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Construction still booming
The construction industry has enjoyed a relative boom period in many African countries over the past five years. Football stadiums, shopping malls, schools and clinics have all been completed, while social housing schemes have created millions of jobs across Africa as a whole. African firms have won a large proportion of the contracts on offer and the share prices of listed construction companies have risen strongly over the period. The construction and real estate markets are often the first to feel the effects of an economic slowdown, as well as the last to emerge from recession, yet there are few signs of a collapse in investment in most parts of the continent. Reports by Neil Ford and Sarah Rundell.
Constructing the African future
Africa is the site of choice for construction companies from around the world as new projects, from airports to large-scale affordable housing proliferate – despite the economic crunch. Neil Ford presents an overview of the sector around Africa. Some construction companies are even suggesting that the global economic crisis will encourage them to step up their property acquisitions in Africa because lower valuations offer good long-term value.
Dubai real estate firm Deyaar has identified markets in Africa and the Middle East where it will concentrate its resources. The company’s chief executive, Markus Giebel, said recently: “We have been negotiating in five different countries right now and we hopefully will be able to announce the first one or two deals in the next couple of months. The mature countries are not good for us. We need underdeveloped and developing countries to invest in.” Property prices have tumbled in many Gulf states over the past year and so a range of investors from the region are looking to Africa and even further afield for alternative investment targets. Any slowdown in investment could be partly mitigated by a wave of new financial support from the multilaterals. In particular, the World Bank’s new Infrastructure Recovery and Assets (INFRA) fund and the Infrastructure Crisis Facility (ICF) have been allocated billions of dollars to promote infrastructural projects in developing countries. Both are to be managed by the International Finance Corporation, with the INFRA budget stretching to $45bn and the ICF expecting to distribute $10bn, both over just the next three years.
Apart from power, water and transport projects, the money will be used to finance low cost housing, which is a growing focus of aid and investment funds, and other construction schemes in Africa.
Robert Zoellick, the president of the World Bank, commented: “As developing countries are facing the trials of the global economic crisis, it is vitally important that economic stimulus packages in the developed world are accompanied by support to those that cannot afford multibillion bail-outs.”Indeed, while the poor state of infrastructure has often been blamed for the economic frailty of many African states, housing and other buildings has rarely topped the list of construction priorities. However, there is growing pressure to put more effort into turning the informal settlements that have built up on the outskirts of African cities into more formal housing suburbs.
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