Journal of African Business Issue 6

CONSTRUCTION
International Airport has been mooted and most parties agree that a new airport
is needed, but there are no concrete plans on the table yet. Once land has been
allocated and contracts agreed, it will no doubt be a major project.
FINANCING
The support of lending institutions is an important factor in driving the construction
and property sectors, and this is particularly true of the infrastructure programmes
of many countries.
The signing in Nairobi in May 2023 of a $3-billion Country Programme
agreement between the Government of Kenya and Afreximbank is a case in point.
High on the agenda of new infrastructure to be funded is the development
of Special Economic Zones (SEZs) as a way of improving the country’s export
performance. Kenya is the first country with access to Afreximbank’s new
Climate Change Adaptation Facility. Some $800-million of the Country
Programme package will be allocated to the Kenya Climate Change
Adaptation Facility which will help fund 200 irrigation schemes under a
public-private partnership framework.
SEZs are growing in popularity across the African continent. Seen as a way
of promoting manufacturing, industrial production and exports, SEZs attract
incentives and rebates for investors and are the focus of government spending.
Consequently, they are frequently the site of concentrated building activity.
Kenya is so focussed on its SEZ progamme that it has a Special Economic Zones
Authority (SEZA) which oversees 14 SEZs in eight regions. One of the more recent
zones is the Konza Technopolis outside Nairobi which is designed to cater to the
information, communications and technology (ICT) sector.
In the same month that Kenya signed with Afreximbank, the African
Development Bank (AfDB) approved a $15-million subordinated loan to the
Nigerian firm, Infrastructure Credit Guarantee Company Limited (InfraCredit),
to support it in providing funding for infrastructure expenditure in that country.
InfraCredit is a credit guarantee company that mobilises long-term capital from
institutional investors, including pension fund and insurance companies.
Konza Complex (Konza Technopolis Development
Authority headquarters) in Nairobi, Kenya
Funding for a major hydroelectric power project in Cameroon is coming from a
wide variety of sources. The Nachtigal Hydro Power Company (NHPC) has been
set up as a vehicle to oversee the construction and running of the facility for
the first period of its existence. Shareholders in the consortium are Électricité
de France (EDF, France), the International Finance Corporation (IFC), the
Republic of Cameroon, Africa50 and STOA Infra & Energy. Ethiopia’s Ministry
of Urban and Infrastructure is the main mover in the country’s decade-long
plan to boost the construction sector and prioritise infrastructure, Ethiopia
2030: The Pathway to Prosperity.
Infrastructure is often cited by national governments as a priority and as a means
of boosting the national economy. South Africa’s 2023 Budget Review pledged to
spend $46-billion on public-sector infrastructure over a three-year period. Where
energy installations, water infrastructure and transport networks are working
efficiently, other sectors can thrive.
An example of this effect is in the explosion in property prices at key points
along the route of the Gautrain in Gauteng. The Gautrain is a piece of public
infrastructure that is not only efficient, but highly sought after and very popular.
In many African countries, climate change is driving another kind
of construction activity – of solar farms and wind farms. An amount of
$9.4-billion has been mooted as the project value of a green hydrogen project
awarded in 2021 in Namibia. Large solar and wind facilities will have to be
built to supply enough green energy to produce the planned output of 300 000
tons of green hydrogen per year. A similar scheme in Mauritania envisages 14
400km² being given over to Project Nour, a very sizable chunk of property on
which to conduct one project.
The African countries that have been most active in the wind farm field are
Morocco, Egypt and South Africa. This has given engineering and construction
firms in those countries a boost but a variety of nations have started to explore
their wind potential, including Senegal, Kenya (the giant Lake Turkana Wind
Farm was a pioneer project), Niger and Zambia.
While renewable energy is driving many projects and contracts, another
subsector related to sustainability is set to have a major impact on the African
construction industry – green cement. Cement is known as one of the worst
offenders in terms carbon dioxide and the pressure to improve in this area is
growing. Companies that can profitably produce replacement products for
traditional cement will thrive.
HOTEL BUILDING BURGEONING
The 2023 African Hotel Chain Development Pipeline report gives an insight into
the tourism sector as a driver of construction projects on the continent. Egypt
is ahead of the pack, with a many more rooms planned than the next-ranked
countries Nigeria, Morocco and Ethiopia. The survey, run by W Hospitality
Group in association with the Africa Hospitality Investment Forum (AHIF),
is based on responses from 45 global and African hotel chains, reporting
on a pipeline of hotel development activity in 482 hotels in 42 of Africa’s 54
countries. See table below. Of the total of 84 427 rooms in the pipeline, over 37
500 rooms (about 45%) are expected by the hotel chains to open in 2023 and
2024. Marriott International, Hilton and Accor are the survey’s leaders, as they
have been in other recent surveys, with Marriott clearly at the top of the table in
2023. The survey managers cite a growing trend towards franchising in Africa,
and Marriott’s relative strength in franchising is noted, with 30 brands in its
portfolio. The fastest pace in terms of opening new rooms has been achieved by
the Radisson Group. Four deals signed in Morocco in 2021 led to hotel openings
in the same year and in 2023, the group is projecting more openings than the
total notched up by all other hotel chains in 2022.
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