Weak regulatory and governance frameworks affecting capital projects in Africa

Lack of effective regulatory frameworks will lead to only seven out of 20 mega projects in Africa being completed, a report by Deloitte Africa Construction Trends report 2017 notes.

According to the Report, project overruns were mainly due to weak regulatory and institutional governance framework, stating that nine out of 10 megaprojects valued at US$ 1 billion were over budgeted or delayed.

Government owned projects had an 83.3 percent delay and approximately 48 percent of the projects were over budgeted and 87 percent have a time overrun.

Addressing stakeholders in Nairobi on Tuesday, Deloitte Africa Infrastructure and Capital Projects in-Charge, Jean � Pierre Labuschagne, noted that the project cost and time overruns were due to procurement delays and challenges.

The number of major capital projects that are either over budgeted, late or both, is alarming. Approximately only 20 percent of projects in Africa reach financial closure and are able to move to execution, said Jean � Pierre.

He urged the government to play a major role through project management, oversight, use of independent engineers, cost and delivery assurance as well as use of technology to monitor delivery of projects.

Governments that invest in enabling infrastructure are seen as more proactive and tend to attract more investors thus making them more likely to achieve economic and export diversification objectives, he added.

The report also states that the number of projects in Africa has increased by 5.9 percent with the Southern Africa region having a nine percent growth with 93 projects and East Africa registering a 65 percent jump with 71 projects while North, Central and West Africa declined with 48, 17 and 14 percent respectively.

East Africa continues to stand out both as a growth region and is focused on creating a more conducive environment through infrastructure investment. This investment increases business confidence and lowers transaction cost making it easier for companies to provide services, said Jean � Pierre.

The Report further states that the government owns between 57 and 90 percent of tracked projects per region while China is the most prolific funder of large scale construction projects in East Africa, financing one in four projects across the region.

Source: Kenya News Agency