Africa's transport challenges highlighted in report

14 March 2014

Business Day

Despite South Africa and the rest of Africa's hopes of becoming the next investment frontier, companies still perceived China, western Europe and North America as the best markets for transport investments in the next two to five years, a Norton Rose Fulbright report has shown.

Building and maintaining suitable transport infrastructure is one of Africa's greatest challenges.
It is critical to unlocking mineral wealth deposits, and facilitating greater movement of goods and people on the continent.

Norton Rose Fulbright canvasses views of global companies in aviation, rail and shipping for its "The Way Ahead" transport survey. South African companies are the best represented on the continent.

Its Durban-based director Andrew Robinson said the need for greater investment was critical for growth.

"Without doubt, Africa's greatest challenge in the transport sector is the construction and careful maintenance of suitable infrastructure: roads, rail links, bridges, harbours and airports. Poor infrastructure translates to poor transport efficiencies," he said in the report published last Monday.

Almost one-third of respondents said China remain ed their preferred country for investment, although its popularity had fallen from 43% in 2010. Interest in India fell from 31% in 2010 to just 12%.

Sub-Saharan Africa's popularity was improving, but the region had been unable to garner sustained interest from companies.

Three respondents for every one believed global market conditions were positive for their business.
In Africa, however, this ratio dropped to 2:1, the report showed.

Within Africa, companies were most concerned about regulatory controls and how it might affect investment decisions. Undeveloped regulatory frameworks had severely hampered infrastructure growth in countries such as Uganda.

With new oil and gas finds in Kenya, better developed regulation to govern public-private partnerships and other elements would be critical for new investment. A host of transport infrastructure projects were required to tap and export the country's mineral wealth.

Although continental growth was off a low base, 11 out of the 20 fastest growing economies globally were expected to come from Africa this year, according to the International Monetary Fund.

On Tuesday, executive secretary of the UN Economic Commission for Africa Carlos Lopez said Africa was slowly "shedding its image as the poster child of poverty and destitution to being the new place for investors to be".

The rate of return on inward foreign direct investment in Africa was 9.3% in 2011, higher than any other region in the world, Mr Lopez said. The global average was 7.2%.

Investment to frontier markets could increase as healthier prospects for the global economy emerge.
Four out of five respondents expected passenger numbers and freight volumes to rise. About two-thirds expected fares to increase.

The survey said a lack of suitably qualified people was of concern to 17% of respondents, making it the greatest challenge to the future efficiency of their businesses.

Despite this, only 6% of companies believed that investment in the skills and size of their workforce would be the most beneficial investment for their business or sector.

The ability to recruit suitably skilled employees was a particular source of anxiety for respondents based in the Middle East, with 28% of the view that this would be the greatest challenge to future efficiency of their businesses, followed by 21% based in Asia Pacific and 21% in North America.

Original article by Razina Munshi

Categories: Transport

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