The Africa-Australia Infrastructure Conference is a pioneer two day conference that will be held in Sydney in September next year for Australian investors and developers.

The Conference is also targeted to give African industry leaders a new platform to present growing infrastructure opportunities in energy, transport, ICT, oil and gas.

Organisers say this will hopefully be the first of an annual event as well as an opportunity for African and Australian infrastructure stakeholders to interact and plan for the future.

This international event will attract key decision-makers in the Sub Saharan African Infrastructure sector from around the globe.

The Africa-Australia Infrastructure Conference will take place on the 3rd and 4th of September 2012 at the Sydney Convention and Exhibition Centre.

Outotec Pty Ltd will undertake delivery of the third phase of an ongoing project, establishing a drinking water treatment plant, transmission mains, distribution systems and associated infrastructure to supply inland areas of the region.

Outotec’s Finnish parent company, a world leader in sustainable solutions for utilising natural resources, was the turnkey contractor for the initial stages of the project, servicing Ampara’s coastal areas.

“Phase three of the project will bring clean drinking water of an international standard to around 460,000 people,” said Outotec’s managing director for South East Asia Pacific Neil Jagger.

Outotec’s contract is underwritten by the Export Finance and Insurance Corporation (EFIC), which has guaranteed an ANZ bank loan of US$105.2 million to the Government of the Democratic Socialist Republic of Sri Lanka to finance the third phase of the project.

Outotec Pty Ltd has been working with EFIC and ANZ on this project for more than a decade. EFIC’s Executive Director, Origination and Portfolio Management, Peter Field said the project was a good example of how EFIC can work with a commercial bank to support financing Australian exports on terms that exceed the bank’s capacity for risk.

Most economists agree that during the next 20 years, China will overtake America to become the largest economy in the world, with India, Russia and Brazil not far behind. It will become increasingly important for entrepreneurs, businesses and investors to properly understand and gain experience in the new BRIC economies, so that deciding to invest or do business (or not) in these markets is a considered, rational progression – not a blind leap of faith!

While the four BRIC countries exhibit many differences, in terms of their local culture, society, language, history and politics, they all exhibit a number of common characteristics, which make them important for business and investment, for example:

They all have large populations (four of the six largest populations in the world).

• China: 1.3 billion
• India: 1.2 billion
• Brazil: 191 million
• Russia: 141 million

They have large areas of land available for farming and mining.

• Russia: 17.1 million sq km
• China: 9.6 million sq km
• Brazil: 8.5 million sq km
• India: 3.3 million sq km

They are already some of the largest economies in the world, and growing faster than developed countries.

• China: US$4,909 billion, growing by 10.3 percent per annum
• Brazil: US$1,574 billion, growing by 3.5 percent per annum
• India: US$1,236 billion, growing by 7.4 percent per annum
• Russia: US$1,229 billion, growing by 5.5 percent per annum

When you combine the three traditional economic forces of big populations, large areas of land and the availability of capital and wealth, an interesting picture emerges:

The four BRIC countries, together with the US, represent the five most influential and dominant economies in the world today for business and investment. And, unlike the US and other developed economies, the BRICs are growing rapidly, applying their available capital into long term growth assets, for example infrastructure, construction and to raise lower incomes, and building new wealth among their emerging middle classes.

The Directory of Major Construction Developers in the GCC (Gulf Cooperation Council) indicates that design and construction companies are set to benefit from growing opportunities as countries in the Middle East and Gulf Cooperation Council rebound from the effects of the global economic downturn.

The findings show that according to the World Bank, the GDP of GCC countries is projected to grow by 3.7 percent in 2010 and 4.4 percent in 2011, in conjunction with large national population growth and a massive housing shortfall. Furthermore, a number of governments have the funding for urban development, capitalising on their oil and gas revenue surpluses.

“The construction industry in the GCC is not a secondary industry but key and will play a vital role in the region’s future. Nowhere else on earth have governments placed their hopes so unreservedly in the construction industry’s hands,” according to the report, with Saudi Arabia and the UAE continuing as the hub of the construction sector in the region.

Download the report at the Export Connections website www.export.vic.gov.au.

Nigeria

To an average Australian, Nigeria brings forth mixed thoughts and feelings. To some, Nigeria is viewed with reservations, but to many; Nigeria represents the largest market and fastest developing economy in Africa. Historically, Nigeria is not in the bracket of Australia’s traditional trading partners; as such, the trade volume between the two resource-rich countries remains low. Having said that, globalisation and information technology have practically made it possible for organisations and entrepreneurs to do business anywhere in the world where there are viable opportunities.

