NAIROBI, Kenya, Feb 7 – Cost and time overruns are the major reasons infrastructure projects are abandoned in Kenya.
This is according to a new report by Deloitte East Africa which reports that 48 percent of projects were over budget and 87 percent of projects have a time overrun.
Deloitte Africa Infrastructure & Capital Projects Leader Jean-Pierre Labuschagne noted that the project overruns in Kenya were due to procurement delays – either upfront or during the construction period which results in significant cost escalations.
The Deloitte Construction 2017 report finds that where projects are contracted irregularly, procurement challenges can be a major factor leading to project delays and cost overruns.
“Approximately only 20 percent of projects (from inception) in Africa reach financial closure and are able to move to execution,” he added.
Labuschagne says governments have a major role to play through project management, oversight, use of independent engineers, cost and delivery assurance as well as the use of technology to monitor delivery of projects.
However, despite the hurdles, the number of projects in Africa increased by 5.9 percent in 2017 to 303, with the Southern Africa region contributing the lion’s share with 93 projects.
East Africa registered the highest jump in the number of projects in 2017, defying a general downward trend across most African economies.
East Africa, which includes Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, Tanzania and Uganda had 71 projects, a 65 percent jump.
Southern Africa had a 9 percent growth while North, Central and West Africa declined by 48 percent, 17 percent and 14 percent respectively.
East Africa projects represented 23.4 percent of the total projects in the continent with the transport sector attracting the highest number of investor interest, accounting for 52 percent of the total projects in the region, while 27 Road & Bridge projects are currently underway.
Energy and Power followed at 23 percent.
Kenya had 23 projects followed by Ethiopia at 20, but projects in Ethiopia had almost twice that of the value of projects in Kenya, signaling higher value projects in Ethiopia.
“East Africa continues to stand out; both as a growth region and as one focused on creating a more conducive environment through infrastructure investment – enabling investment and business. Investment in infrastructure tends to increase business confidence and lowers transaction costs, making it easier for companies to move people and goods, and to provide services. Governments that invest in enabling infrastructure are seen as more proactive and tend to attract more investors, ultimately making them more likely to achieve economic and export diversification objectives,” he added.
The report also says governments remain the single largest developers of infrastructure projects owning between 57 percent and 90 percent of tracked projects per region.
China is the most prolific funder of large-scale construction projects in East Africa, financing one in four projects in the region.
“International Development Finance Institutions (DFIs) followed at 19.7 percent, overtaking African DFIs, which fund 16.9 percent of projects. China is also the most visible builder, now constructing over half of all projects in East Africa,” the report states.