The number of global mega-projects that are either over budget, late or both, is alarming. Nine out of 10 global mega-projects (projects with a value of at least US$1bn) experience cost overruns.Although average overrun estimations vary greatly, some studies suggest that this could be as high as 70% for cost overruns and 183% for time overruns.Cost overruns also differ by sector. For example, estimates of overruns are equivalent to 45% for rail projects, 34% for bridge projects and 20% for road projects.
According to the Deloitte Report approximately only 20% of projects (from inception) in Africa reach financial closure and are able to move to execution.10 Countries with stronger regulatory and institutional governance frameworks tend to have a lower risk of project overruns. Emerging markets, with weaker governance institutions, tend to have significant time and cost overruns. In Malaysia, for example, approximately only 21% of public sector projects and 33% of private sector projects are completed within the stipulated time while 60% of projects in India suffer time overruns.Unfortunately, no known public data for the average cost and time overrun exists for projects in Africa. However drawing on secondary literature, these delays echo for projects across territories and sectors on the continent.
1. Lack of proper planning
It is estimated that Nigeria’s transport infrastructure projects cost on average 14% more than the initial cost estimates and take approximately 188% longer to complete.12 Seven out of ten projects in Nigeria are delayed.The major causes of delay in Nigeria are improper planning and a lack of access to funds to finance projects to completion, lack of effective communication leading to inaccurate estimates and slow-decision making.
2. Slow decision making
South Africa’s role as host of the 2010 FIFA Soccer World Cup resulted in the construction or upgrading of 10 soccer stadiums as well as other transport infrastructure upgrades. Although all 10 of the stadiums were completed on time for the tournament, almost all projects incurred significant cost overruns and time delays. Altogether, the stadiums were US$267m over budget. This was due to a lack of communication, slow decision making and the late issue of instructions.
3.Insufficient production rates
In South Africa’s capital city, Tshwane, all of the road and storm water projects completed between 2006 and 2010, experienced delays. Road and storm water projects saw an average time delay of 67% compared to the original contract time. This was largely the result of insufficient production rates, lack of services planning and weather delays.
In Ghana, research has shown that 75% of groundwater projects completed between 1970 and 1999 experienced both time and cost overruns. Therefore, only 25% of groundwater projects were completed on time and within budget.17 The delays and cost escalations were caused by monthly payment difficulties resulting from bureaucracy, poor contract management, problems with material procurement due to excessive processing times, lack of technical skills and an escalation in the price of materials due to currency fluctuations. There is very little investment from the private sector in Ghana’s groundwater industry and therefore all projects were Government owned.
5. Government Bureaucracy
The Tanzam Highway plays an important role in facilitating neighbouring Zambia's import and export trade through the Dar es Salaam harbour in Tanzania. Construction on the rehabilitation of the highway was expected to start in April 1987. Construction was only completed in June 1995, resulting in a time delay of 50 months and a cost overrun of 54%.The cause of the delay was attributed to the depreciation of the currency, a rapid rise in inflation and a delay in payments because of government bureaucracy. Tanzania’s Songo Songo IPP gas project incurred cost overruns of nearly 50%, worth approximately US$100m, due to a number of delays. Approximately US$30m of the cost increase was the result of rising debt interest charges, because of the project delay.
6. Delays in project execution
The rehabilitation of Inga 1 and Inga 2 hydropower dams in the DRC, launched in 2002, which led to significant cost and time overruns. The cost overrun is estimated to have reached 340% due to numerous reported project mismanagement and delays in execution. The project was due to be completed by 2009, but by 2016, the dams were only able to operate at about 40% of their proposed capacity.
In Nigeria, the Ajaokuta Steel Plant was due to be commissioned in September 1979, however, nearly 40 years later the plant had not yet started production. Construction on the project finally stopped in 1994, with an estimated completion rate of 98%. The Nigerian Government has supposedly spent US$9bn on the project. In recent years, a number of companies and the Nigerian Government have expressed interest in restarting the project, which will cost an estimated US$400m