Nigeria has many such investment opportunities for Australians to explore. Moreover, Australian businesses stand to do better in Nigeria than most Asian and Middle East investors because both countries have English as official language, belong to the Commonwealth, are governed by democratically elected leaders, and share the same values of human rights and rule of law under the British judicial system.

Recent economic reform initiatives have opened Government-backed business opportunities in agribusiness, telecommunications and ICT, energy generation and distribution, oil and gas exploration, construction and infrastructure development among others. For example, in 2001, only 150,000 Nigerians were connected to mobile phones; today, more than 70 million Nigerians are active mobile phones subscribers courtesy of the rapid flow of foreign direct investment. With a population of more than 150 million people, Nigeria stands as an investor’s delight in Africa.

New exporters

Nigeria’s economy is currently experiencing the resurgence in the middle class as a result of strong economic activities in the oil and gas, telecommunications, entertainment and commerce sectors. Nigerians in this economic bracket indulge in acquiring luxuries such as furnished new homes, brand new cars, designer labels, electronic gadgets, and choice wines. These acquisitions are considered necessary to announce the change of social and economic status. The growing appetite for luxury goods in Nigeria provides viable opportunities for Australian businesses to enter the supply chain or develop shopping malls in partnership with state governments or local companies.

According to the latest 10-year forecast from Global Construction Perspectives and Oxford Economics, China will overtake the US as the world’s biggest construction market by 2018, and the fastest growth will happen in Nigeria. The forecast is already coming true with the Federal and State governments’ new policy of developing the nation’s infrastructure through public private partnerships (PPP). The new PPP initiatives have resulted in the concession of airports, roads, bridges and public buildings. Australians can be part of this new approach for infrastructure development in Nigeria.

Existing exporters

Nigeria’s primary economic strength comes from the export of natural resources. Despite huge deposits of oil and gas in the country, steady supply of electricity remains a major source of worry and burden to every Nigerian and business in the country. Nigeria’s unreliable power situation offers Australians great opportunities in energy generation, distribution, consultancy and equipment supply. Australians are guaranteed opportunities because of the Nigerian Government’s vision 2020 target to generate 60,000MW electricity from less than 7,000MW obtainable today.

Visiting Nigeria in December 2009, I observed that Nigeria’s Federal Government is truly working hard to improve the power situation in the country with a flurry of activities taking place in the power sector. My advice for intending Australian investors is to ensure they partner with either the Federal or State Government in a PPP for any power project as a sure berth into the market.

In the 1960s, Nigeria experienced a massive economic boom because its economy was based on agribusiness, coupled with high global demand for oil. The present Nigerian Government has thus launched major economic reform initiatives that are expected to switch the country from oil and gas dependence to an agribusiness and technology-driven economy. Australians can explore the Nigerian Government’s 40:30:30 co-financing formula for the agribusiness sector. This unprecedented system enables foreign investors to come up with the initial 40 percent of take-off capital, while the Government brings 30 percent to the table and guarantees a local bank loan for the remaining 30 percent. It is a win-win outcome for both investor and Nigeria.

The Federal Government of Nigeria provided more than US$8 billion in early 2009 as low interest loans to local farmers and foreign investors who intend to start commercial farming and processing of produce in the country. Australians with an interest in agribusiness could seek partnership with Nigerian state governments.

“E-government, e-health and e-education are some of the most important industries to benefit from advancements in broadband infrastructure … countries have begun to understand that broadband transmission infrastructure is not merely important for the direct social and economic use of citizens, but that it is equally important for the digital economy and includes critical sectors such as healthcare, education and smart grids,” the report noted.

It pointed out that a number of governments, including Australia’s, have taken the lead on an e-government level, and have also recognised how going digital can assist in areas such as healthcare.

BuddeCom highlighted: “The financial crisis has focused global attention on new infrastructure developments and facilitated a unique opportunity to shift the broadband emphasis from a high-speed internet service to a national infrastructure for the digital economy that will underpin a range of positive social and economic developments.”

See the BuddeCom website for an executive summary of the report.

Of all the four BRIC (Brazil, Russia, India and China) economies, Brazil is the country that is the closest to Australia from a cultural and social perspective. Brazilians share many of the same passions as Australians—the beach, sport, football, the great outdoors and a warm and sunny climate—and this provides a great start for those looking to engage with a country of 180 million people, which is rapidly growing in confidence as an emerging economic power.

