SA contractors ‘not as active in Africa as anticipated’

14 January 2014

The infrastructure boom in Africa has seen investment in 322 megaprojects reach $222.7-billion, says professional services firm Deloitte in its ‘African Construction Trends’ report.’.

Deloitte Southern Africa infrastructure and capital projects leader André Pottas says the report focuses on projects valued at more than $50-million, which have already broken ground, but had not yet been commissioned as of June 1.
The report shows that most of the money pot is being spent on energy (36%, 97 projects) and transport (25%, 82 projects), with the Chinese not as dominant as some would expect.
Overall, 59% of the megaprojects are owned by governments, 2% by public–private partner-ships and 29% by private investors.
European and US investors own 17% of the projects.
Ownership by Brazil, Russia, India and China is currently limited, says Pottas, and Eastern and intra-African investors hold only 2%.
However, this picture is somewhat different when it comes to funding and building the megaprojects.
The bulk of project funding comes from China, at $43.6-billion. Development finance institutions are responsible for $43.4-billion of funding, Europe and the US $36.1-billion and domestic governments $17.4-billion.
China is funding fewer projects, but at a higher value, notes Pottas.
European and the US companies are building 115 projects, private domestic companies 45 projects and the Chinese only 38 projects.
This shows that European and US construction groups are still dominant on the continent, and that South African construction groups are not as active as would have been expected, says Pottas.
Africa is not an easy market to be in, he adds, with South African construction companies active on the continent faced with some stiff global competition.
Region by Region
East Africa is home to 93 of the projects in the Deloitte report, representing 29% of the spend covered in the report, with a value of $67.7-billion.
The currently unstable North African region accounts for only 7%, or 22 projects, of the infrastructure development surveyed in the report, valued at about $6.7-billion.
West Africa has attracted megaproject invest- ment totalling $49.8-billion, representing 21% of the continent’s major projects.
Central Africa, also fairly unstable, politically speaking, hosts 5% of the continent’s pro jects, valued at roughly $15.3-billion.
Southern Africa leads in the numbers, with 124 projects valued at $83.1-billion under way.
South Africa hosts the two largest projects by value under construction in Africa, says Pottas.
At least $20.3-billion is being invested in Eskom’s Kusile power station, with the Medupi power station receiving more than $10.8-billion.
Pottas says some of the main drivers for the increased spend in African infrastructure include a move to cater for the people of the continent, rather than following the decades-old pattern of mining Africa’s resources and transporting them to ports for shipment to former colonial masters.
“The growing African middle class is a big factor here, as is urbanisation.
New energy generation hubs are being forged, transport and logistics corridors are being built and basic social infrastructure is being invested in,” he adds.
“Telecommunications connections are being strengthened and development is now starting to touch the commercial property sector on the continent.”
By: Irma Venter

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