Annual report details Africa's construction sector

The annual Africa Construction Trends Report by Deloitte, an international consultancy firm, indicates China's footprint in building and funding of mega infrastructure projects on the continent is growing.

While traditional foreign firms from the US and Europe have seen their market shares slide, Chinese firms have improved their positions and currently own projects in southern and western Africa. According to Deloitte, to qualify for inclusion, infrastructure projects are required to be valued at over $50 million and to have broken ground but are yet to be commissioned as of June 1, 2016.

This is despite a gloomy global landscape with the International Monetary Fund revising its forecast downward for 2016 and 2017 to 3.1 percent and 3.4 percent respectively.

East Africa was home to 15 percent of construction projects in Africa, and 43 projects with a combined value of $27.4 billion were reviewed. African Development Funding Institutions and China together funded about 10 projects each, nearly half of the total projects. This was followed by international DFIs, which funded eight, and governments which funded five.

China funded five projects more than last year, when its participation was at 8 percent of 61 total projects. There was a dramatic drop in the number of projects funded by international DFIs, from 39 in 2015 down to just eight. While Kenya boasted the most projects, with 11 - closely followed by Ethiopia and Uganda with nine projects each - its northern neighbor in the Horn of Africa stood out for its consistent spending and one of the highest gross fixed capital formation ratios globally.

China maintained its lead in building, with 41.9 percent of all regional projects. Private domestic companies were responsible for 25.6 percent, while companies from Italy, Lebanon, the Netherlands, Portugal, Switzerland and the US together made up 14 percent of the contractors.

In southern Africa, China owned 2.4 percent of projects. This was together with France, India and South Africa, with the governments holding the lion's share at 60 percent. In total, Deloitte reviewed 85 projects valued at $93.4 billion. The real estate sector accounted for 30.6 percent of activity, followed by energy and power, which accounted for 24.7 percent. Transport projects recorded the third-largest share with 20 percent.

In Central Africa, the downturn in commodity prices significantly affected the region's economies and hence saw a lower number of projects reviewed. The region had only 24 projects, valued at $7 billion, which represented 8.4 percent of all projects in Africa and 2.2 percent in terms of value.

China emerged as the highest funder at 33.3 percent, followed by international DFIs with 25 percent. "China is also an important player in the construction sector, building half of all projects in the region. Private domestic companies built 20.8 percent. Transport projects dominated the construction sector with 41.7 percent, accounting for nearly a third of all projects, followed by energy and power," says Jean-Pierre Labuschagne, Deloitte Africa Lead for Infrastructure & Capital Projects, based in Nairobi.

West Africa had 92 projects under review valued at $119.8 billion, which is 32.2 percent of total projects on the continent. China was the most visible single funder, responsible for about 10 projects, while governments funded 31 projects. International DFIs funded only seven, with Nigeria, South Africa, UK and France each responsible for four projects.

Chinese firms built 17.4 percent of the projects, second to private domestic companies, which built 26.1 percent. The transport sector continued to have the highest concentration of projects, representing 33.7 percent, followed by real estate and energy and power as the second-and third-largest sectors.

This time however, Deloitte emphasized the need for more investment in water projects, which are not prioritized by governments.

"There were only 15 water projects in Africa for the period under review, with a total value of $4.8 billion," the report says, adding that China builds 20 percent and funds 13.3 percent. The largest water project is the National Matabeleland Zambezi Water Project in Zimbabwe, funded by China at $1.2 billion.

lucymorangi@chinadaily.com.cn

(China Daily Africa Weekly 02/17/2017 page27)