Africa’s building boom: Chinese firms losing advantage – Group Five


JOHANNESBURG  – Construction companies in sub-Saharan Africa are moving beyond mainstay mining work as rising wealth and urbanisation spark demand for shopping centres and better roads, the chief executive of South African builder Group Five said.Labourers work at the construction site of the Sandton Gautrain station in Johannesburg

Mike Upton also told Reuters in an interview that some sub-Saharan governments were increasingly wary of previously favoured Chinese contractors, presenting an opportunity for local and other international firms.

“Africa for us previously – apart from the countries neighbouring South Africa – was really mining only,” Upton said in an interview late on Friday.

“As the economic impact of extraction starts to flow through into those economies, we start to see demand for shopping centres, housing and better roads.”

Johannesburg-based Group Five, South Africa’s fourth-largest builder by market value, is active in around 20 countries across the continent.

Nigeria, now Africa’s largest economy, is an example of the trend, Upton said. Where previously, much of Group Five’s Nigerian work was focused on power generation, the company is now doing projects in housing, shopping centres and toll roads.

The widening economic activity is part and parcel of Africa’s growing consumer spending and swelling population.

Management consultancy McKinsey estimates that African consumer spending will be $1.4 trillion by 2020 – nearly doubling from $860 billion in 2008 – and forecasts a more than doubling of the working age population to 1.1 billion people by 2040.

So far some of the biggest beneficiaries of that growth have the been the Chinese, who have built roads, ports and airports across Africa in exchange for its mineral wealth.

Yet they may be losing their advantage, Upton said, given questions about their building quality and use of their own labour.

“There is a push-back, based on a couple of things: One is the quality, and two is the culture of the contracts – it’s not empowering for the local economy – and can actually inflate the costs in the end.”