Brazil’s traditional strengths are in mining and agribusiness and in some ways resembles Australia as a leading exporter of commodities, notably orange juice, coffee, soy, beef, and chicken, and resources, particularly iron ore. I remember last year standing on the quay of China’s largest steel producer Baosteel in Shanghai watching the large tankers arriving from Australia and Brazil full of iron ore and wondering whether we should view Brazil as a friend or competitor.

My answer to this is that our opportunities to engage with Brazil, a country that will during this century dominate the global economy, far outweigh any competitive threats.

New exporters

As with all of the BRIC countries, future economic growth in Brazil depends on strong local domestic consumption, as opposed to exports to the cash-strapped developed world, and the Brazilian Government has introduced measures to boost domestic spending via lower interest rates, an easing of capital requirements to Brazil’s banking system, designed to stimulate housing and car loans, and reducing unemployment via a range of spending initiatives.

Brazil’s aspirational population of more than 180 million is the sixth largest in the world, and the largest in Latin America, growing at approximately 1.3 percent per year. Its population is relatively young, with 42 percent under the age of 20, and the youngsters have a strong appetite for Western-style consumer goods, brands, fashion labels, technology and gourmet foods.

The population is 80 percent urban, with approximately 30 percent living in the 10 principal metropolitan areas, including São Paulo and Rio de Janeiro which have populations of around 19 million and 12 million respectively. Some 14 other metropolitan areas have populations of more than 1 million. This makes it relatively easy to access the retail markets due to the high levels of concentration in urban centres.

Also, Brazilians are generally keen to spend rather than save, as evidenced by the large numbers of new shopping malls, outlets, hypermarkets, supermarkets and convenience stores offering the usual wide range of services—restaurants, coffee shops, fitness centres, beauty parlours, shoe repairs, post offices, bank services and dry-cleaners—and providing entertainment with cinemas, cyber-cafés and play areas for children.

There is also a rapid rise in the middle class, with a growth rate of more than eight percent of people per annum becoming increasingly affluent and upwardly mobile. Being one of the world’s ‘Big Rapidly Industrialising Countries’, Brazil’s growing middle class presents opportunities across the board for Australia’s retailers, from food and beverage, cosmetics and clothing to some of our more premium products, notably gourmet food and wine.

The exports of Australian wine to Brazil lags our success in other countries and represents only one percent of our total wine exports. While strong, traditional and tariff-free competition exists from Brazil’s South American neighbours, particularly Argentina and Chile. Australian wine producers can and must compete in the more prestigious, high value, niche sectors of the market where there is a strong appetite for our premium labels.

While virtually every Australian winemaker is currently focused on the burgeoning Chinese wine market, some unique and lucrative opportunities exist in Brazil for those brave enough to cast the net more widely.

Existing exporters

With Brazil’s primary strength as a resource and agricultural based economy, similar to ours, leading Australian companies offering high value-adding services to the agribusiness and resource sectors, including technology, software, engineering and consulting services, are highly sought after by Brazilian producers looking for greater efficiency, increased production and yields from their existing activities.

Brazil has a vast land mass, much greater than ours, and much of its arable land is available for farming activities and there are new sites under exploration for mining; Australia has much to offer Brazil as it seeks to modernise and upgrade its land economy.

In addition, while Brazil’s construction industry has been hit by the global economic slowdown, the government’s Growth Acceleration Program launched in 2007 is committed to supporting investment in infrastructure projects. With Brazil’s large fiscal stimulus package—US$254 billion, representing a significant 19 percent of gross domestic product—there is widespread activity across many infrastructure projects including road, rail, power and the construction of low income housing.

In addition, housing, commercial and tourism construction is also set to receive a sizeable boost from the preparations for the 2014 FIFA World Cup, which is estimated to inject a further US$43 billion into the infrastructure sector. With Australia’s Olympic experience in designing, constructing and fitting out sporting venues, opportunities exist in many areas for Australian architects, builders and landscapers.

New business shift

One-third of Africa’s total trade is now with markets in emerging economies, namely China, India, Brazil and Malaysia among others. Africa is marking a shift away from previous reliance on traditional trading partners in Europe and North America. Although the European Union (EU) as a whole continues to dominate Africa’s trade, that dominance is receding, especially in imports. European Union now accounts for only a little over a third of the continent’s inward trade.

The International Monetary Fund (IMF) projections for world growth reinforce the grounds for optimism. While many of Africa’s traditional trading partners are in a recession, many of its new markets, particularly China and India, show relatively healthy growth prospects.

