Tag Archive for africa

Suez Canal — Quick plan execution will double its capacity in about one third of the expected project timeline

Leadership and focus can make a difference.  This is a good technical news story out of Egypt.  The project was originally expected to take 3 years and be ready by 2017.  Instead, it will be essentially completed in just one years time and dedicated in August this year.

The New Suez Canal (actually an expansion project) is more than 80% complete according to multiple sources. The project is intended to increase the capacity of the channel from the current 49 ships a day to 97 ships a day.  The market target of almost 100 daily ships (half in each direction) will be likely reached by year 2023

The result will be a POSSIBLE 1 DAY SHORTER journey on a 21 to 24 day containership passage between Asia & Northern Europe

Waiting time for entering the canal will be reduced to 3 hours from the current 8 to 11 hours. The actual canal transit times could drop from 18 hours to 11 hours.

COMMERCIAL REVENUE IMPACT

The investment could increase canal revenue from the $5.3-billion generated from the payment of tolls by 16,744 vessels in the 2013/14 financial year to $13.2-billion by year 2023.

The Suez Canal route competes with railways trying to offer price competitive and time competitive blends of container transport between Asia and Europe.  The water route via Suez has ~ a 99% share. Now the Suez sailing times will improve.  The maritime route has a huge price advantage in terms of the price per container moved. versus the railway prices.Suex Canal Asia - Europe route map

http://www.engineeringnews.co.za/article/egypt-eyes-opening-of-new-suez-canal-on-aug-6-2015-06-15 Sent from my iPad

More evidence of Mounting Risks to Keep Africa Growing

Still largely a very poor region, Africa faces economic hurdles is its hopes for growth

A Bloomberg report on 2 June shows evidence that African nations are facing mounting risks as they seek to extend two decades of stellar economic growth.

Stellar but uneven.

To read the entire Bloomberg report, go to http://bloom.bg/1RHYdJ

 

Here are some important points for my associates in the African rail industry.

In May The International Monetary Fund lowered its 2015 growth outlook for sub-Saharan Africa by 1.25 percentage points to 4.5%

Based on multiple sources of evidence, economic growth in both Nigeria and South Africa is clearly slowing. “Sustaining Africa’s growth is going to prove increasingly challenging,” says Peter Attard Montalto (an economist at Nomura International Plc in London) in a conversation with Bloomberg reporters. Montalto points out that “competition for trade and investment within the continent is increasing. All countries will need to step up their game.”

THE NEED TO STEP UP THEIR GAME

Are the key government leaders, policy makers and company executives from companies meeting at this week’s World Economic Forum in Cape Town paying attention?

The forum will discuss growth in the context of a continent where 72% of the Sub Saharan population still lives in or at the brink of poverty (UN data). In numbers, that is a staggering 585,000,000 estimated souls.

IF (actually very likely) global commodity prices remain low or worse even decline further — then the African governments will have to go increasingly to a Plan B government budget cut approach. Most are not use to that tactic.

On the positive side, There is still selective growth in Africa.

Ernst & Young released a report to the public this week that shows Africa attracted $128 billion in foreign direct investment during 2014. That marked an increase year over year. However, the number of projects dropped by 8.4%.

On the negative side, a large number of mine and rail and port projects are on hold. Many indefinitely. My readers and clients have discussed this pattern before. Tonight’s report is just another confirmation of the pattern.

Where and on What?

E&Y found that 44% of the investment went to projects in the real estate, hospitality and construction industries 25% went for oil, natural gas and coal 9 of the world’s 15 fastest-growing economies are in Africa

SLOWING INVESTOR CONFIDENCE

EY surveyed more than 500 business executives in 30 countries Growth could slow they felt because of a combination of factors

Those identified include: 1) Africa’s political instability, 2) Corruption 3) Poor security 4) Lack of infrastructure including transport and electricity These plus a scarcity of skilled labor are the biggest deterrents to investors.

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What will come out of this week’s forum?

What leaders will leave with a sense of urgency and change?

Stay tuned and we can discuss later when more facts emerge.

Sent from Jim’s iPad

More than 60% of megaprojects mines face cost overruns –. LIKELY for rail also

WHERE IS THE DUE DILIGENCE on these ambitious project feasibility cost estimates?

This was a timely report on the internet business news

A 60% rate of large project cost over runs reported from a after the fact due diligence review.

What executives were “watching out for the investors’ interests”?

Where was the pre-project due diligence review?

As exuberance over China “go-go” growth cools down now to more realistic levels, some formerly free wheeling mine executives are probably going to be reassigned or worse.

Likely a similar fate awaits many project rail planners.

The cited EY study below is not focused on the supporting railway projects. But this significant mining failure implies similar rail project cost over run impacts from Mongolia to South Africa and from Mali to India.

