Africa’s Top 250 Companies: Construction

Africa’s Top 250 Companies: Construction

Increased construction activity is a sure sign of economic growth. Judging by the number of high-profile city centre projects and new cement plants under construction, most African countries are benefiting from a construction boom.

Perhaps the most active part of the construction industry is the transport sector and one of the most ambitious projects is the $140m Second Nile Bridge. It is being built over the River Nile in Uganda by a joint venture of South Korea’s Hyundai Engineering and Construction Company and Japan’s Zenitaka Corporation.

The 525 metre bridge, which will connect the towns of Jinja and Njeru, is being funded by the Japan International Cooperation Agency (JICA) and the state owned Uganda National Roads Authority (UNRA).

UNRA describes it as “the longest single plane cable configuration in the entire African continent” and it is designed to relieve pressure on the existing crossing, while improving  links between Rwanda, Burundi and Democratic Republic of Congo, on the one hand, and Kenya on the other.

To the southeast, the Chinese government has agreed to help fund the construction of a new port at Bagamoyo, north of Dar es Salaam, in Tanzania, which is to be developed by China Merchants Group (CMG). A rail link to both the Central Line and the Tanzania Zambia Railway (Tazara) is to be provided, as well as road connections to the rest of the country. East Africa’s biggest industrial export zone is to be developed at the port. The importance of the project is underlined by the fact that both President Xi Jinping of China and President Jakaya Kikwete of Tanzania attended the official project signing ceremony.

However, there is no doubt that Dangote Cement is the star of the African construction sector. The firm is scheduled to increase its cement production capacity from 20.3m tonnes a year to 40m tonnes a year by the end of this year and then to 60m tonnes a year by the end of 2016.

Of this 40m tonnes, 29m will be in Nigeria and 11m in other markets. After focusing on its Nigerian operations, the company is now expanding into 12 other African markets, including Cameroon, Senegal Sierra Leone, South Africa and Zambia.

Chief executive Devakumar Edwin says: “As the Nigerian cement market grew by a strong 15.6%, we managed even better growth. We increased our margins despite continuing disruption to our gas supply.” The company’s net income for 2013 increased to N201.9bn ($1.2bn), up 39% on the previous year, mainly due to a 28% increase in Nigerian sales to 13.3m tonnes. Such rapid expansion saw the Dangote Cement share price jump by 51% during the course of 2013.

Edwin added: “Other cement majors borrowed heavily for mergers. One of the key reasons we have been able to grow aggressively in the African market is because they are cash strapped and we do not have that problem.” Most of the investment required for this expansion has been generated by internal cash flows. After some delay, the company intends to list on the London Stock Exchange next year.

Despite the completion of new cement plants, huge amounts of construction materials are still imported in many African countries, including in Ghana, where city property is almost too expensive for almost all citizens.

The production capacity of the GHACEM cement plant in Takoradi will be expanded from 1.2m tonnes a year to 2m tonnes a year by late 2014 but most plumbing and electrical materials are still imported, so there is a long way to go before construction costs can be substantially reduced. There is certainly plenty of scope for Dangote, Bamburi and their counterparts to expand over the coming years.

Jumbo urban construction projects are becoming increasingly popular in Africa’s biggest economies. The most recent scheme is Modderfontein New City, which is to be developed by China’s Shanghai Zendai Property at a cost of R84bn ($8bn) on a 1,600 hectare site near the prosperous northern suburbs of Johannesburg, informal settlements and Oliver Tambo International Airport. Housing for 100,000 people is to be provided over 15 years, alongside schools and other residential infrastructure, plus office accommodation and a business park. The site of Modderfontein was bought for R1bn ($95m) last year.  

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