2022 PwC Middle East Capital Projects and Infrastructure Survey captures mood of optimism
November 15, 2022
15.11.2022: The Capital Projects and Infrastructure sector continues to witness an activity rebound to near pre-pandemic levels after the sudden pullback of public funding that accompanied the COVID-19 pandemic, according to the PwC Middle East Capital Projects and Infrastructure 2022 Survey. The survey captures an emerging direction of optimism in the market, driven by major investments in capital assets over the next two years.
This year’s survey results are markedly better than those of two years ago (with more than half of organisations experiencing a major delay in projects in 2021, and 38% of organisations who had seen projects run over budget in the preceding 12 months). However, with the return of higher growth levels, some challenges are emerging.
43% of the survey’s respondents cited the conversion of strategy into implementation as the most significant internal obstacle affecting the ‘health’ of their capital investment portfolio, programme or projects and 37% of respondents included ‘risk and change management’ as their main challenges. While ‘improving the technologies and tools to the workforce’ were addressed by 34% of respondents.
These challenges of strategic implementation, technology and change management are inextricably linked. The 2022 survey was clear; exploit the growth potential within the sector and achieve greater efficiencies, while emphasising on these key findings:
71% expected to increase their investment over the next two years.
55% expected the proportion of their portfolio funded by private finance to increase, where it will act as a catalyst for skills development and an increased focus on sustainability.
Only 11% of respondents considered environmental and/or societal impact to be key metrics for determining project success.
15% identified ESG (Environmental, Social & Governance) as their priority investment area and 23% identified environmental/sustainability as the functional skills in greatest demand.
58% plan to increase internal investment over the next 12 months in order to modernise their business and positively exploit the market growth opportunity.
People (69%) and technology (55%) related initiatives are the top investment priorities placing a sharp focus on skills agenda for the sector.
Commenting on the survey’s outcomes, Maarten Wolfs, Partner, Infrastructure & Government Leader, PwC Middle East, said: “We believe that infrastructure investment is a key input to the transformation and modernisation of society in the region. Huge investments such as the trillion dollar Giga-projects and the Landbridge Rail initiative will help redefine the Saudi economy. Coupled with over $ 200 billion investments in renewable energy generation, we see the infrastructure sector at the heart of government policy. This is a region-wide trend but very much catalysed by Saudi Arabia’s National Transformation Programme 2030.”
Adding: “The sheer magnitude of the investment required in the region along with ambitious time frames point to the government and the private sector needing to work more closely together in areas such as talent development, carbon neutral technology, localisation and alternative financing structures such as PPPs. Our survey findings also show that in the face of this, organisations also need to respond positively to the demands of the changing market. Procuring authorities and policy makers will need to synthesise the collective insight and innovation of the entire development value chain to find the answers that will be needed. Laws and regulations also need to evolve so that bankable commercial frameworks become FDI enablers.”
The shape of modernisation
Over half of the survey’s respondents - 58% - are planning to increase investment in their businesses over the next 12 months compared to last year, with over a fifth - 22% - planning ‘significant’ investment. This comes to drive innovations that revolve around people, technology and turning the overall organisational capacity from strategy into action effectively .
The continued rise of private funding
78% of respondents confirm that private financing already makes up part of their funding strategies for their capital investment portfolio, and 55% say they expect the proportion of their portfolio funded by private finance (PPPs) to either increase or significantly increase over the next two years. Our survey found that companies and government agencies are seeking private funding for reasons that go beyond capital availability. 48% of respondents believe the use of private finance increases the likelihood of delivering on time, while 44% believe it increases the likelihood of delivering on budget.
Digital transformation begins
According to our survey, amongst the key growth areas are the use of ‘Big Data’ (41%), digital twins (17%) and drones (33%). 91% of respondents cited measurable improvements including reduced human error (62%), improved employee experience (59%) and enhanced project delivery insights (59%) when implementing new technology solutions.
Building a local talent pool
The survey found that 41% of the respondents cited access to skilled resources as the top area that will constrain, with over a fifth expecting their future demand for talent to exceed their ability to retain and/or attract people. In response, nearly half of those surveyed (42%) said that people-related investments were their top priority, with 69% including them in their top three priority areas.
The decarbonisation deficit
The 2022 survey shows that the long-recognised regional under-emphasis on decarbonisation persists. With only 11% of respondents considered environmental or societal impact to be key metrics for determining the performance of the projects they are working on, and only 15% cited environmental, social and governance (ESG) factors as a priority investment area for them. However, we expect attitudes towards decarbonisation to change, especially with the two United Nations Climate Change Conferences in the region - the recently held COP27 in Egypt and the upcoming COP28 in Dubai in addition to the recognition of the environmental priorities of global investors that comes with private funding access. Although over 130 banks and financial institutions have already adopted the Equator Principles, more work needs to be done to encourage the adoption of these principles globally.
Our survey findings encourage the modernisation of the workforce and of technology to drive growth and maintain the sector’s momentum. This means digitisation, privatisation of the sources of capital and localisation of skills and capacity are essential. Also, organisations need to invest in decarbonisation of the sector since it is considered the main area where the region is lagging behind its global peers.
About the Survey
The PwC Middle East Capital Projects and Infrastructure Survey has provided a vital ‘pulse check’ for those involved in the planning, funding, designing, delivering and operating capital and infrastructure assets across the region for over a decade. Our 2022 survey sought the perspectives of project sponsors, developers, functional/technical experts, contractors, financiers and asset managers from over 100 organisations across the region.
Over half (47%) of the organisations who participated in the survey were headquartered in UAE, while only 15% hail from Saudi Arabia. It was also clear from our respondents that the large majority work as regional businesses, operating in multiple territories, the major ones being: UAE (78%), Saudi Arabia (47%), Qatar (31%) and Oman (27%).
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