Africa gets ready for commodities turnaround

Depressed commodity
prices have seen
investment in
infrastructure in Africa
grinding to a halt – especially
where infrastructure has a
commodity focus, according
to Duncan Bonnett of Africa
House.
“Even donor funded projects
that are not necessarily related
to economic cycles have also
slowed down somewhat.”
But, he said, this did
not mean that the
project sector was in
a decline.
“In many regions
we are seeing
the auxiliary
infrastructure
required for
capital projects
continuing. So the
transmission lines,
the power lines,
the communication
lines, the roads are all
still in the process of
being developed, even
though the capital
projects have been put
on hold,” he said. “It is
clear that as the economy
turns the projects can then
pick up immediately as the
infrastructure around the
capital project will then
already be in place.”
He said West Africa,
where economies had
been hard hit
by the low oil
price, had seen
projects being
delayed or even
in some cases
abandoned.
“There are
also concerns
around
getting paid.
The project
promoters have
the money, but
the central banks
in several of these
countries don’t have
the foreign exchange
available – and so
there are concerns
around getting paid.”
Bonnett said Nigeria, Angola,
Ghana, Mozambique and even
Zambia had been the hardest hit in
this regard.
He said a country to keep
watching was Cote d’Ivoire.
“The return of the African
Development Bank
to the country has
been very positive
and there is a lot
of investment
happening in
property around
Abidjan. Activity is
definitely picking
up,” he said. “We
are hopeful of
seeing a region
from Guinea to
Cote d’Ivoire that is able to start
growing at a better and more
sustainable pace.”
Bonnett said with commodity
prices having probably bottomed
out the odds of development were
increasing.
“While we won’t see the prices
of several years ago, the outlook is
that we will start to see an uptick in
commodity prices next year for the
likes of iron ore, copper and coal.
Guinea in particular will benefit
from this as it is one of the largest
iron ore players in the world and
there is major
potential around
this commodity.”
He said in the
African context
concern over
South Africa was
increasing.
“Many of the
key sectors have
no clear policies in
place. Business has
been calling over
and over again for policy clarity and
stability, and until that happens
the country is not going to get any
meaningful investment from high
quality investors.”
He said South Africa was also
growing far more slowly than any of
the other economies in the region.
INSERT & CAPTION
We will start to see an
uptick in commodity
prices next year for the
likes of iron ore, copper
and coal.
– Duncan Bonnett