The african construction market, an employment generator?

Faced with strong local societal pressure and international economic pressure, African states are confronted with growing demand for development and infrastructure construction. Attracting more and more international investors, can the African construction market be considered as one of the generators of employment?

The african construction industry, the core of investments?

In 2014, the rate of construction industry investment experienced strong growth: +46.2%, an increase of about 100 billion dollars compared to 222 billion in 2013. In just one year, the average value invested per project doubled, from 689 million to 1.27 billion. Until just a few years ago, governments found themselves alone against the huge expense construction represents. But the situation has clearly changed. 

Who are the players that have contributed to supporting investment growth?

Establishing the PPP, public/private partnership

In more than 20% of cases, governments are the investors in the construction sector. However, unable to carry the huge expenses required for the construction of infrastructure, African governments are increasingly turning toward shared investment solutions. Thus for eight years, Morocco has held the Forum Africain des Infrastructures: several days of panel discussions, sharing successful experiences and facilitating meetings between governments and investors. At the eighth edition, Morocco and Tunisia have returned to PPP, allowing the state to reach an agreement with a private investor to carry out a project.

Between 2007 and 2015, Tunisia built the new Enfhida-Hammamet airport. Already developed in countries such as Senegal and Côte d’Ivoire, these partnerships can be indispensable for the realization of development-related infrastructure.

 National and international private investors

Some consider the Africa today like China in the 1980s, with a huge potential for profit. Thus, if international investors have sometimes cast aside projects in Africa, they seem to be returning to the charge. This is the case with foreign companies that regularly subcontract to other companies like Imperial Construction, the Chadian company that is part of the Oum Alkheir Holding group of the young entrepreneur, Ibrahim Hissein Bourma. In early 2016, Chad received Chinese investors who, after meeting with the government, announced their desire to create a subsidiary in Chad in order to take part in its development.

International development institutions

On their own, international institutions represent about one quarter of investments in the form of loans and technical assistance. In the CEMAC zone, for example, which is made up of Cameroon, Congo, Gabon, Equatorial Guinea, the Central African Republic and Chad, the Banque de Développement des États de l’Afrique Centrale (BDEAC) can prove invaluable. Since November 2015, the BDEAC has granted Chad a loan of some 70 billion CFA francs for the construction and paving of the Kyabé-Singako (72.3 kilometers) and Kélo-Pala (109 kilometers) roads, and to establish standards in airport hubs. Good news for Chadian companies such as Oum Alkheir Holding, specialists in construction, earthmoving, and road development. 

Thus today, several actors allow African states to expand their infrastructure. In countries where much remains to be done, there is no risk of the construction market falling into despair. 

The construction industry in Africa, a priority market?

The construction market is one of Africa’s major concerns. Road, health, trade, and tourism infrastructures, in more or less developed countries: what is the actual situation?

Increased investment

In 2014, Africa saw 325 billion dollars invested in the construction of 257 infrastructure projects, with a minimum of 50 million dollars. These figures represent an increase of 46% compared with the previous year’s 222 billion. While a reduction in the number of projects was recorded—65 fewer than in 2013—the investment amount per site has increased dramatically, bringing the average value per project to 1.27 billion against 689 million the previous year, almost double, allowing local businesses, such as the Chadian entrepreneur Ibrahim Hissein Bourma’s Oum Alkheir Holding to participate in the development of their country.

Success stories

Today, Africa is undergoing a metamorphosis. You only have to see the ambitious project the capital of Togo is planning. An administrative and financial hub, located in the Lomé II district, with a futuristic, modern look, which will invariably give the city a facelift. While no launch date has been set, projects of this kind are destined to break ground in Africa, accelerating development. In late December 2015, in N’Djamena, Chad, the Hilton group inaugurated a new hotel complex: 250 luxury rooms, presidential and royal suites, conference rooms, restaurants, and more. The result of a public/private partnership this successful project is testament to the country’s willingness to address its lack of tourist facilities, for officials and business clientele, thus opening up to the international economy.

These issues were widely discussed during the 8th edition of the Forum Africain des Infrastructures, held in October 2015. At the heart of the discussions are the opportunities and advantages for public and public partnerships between governments and investors.

In this regard, Morocco stands as example, demonstrating the effectiveness of such agreements, particularly in the transport sector. Morocco has seen 1,700 kilometers of highways and 2,000 kilometers of rail track across its territory (1,500 are planned for 2020). The development of road and airport infrastructure is also a priority in Chad. In February, an agreement was signed between the Chadian government and BDEAC, granting a loan of 25 billion CFA francs for the paving of the Kélo-Pala road (109 kilometers), located on Cameroon’s major Kélo-Pala-Léré-Frontière axis, helping with the region’s opening up. Likewise, work on the 260-kilometer Mongo-Am-Timan road started in December. Specializing in earthworks and maintenance and repair of roads, the Chadian group Oum Alkheir Holding holds pole position.

Synonymous with growth and luxury, road, health, and tourist infrastructure are still looking for investors, and are a priority for African states, resulting in the expansion of the construction industry.