa Corridor (in SADC) between Zambia and South Africa is an excellent example of this, as although projects around this Corridor are still being conceptualised and developed, once this Corridor comes into being it will be a major player in facilitating export trade within Southern Africa, in terms of promoting proficient movement of goods and services,” indicates Scott.
On the other hand however, Emerging markets represent a frontier for private finance in infrastructure. Although in some emerging economies a lack of funds, inadequate planning, and unstable political environments have limited the availability of projects that could attract private money.
The other ten African projects that are showcased in this report include:
Khi Solar One (South Africa)
Square Kilometer Array (South Africa)
PRASA Rolling Stock (South Africa)
Kudu Gas Field and CCGT Project (Namibia)
Nigeria High Speed Rail (Nigeria)
Trans-Saharan Natural Gas Project (Nigeria to Algeria)
Mombasa-Kigali Railway (Rwanda)
Jinja Bridge (Uganda)
Jomo Kenyatta International Airport Terminal (Kenya)
Building for the future
The Infrastructure 100: World Markets Report strikes a note of caution over the limited supply of specialist talent that poses a big threat to the momentum of infrastructure development.
Scott indicates that over the past decade or so South Africa – in particular – experienced a huge outflow of crucial skills to other parts of the world and the massive talent shortages have persistently presented significant challenges with getting projects out of the pipeline and on the ground. “However, more recently South Africa has been taking proactive steps to improve this problem, where all current Government infrastructure development projects include significant elements of localisation – amongst others providing training and skills transfer for local partners, the local workforce and along the supply chain. This means that the private sector are contractually committed to ensure these training and up-skilling elements of localisation take place and they do get monitored along the way. This has been a highly positive development for the country as we can now also expect that our local people we be more involved and will continue to remain involved with these projects and less will leave country”
The report also touches on new technology and questions when it will have a meaningful impact on the infrastructure industry in the same way it has transformed other sectors. However, the report also acknowledges the continued ability of the sector to innovate, with trends such as capital recycling and asset management, helping to make better use of budgets and generate vital funds for further investment.
“Ultimately, we see a better world supported by infrastructure projects that are desperately needed, those that are opportunistic, and others that are truly visionary,” said Stewart.
View a complete list of the 100 projects online. – http://www.kpmg.com/ZA/en/IssuesAndInsights/ArticlesPublications/General-Industries-Publications/Documents/infrastructure-100-world-markets-report-v2.pdf