The $5 billion China-Africa Development Fund (CADFund) opened first office in Africa at Johannesburg South Africa. At a time when much Western capital is fleeing the continent, the CADFund, established in 2007 by the state-owned China Development Bank as an equity investment fund for Africa, has already spent some $400 million of its initial $1 billion capital and looks to be adding a further $2 billion to help promote more Chinese investment in Africa.

Brazil’s oil giant, Petrobras, has projected that it will invest more than $2 billion in Angola and Nigeria over the next five years, while its steel-producing compatriot, Vale, is putting a reported $1.3 billion into developing coal deposits in Mozambique, where Coal India also has acquired mining rights. India’s Tata is planning a major expansion in South Africa, Nigeria and a number of other countries.

On the other hand, Russia’s Gasprom is looking to invest in natural gas in Nigeria and to acquire oil concessions in Algeria and Libya. Malaysia’s Petronas has made a significant presence in the oil sector in Egypt and Sudan. These are all snapshots of Africa’s newfound trade and investment partners among emerging economies.

Global perception challenges

The image of Africa as a continent bedevilled with sufferings and wars still exists in minds of millions through television images and news reports. Most media outfits in developed nations continuously mirror the worst pictures out of Africa to maintain the stereotype. There may be drought, disease and corruption. Still, there are new generations of young, educated, savvy entrepreneurs running businesses in Africa. A great number of professionals and business managers in Africa are educated in the world’s best universities, and have worked in high profile organisations in developed economies across the globe before returning home.

Despite the contribution of these new generation of Africans in the development of the continent, the global television audience is still being fed with an overdose of malnourished children, conflicts and famine to mention a few. The media blitz on Africa may have discouraged many entrepreneurs in the western world with products and services that could thrive in Africa to look elsewhere. There is a widening gap between reality and perception of Africa.

Economic prospects

Africa’s economic growth is steady despite the global financial crisis. The World Bank confirmed that growth in gross domestic product has been higher than the world average for five years and is predicted to grow in 2009 and beyond.

Africa’s economic prosperity has created a growing middle class. The World Bank estimates that the sub-Saharan middle class will be 43 million strong by 2030, up from 12.8 million in 2000. South Africa leads the pack, with other countries such as Zambia, Nigeria, Kenya and Ghana demonstrating strong prospects. It all means that billions will be spent on consumer goods, telecommunications, agriculture and infrastructure projects.

Africa’s mineral wealth is vast. Africa supplies half of the world’s diamonds, a third of its gold and more than three-quarters of the platinum/palladium precious metals complex. It has huge copper reserves in Zambia and South Africa and 12 percent of the world’s oil reserves.

Political reforms

Across Africa, the number of democracies has risen from 10 in 1980 to 34 by the end of 2007. The older generations of leaders are retiring and the new western-educated elite is taking control. From 1960-1980, no African leader left office having lost an election. In the 1980s, there was just one. But from 1990-2003, 18 were voted out of office.

The Mo Ibrahim Foundation has recently published its new ranking of African governance; 48 of the 54 African countries were reviewed, with Mauritius, the Seychelles, Botswana, Cape Verde, and South Africa occupying the top five positions and Sudan, Chad, the DRC and Somalia at the bottom of the table.

A country such as Nigeria noted for protracted military rule has been under democratic rule since 1999 till date. There are still democratic challenges in African countries such as Zimbabwe, Niger, Madagascar and Kenya. These are young democracies that are bound to make mistakes and learn as they climb the ropes of good governance. Almost all African countries are embracing capitalism and stock markets have a sound legal framework based on respect for property rights.

It also stipulates that countries provide protection for foreign direct and portfolio investments, and compensation against damages caused by riots and political disturbances, as well as decrease in restrictions on equity ownership and land acquisition.

The new FTA is the third between ASEAN and China; the first two covered goods and services. It comes as Chinese investment in the region increases, and follows Chinese Premier Wen Jiabao’s announcement of a US$10 billion China-ASEAN Fund on Investment Cooperation for infrastructural development in April.

The Indian government has forecast the need for $500 billion in infrastructure by 2012, but the McKinsey report, Building India: Accelerating Infrastructure Projects, indicates that India’s capacity for rapid modernisation may be lacking.

The report stated: “Inefficiencies in implementing infrastructure projects in India occur at every step. Data from government and industry suggest that on average each project suffers from 20-25 percent time and cost overruns, while in some sectors this is as high as 50 percent.”