Ballast Nedam predicts surge in Africa’s share of new construction business

By David Whitehouse
Posted on Wednesday, 25 May 2022 06:00

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Dutch-based construction and engineering company Ballast Nedam expects a major increase in the share of its project pipeline coming from Africa, CEO for international projects Roy van Eijsden tells The Africa Report.

The company’s international business expects 40%-50% of new work in revenue terms to come from Africa in 2023, from a currently minor share of less than 10%. Though the progression may be “volatile”, Van Eijsden is confident that Africa will be able to sustain that kind of level in subsequent years. “We can accelerate our activities in Africa.”

Ballast Nedam was taken over by Turkish construction company Renaissance Construction in 2015 and delisted from the Dutch stock market in 2016 after running into financial difficulties. The company said in its 2021 results that it is open to possible acquisitions and investments in real-estate development.

North Africa is now dealt with by the parent company, while sub-Saharan Africa falls under van Eijsden’s remit. West Africa, he says, is “a larger market with a steadier stream of new projects,” while opportunities in east Africa are more “ad hoc.” English-speaking Africa is likely to be the main focus as francophone countries tend to turn to French companies, he says.

  • Port facilities, including for the export of oil and grains, jetties and breakwaters are among the types of project that van Eijsden expects to focus on. He also aims to add more water treatment and distribution projects, which have an immediate social impact.
  • Higher input prices caused by the Russia-Ukraine war are a challenge. Van Eijsden points to increased costs for commodities such as steel, gas and wood.
  • Intangible aspects of logistics such as delivery times are also becoming more difficult, he adds.

Public-private partnerships

Sovereign debt levels in Africa are currently a constraint on the ability of governments to underwrite projects, van Eijsden says. He sees a greater role for public-private partnerships (PPPs), and argues that there is an opportunity for global infrastructure funds to invest. “There are maturing markets in project development terms,” he says. “There’s an opportunity for more parties to become involved.”

Projects in Africa take longer than in Europe to get off the ground, and the “people factor” is much more important, van Eijsden says. Finding the right partners is a challenge. Van Eijsden gives Ghana and Kenya as examples where governments have developed knowledge in managing complex projects.

Ghana, he says, is a prime candidate for more PPPs. Projects in Ghana 20 years ago mostly relied on “fly-in, fly-out expertise.” Today, local expertise plays a much bigger role. “The days of Europeans travelling in to explain how to build a port or a water system are over. The knowledge is there”

  • Kenya, he says, has in the past been over-reliant on China for construction projects, but is now diversifying, which is a “healthy” sign.
  • Van Eijsden argues that Ballast Nedam makes much greater use of local labour in African construction projects than Chinese companies.

Bottom line

Africa’s need for infrastructure and narrowing government ability to pay for it means the opportunities for infrastructure funds are increasing all the time.

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