Can African firms compete?

Author:Ford, Neil
Position:CONSTRUCTION IN AFRICA
 
FREE EXCERPT

From Kenya to Ghana and Ethiopia to Angola, strong growth in the construction industry is forecast as developers invest in new real estate projects and more general infrastructural schemes.

The big question, however, is whether African or foreign firms will benefit most from this upturn in demand for construction services. All too often, contracts for any kind of infrastructure in Africa are awarded to foreign firms, whether by private or public sector developers, and this is as true in the construction industry as anywhere else.

Outside South Africa, North Africa and to some extent Nigeria, foreign companies have traditionally been awarded most high-profile building contracts on the continent, while local companies have been left to fight for small projects. However, as we discuss in this report, many African firms are enjoying rapid growth and are starting to compete on an equal basis, whether in competition with international operators or in conjunction with them.

Andries van Heerden, the chief executive of South Africa's Afrimat, warned that Chinese companies would dominate the sector if African firms failed to meet their challenge. He said: "The Chinese are moving extremely fast and if we don't move fast, they will get it all."

Mozambican cement production is set to double or even triple over the next two years as Chinese companies invest heavily in what is still one of Africa's fastest-growing economies. Three projects, all located close to Maputo, are already under development. China International Fund is investing $72m in a plant in Salamanga with output of 800,000 t/y; GS Cimento in a 550,000 t/y facility next to the Mozal aluminium smelter; and Africa Great Wall Cement Manufacturer in a 500,000 t/y project in Magude. At present, the market is dominated by Portuguese firm Cimentos de Mozambique.

Several Chinese construction companies are active elsewhere in Mozambique. Sogecoa Ltd has completed a 10-storey block in Maputo for China's Investment Promotion Agency and in May was awarded a contract to develop the Banco ProCredit building in the Mozambican capital. Construcao CCM, China Henan International Cooperation Group (CHICO) and the Anhui Foreign Economic Construction Corporation (AFECC) are also currently developing high-rise projects in the country.

However, Chinese investors are not alone in identifying Mozambique as an attractive market. Pretoria Portland Cement of South Africa has committed $200m to a new plant with...

To continue reading

REQUEST YOUR TRIAL