Africa: the market of the future
Good performance for constructions especially in north Africa
The future is in Africa: or, rather, how Cresme (the Italian Research Institute specialising in constructions) points out in its report titled “Africa and emerging economies”, the international market may be an effective response to the recession.
The main emerging economies, the so-called BRIICS (Brazil Russia India Indonesia China and South Africa) today already represent 24% of world GDP and 46% of world population, and have grown in recent years at unthinkable rates for western economies. Our attention is customarily focused on these countries, which at most can be joined by Mexico, but overlooks an equally interesting phenomenon: the economic growth of the African continent that, despite a downturn in 2009 in the wake of the global crisis, posted 6.4% in 2007 and 5.5% in 2008. An average figure highlighted by the excellent performances of all countries on the southern shores of the Mediterranean. In 2008, GDP in Egypt grew by 7.2%, Morocco by 5.6% and only Tunisia was below-average with 3.4%. Yet especially this was not episodic growth but linked with the permanent and structural development of these economies. African countries are no longer a source of natural resources largely intended for exports to developed countries but a market with enormous potential. China and India realised this perhaps before us and have combined free aid to African countries with other kinds of action in order to promote solid and long-lasting economic and commercial relationships.
In recent years, many African countries have benefitted from better management of their economic policies, substantial aid for development, direct investments by western economies and even the cancellation of debts. These development factors are now joined by massive investments from China, India and Gulf countries. A new situation that forces the more industrialised countries to develop new strategies for the creation of development partnerships and incentives for the involvement of national companies on these markets.
This is particularly true for European countries even in the light of the project to create a Euro-Mediterranean Free Trade Zone, expected to be finalised very shortly.
African economic growth is also driven by the construction market that has seen a full-scale boom in the continent . Over the last eight years, investments have grown at an average rate of 8.5%, coming to 167 billion euros. In 2008, growth was 9.4%, a percentage comparable to figures in countries such as China (12.6%) and India (14.9%). The latest 2009 data published by the "World Information System for the construction market (Simco)" by Cresme indicate growth in investments of 6% when all over the world, on the other hand, a drop of 2.6% is calculated, with peaks of 8% in Europe and 14% in the United States.
The growing importance that the African market has achieved on an international scale may also be highlighted by analysing the role of this market in terms of business volumes for the main world contractors, attracted to the continent by major economic prospects and huge infrastructural development projects. The volume of business in Africa by the top 225 general contractors in the world, in short, has grown from just 7.7 billion dollars in 2000 to almost 51 billions in 2008, the year in which the increase compared to the previous year was an impressive 78%. In order, the 2008 ranking by turnover of the main general contractors in Africa sees China take first place with 46 companies and revenue of 21.5 billion dollars, followed by Italy with 23 companies and turnover of 8.3 billion dollars, France with 5 companies and 5 billion dollars, the USA with 12 companies and 3 billion dollars and Brazil with 2 companies and 2.2 billion dollars.
The important infrastructural projects launched in many African countries, especially in the Mediterranean area, are a major opportunity for companies. By way of example, mention can be made of the “power pools”, four huge projects involving private and public companies in sub-Sahara countries with the intention of upgrading and networking energy production and distribution infrastructures. Or even the north-south corridor involving 8 states and finance and maintenance of more than 8000 km of roads and 600 km of railways.
Infrastructural projects in North Africa are very significant: Algeria has approved finance of 11 billion euros to upgrade the railways, while Morocco has launched an infrastructural plan worth 109 billion euros. Libya recently stipulated an agreement for the implementation of a motorway costing more than 3.5 billion euros. Moreover, Morocco has launched work on the construction of the second part of the port in Tangiers.
These projects of public interest are also joined by significant investments in the tourism sector, especially in Egypt, with the construction of new hotels and holiday villages.
Analysis of the construction field in North Africa in 2008, with an overall value of about 43.2 billion euros, indicates how in all countries considered (Algeria, Libya, Egypt, Morocco and Tunisia), the infrastructures sector takes the lion's share with percentages ranging from 34% to 54% of total and an overall value of 20 0.8 billion euros. Emphasis should be given to the performances of Tunisia and Egypt in the residential sector, essentially in the tourism area, with percentages respectively of 53.1% and 39.1 % on total investments in constructions. Non-residential investment in Morocco is significant in percentage terms (34.3%) and absolutes values (more than 3 billion euros).
In conclusion, it can be said that, in times of crisis such as these, companies capable of grasping the opportunities offered by the markets in these emerging economies will come to the fore.
It will certainly not be an easy or risk-free undertaking: "hit and run" operations are not possible - it is essential to plan a well-established presence in the markets where companies decide to operate. Local realities, starting with standards governing the activity of foreign companies, vary from country to country and are often penalising, especially for medium-small companies.
Yet today as never before, the future lies abroad and in Africa in particular.
Verona, 16/12/2009
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