Posted on Monday, 19 March 2012 13:23

Construction: Build a bigger and better tomorrow

By Bille McTernan

Strong economic growth brings more business for construction companies, but the top firms are facing capacity problems and uncertain regulatory prospects Africa's construction materials companies are struggling to keep up with demand.

photo/ reutersIn 2011 West African cement demand reached 30m tn, but production fell short at 21m tn. In an attempt to reduce this shortfall, cement manufacturers across the continent are investing in nine new plants to increase capacity by 15.2m tn.

The Lafarge Group – through its Nigerian subsidiaries Lafarge Cement Wapco (#391) and Ashaka Cement, Moroccan subsidiary Lafarge Ciments (#207) and Lafarge Zimbabwe – has four new plants due to complete over the next two years, providing a total capacity of 5.6m tn.

Other plants due to start production in 2013 include an Athi River Mining plant in Tanzania, a Lucky Cement plant in the Democratic Republic of Congo, a plant for Holcim (#292) in Morocco and Dangote Cement's (#111) new operations in Cameroon and South Africa. 

The uncertainty around project finance and bubbles in the project pipeline are obstacles for construction firms. 

Julius Berger Nigeria (#146) fell the most amongst construction firms. However, in October, it announced plans to take over engineering and services company Bilfinger Berger Nigeria, and will also launch another engineering subsidiary and a health-care unit. 

Infrastructure upgrades in East Africa have pushed the demand for cement in the region. In Kenya, construction accounted for 60 percent of the country's total investment during the first quarter of 2011, whilst demand in Tanzania is expected to increase by 18 percent given the country's current investments in mining and infrastructure development. 

Construction was one of the fastest growing sectors in the Kenyan economy in 2010. The trend continued into 2011, but the World Bank cautioned that the pace would slow down due to financing difficulties in the real estate market. 

South Africa's construction sector continues to under-perform and all of the country's construction firms in the top 10 slid down in the ranks.

altMurray and Roberts (#29) recorded a loss of $200m in its 30 June 2011 interim results after last year's $160.7m profit over the same period.

Wilson Bayly Holmes (#66) did not fare much better, and its interim results showed that revenue was down by 3 percent from last year and operating profitwas downby 14 percent. 

In November, Group Five (#87) said that it would continue to shed workers to make its operations more efficient. 

In order to be less reliant on the South African market, the country's fourth largest construction company said it would seek to balance its order books so that 40 percent of business comes from outside the country. 

Reconstruction works in Libya will soon be underway. The Arab Contractors (#47) and Orascom Construction (#32) are some of the companies aiming to land contracts there.

Elsewhere, Industrial Association of Angola chairman José Severino said in late 2011 that he hopes more domestic actors will join the civil engineering sector. 

This article was first published in the 2012 February edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.

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Mining: Prices up, production down

Gabon: Foreign banks rush in

Last Updated on Monday, 19 March 2012 15:19

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