Mongolia’s rail plan execution failure out of the Gobi Desert TT fields is probably a close parallel to this report’s conclusions. Almost now a decade in only partial construction, the Mongolian project is a similar “failure to execute” on time and on budget. But here, the blames rests on government rather than executives.

MASSIVE MISS IN ESTIMATING THE TRUE PROJECT COSTS

How can so many screw up so badly?

COSTS as identified in the EY evidence were on average 60% or more over the initial predictions.

Who did the original diligence checking?

Where was the investor/banking over sight?

60% is what most of us who are economist refer to as the conceptual level accuracy of costs. That is terrible for an actual post project delivery audit..

60% is a flunking grade if judged logically.

60% suggests that there was never a serious project feasibility assessment of the market and economics.

Will this lesson learned be used by project leaders going forward now that feasibility may be even more difficult if the resources super cycle is behind us?

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The report title is: ‘Opportunities to Enhance Capital Productivity’

Here are a few highlights.

1) EY found that “an average budget overrun of 62% was reported on the 108 megaprojects investigated.”

2) “The projects considered were at various stages across the investment and project delivery life-cycle.”

3) “The projects were geographically diverse and related to the development of copper, iron-ore, gold, coal, nickel and other commodities.”

4) Cumulatively, “the projects represented global investment of $367-billion.”

5) “An estimated 50% of projects were reporting schedule delays even after remedial acceleration initiatives had been applied.”

The study spokesperson at EY is its global mining and metals advisory leader Paul Mitchell.

Mine company leaders now admit to their shareholders that with the good old high growth China days behind them… … the project managers need to be much more precise with their due diligence in order to achieve the promised investment margins. There is now a lot less room for error.

The report cites that total capital expenditure for the subject projects examined “have dropped from $142-billion in 2012 to an estimated $96-billion this year”.

For more details, please go to the Mining Weekly report from an Earnst Young special study at: http://www.miningweekly.com/article/more-than-two-thirds-of-megaprojects-face-cost-overruns-ey-report-2015-05-21

How would you score the report card based on the E&Y report?

Sent from Jim’s iPad

Hunger in Oil-Rich Angola — now with better railway — Yet the World’s Worst Child Death Rate

Saluting Children, Nigeria. Jim Blaze photo

From Bloomberg, May 5, 2015

Every so often, investigative news reporters reawaken my senses as to if our technical efforts to help improve rail transport really matter.

This is because the report shows that about 30 percent of children in Angola are stunted because of malnutrition, according to a 2007 government survey.

This while oil and improved rail projects are positively increasing parts of the national economy, but not eliminating either poverty or hunger. You would think that it would improve both conditions. But not so.

It is hard to try and help such nation’s on their rail prospects in the face of the surrounding poverty and malnourished children we see while on assignments. Personally, I find it harder as time passes to get back on a plane to go and work amidst such physical conditions. It tears at your soul. You feel helpless.

To read the entire Bloomberg article, go to http://bloom.bg/1FObM6I

Critical Excerpts:

“Counting the number of children who don’t live to see their fifth birthday is a broad indicator of social and economic development, according to UNICEF.” In Angola, sub-Saharan Africa’s third-biggest economy, Porsche dealerships and Armani shops cater to members of the elite under the political leaders… — after 35 years, two-thirds of the nation’s people live in slums or impoverished rural settlements, often without running water and electricity reports Bloomberg.

Data shows that Sub-Saharan Africa hosts all 12 countries where more than 10 percent of children die before their fifth birthday, according to UNICEF. Sierra Leone is second, followed by Chad, Somalia and Central African Republic. Nigeria, which has the region’s largest economy and population with about 170 million people, is ninth.

I have gone there four times on rail improvement projects.

Among the riches we selectively saw …sadness…. …and an unanswered question as to “why.”

Angola is by far the richest country among African countries with the highest child mortality, with gross national income per capita of $5,170 in 2013 (World Bank). Nigeria, which pumped 2.1 million barrels of oil a day in March compared with Angola’s 1.84 million, earned $2,710 per person two years ago.

From time to time I wonder… … What happen to the young children that ten years ago chased our Nigerian inspection train?

You CAN finance new railways or upgrades in emerging nations with private funds — if you do it right

It’s a common misconception among investors that less-developed countries can’t build out railways unless there is an international “donor” for the funding.

However, the attached report suggests that if you engage shippers — like coal and ore companies — as part of the railway project funding effort, you CAN finance the construction project without depending on outside “charity.”

Take a look at this Executive Summary of my West Africa railway feasibility study: EXECUTIVE SUMMARY Rail Feasibility Report to UEMOA-Final

There is also a French version of this report available. Email me for that version.