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INDUSTRY REVIEWCIVIL ENGINEERING


investing in offshore wind projects and this results in civil infrastructure works as well, such as bridges, port infrastructure, and quay facilities – these are always linked and connected.” Ole Schmidt, vice president, projects at


DSV, agreed the global market for infrastructure has been stable since the 2007-8 financial crisis. However, he singled out Africa as a standout market for increased activity. “Africa is growing very fast at the


moment, although this is from a rather low level,” said Schmidt. “Many countries in Africa are growing by 4-8 percent annually – high numbers compared with what we see in Europe, for instance.” He added that while there is “huge


demand” for new projects across the continent, financial constraints play a big role in whether a project breaks ground. “With 54 countries in Africa, you have to look at each individually as each has its own merits.”


African needs The African Development Bank (AfDB) places the continent’s infrastructure needs at USD130-170 billion per year – a sum unlikely to be met due to a USD68-108 billion funding shortfall. According to Deloitte’s Africa


Construction Trends Report 2018, however, 482 projects valued at USD50 million or above broke ground by June 1, 2018, with a total value of USD471 billion. The number of qualifying projects


increased by nearly 60 percent year-on-year, Deloitte noted, with the transport sector leading the way with a 40 percent share consisting of new roads, bridges and railways. East Africa has the largest share with 139


projects, and here DSV’s Schmidt recognised there are some “huge jobs” under way. “The railway projects in Ethiopia and


Tanzania are good examples, while power stations and distribution networks are also being established,” he said. For example, DSV has been busy


working on Ethiopia’s USD1.7 billion Awash-Weldia railway, an economically important project connecting the country’s north and central regions. Due for completion by 2020 and with 400 km of new tracks to lay, DSV’s role included transporting 200,000 freight tons of various project cargoes into the port of Djibouti. “When handling project cargoes into


Africa, there are always infrastructural challenges, and bureaucratic demands necessitate proper planning and backup plans for logistics,” Schmidt added. Elsewhere, he said, while China and


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India account for a very large share of worldwide infrastructure projects and have the highest growth rates, these projects are mostly controlled by Asian contractors and developers. He also noted that the South American market is “picking up again after the Brazilian crisis”. According to Schmidt, infrastructure


projects in developed countries are mainly public contracts, with each country having its own unique financing strategy. In the EU, for example, he said a “huge coordination” is taking place to allocate funds. However, while there are many projects


in the pipeline, with plenty of funds available, most are not going through as they are not “properly described and feasibility studies are not made properly”, he added. Regarding the merits of PPP, Schmidt


explained that although it is hoped they take a larger share of the market, the deals are limited to strong financial institutions due to the immense risks involved. He added: “In developing countries PPP


will only play a limited role. Governments will still play an important role in basic infrastructure projects such as roads,


When handling project cargoes into Africa, there are always infrastructural challenges, and bureaucratic demands necessitate proper planning and backup plans for logistics. – Ole Schmidt, DSV


railways, water treatment, and to some extent power distribution. Ports and airport projects are normally PPP with long concession agreements.” The increasing scale and complexity of


projects is increasing risk for all parties involved. As a result, Schmidt said, only big corporations can undertake major infrastructure projects. “Risks are large and equipment investments are becoming larger.”


Financial protectionism Furthermore, financial protectionism in the USA has complicated matters further. The USA export credit agency, the Ex-Im Bank, is still constrained to issuing loans of up to USD10 million per transaction. This is problem, according to Schmidt, considering standard deals in the civil infrastructure sector are in the USD50-500million range. “This has now been going on for the last three to four years, and at the same time the USA has blocked any modernisation of OECD consensus rules related to export credits. “We have been informed that the USA is


starting up a new financing tool in direct competition to the old structures under the Overseas Private Investment Corporation (OPIC), with details to be revealed within the next two months.” And it is not only the USA that is


planning an overhaul of old financial institutions. Schmidt pointed out that China is doing the same through its Belt & Road Initiative (BRI), and he believes European companies may lose out as a result. For example, to help fund its mammoth


May/June 2019 105


DSV has been working on Ethiopia’s


USD1.7 billion Awash-Weldia railway, connecting the country’s north and central regions.


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