Africa’s construction dragons

Construction Intelligence Center 6 Dec 2016 AFRICA BUSINESS

Youssef Ouchagour, construction industry analyst at Timetric’s Construction Intelligence Center, looks at some of China’s leading contractors, and projects that they are undertaking in Africa.

In 1999, the Chinese government launched its ‘go global’ strategy, aiming at promoting the export of Chinese goods and services, and increasing Chinese competitiveness globally. Spurred by this initiative, state and privately owned Chinese contractors with the backing of the Chinese government and funders have sought to win more work outside China, especially in developing regions such as Africa and Central Asia.
 
In a matter of few years, the market share of Chinese contractors in Africa surpassed that of Europe and the USA, making China the continent’s largest contractor. Today, Africa represents China’s largest overseas construction market.

China Civil Engineering Construction Corp (CCECC)

China Civil Engineering Construction Corporation (CCECC) was established in 1979 as the Foreign Aid Department of the Ministry of Railways of China. Over the years CCECC has evolved into one of the largest state owned enterprises. It is headquartered in Beijing and operates as a subsidiary of China Railway Construction Corporation Limited (2016 Global Contractors Engineering News-Record Ranking: 3).

The company’s business scope has expanded from international contracting for railway construction to project contracting, civil engineering design & consultancy, labour services cooperation, real estate development, and import & export trading. The company’s project contracting activities include construction of railways, roads, highways, hotels, bridges, and residential, commercial, industrial, and infrastructural buildings and facilities. The business activities of CCECC have covered over 50 countries and regions in Asia, Africa, America, Europe and Oceania.

According to the Construction Intelligence Center’s (CIC) projects database, the total value of projects under execution in Africa involving CCECC is $70,101M. These projects cover the residential buildings, infrastructure, industrial, commercial & leisure, energy & utilities and institutional sectors.

Ethiopia – Djibouti Railway Line project / project status: execution

One of the main components of the Growth and Transformation Plan formulated by the Ethiopian government to improve the country’s economy is railway infrastructure development. Ethiopia plans to develop the Ethiopian National Railway Network (ENRN), which will link different parts of country and extend it to neighbouring countries through the Trans-Africa Railway Network.

The first railway line of the ENRN to be constructed links Addis Ababa with the port of Djibouti. It is built in two sections in Ethiopia: One section from Sebeta town, near Addis Ababa to Mieso town — built by the China Railway Group — and a second section from Mieso town to Dewele town, near the Ethiopia – Djibouti border, awarded to China Civil Engineering Construction Corp. (CCECC).

The railway route between Addis Ababa and Djibouti.

The funding needed for the project implementation is $3.4bn, and has been mainly provided by The Export and Import (EXIM) Bank of China, the China Development Bank and the Industrial and Commercial Bank of China.

The Ethiopia — Djibouti railway line has been officially inaugurated on the 5 October 2016 by Ethiopia’s prime minister Hailemariam Desalegn and Djibouti’s president Ismail Omar Guelleh. Once it enters in full operation, after an initial trial period, the new railway line will significantly reduce transit times of both passenger and freight along its route and provide landlocked Ethiopia better access to the port of Djibouti. This in turn will increase the competiveness of Ethiopia and help attract foreign investment. It is worth noting that 95% of Ethiopia’s trade passes through Djibouti — this represents 70% of the activity at the port of Djibouti. In addition to the economic benefits, the new railway line will help reduce road traffic and pollution caused by the movement of vehicles along the main road linking Ethiopia to Djibouti.

Due to a shortage of skilled railway personnel, the railway line operation will be handled by the Chinese for a period of five years. They will be eventually replaced by local people currently participating in a training programme led by the Chinese operators. This is the first time that Chinese companies have been involved in all stages of a rail project in Africa — including the laying of tracks, the manufacturing of trains, the provision of the signal systems, and the management of the route.

Sinohydro

Sinohydro was founded in 1950 as a state-owned hydropower project contractor. Since its inception, it has built around 65% of the large and medium scale hydropower stations in China. Sinohydro is based in Beijing and has now become part of the newly formed Power Construction Corporation of China also known as Powerchina (2016 Global Contractors Engineering News-Record Ranking: 6).

Today, after years of expansion and development, Sinohydro has become a global enterprise engaged in a variety of businesses from water conservancy and hydropower construction to project financing, design, implementation and operation in almost all kinds of infrastructures such as power, transportation, civil work, mining and real estate. Sinohydro has delivered a number of major projects across the world — it has five main regional offices managing 116 overseas offices in over 87 countries.

According to the CIC’s projects database, the total value of projects under execution in Africa involving Sinohydro is $15,855M. These projects cover the infrastructure, energy & utilities, residential buildings, and commercial & leisure sectors.

Karuma Hydroelectric Power Plant 600MW - Uganda / project status: execution

The inability of the Ugandan energy sector to provide a sufficient, reliable and affordable supply of electricity has always been one of the major impediments to socio-economic progress in Uganda. Only 14% of Uganda’s population has access to electricity and Uganda has one of the world’s lowest electric power consumption per capita rates. High electricity tariffs, high connection costs and chronic power shortages are some of the major problems affecting the energy sector in the country.

As part of its national development plan, the Ugandan government has stepped up efforts to develop the energy sector and launched a number of hydropower projects, such as the 600MW Karuma Hydroelectric Power Plant. The project is located on the Victoria Nile River at about 15Km downstream from the Karuma Falls.

Through a bilateral arrangement between the Ugandan and Chinese Government, 85% of the project will be financed by the Exim Bank of China and the remaining 15% by Uganda’s Government Energy Fund. Sinohydro was appointed as the project’s engineering, procurement and construction (EPC) Contractor. Construction of the dam and power plant was launched in 2013. Sinohydro has awarded Alstom a $65M contract to provide equipment and technical services for the hydropower plant. This was the third contract in Africa awarded by Sinohydro to Alstom — they have successfully cooperated in hydropower projects in Ghana and Ivory Coast.

When completed in 2018, the Karuma hydropower plant will be Uganda’s largest power plant and will double Uganda’s total electricity capacity from 509MW to 1109MW. By alleviating Uganda’s persistent energy problems, it is hoped that this project will give a great impetus to the social and economic growth of the country.

The project has had its fair share of problems since construction started. The project has been marred by a public and damaging spat, between the Ministry of Energy and Mineral Development and the Uganda Electricity Generation Company Limited over the supervisory control of the project, which has necessitated the intervention of the Ugandan presidency and parliament. In addition to this, there have been allegations of shoddy civil works by the contractors, allegations of inadequate supervision of the contractors by the owner’s consultants, and claims of corruption in the procurement process.

More recently, a public interest suit filed by a Ugandan lawyer against all the main stakeholders in the Karuma and Isimba power plant projects, including the Exim Bank of China. It has prompted the latter to send a strong signal to the Ugandan government that it may withhold its funding until the legal disputes involving these projects are resolved. Despite the Ugandan government’s efforts to resolve the current challenges the project is facing, it is now highly unlikely that it will be completed on time and budget.

China Harbour Engineering Company Ltd

The Beijing-based China Harbour Engineering Company Ltd. (CHEC) was previously known as China Harbour Engineering Company Group when it was founded in 1980. In December 2005, CHEC became a subsidiary of China Communications Construction Company Limited (CCCC), one of China's largest infrastructure government-owned companies (2016 Global Contractors Engineering News-Record Ranking: 4).

CHEC provides engineering, procurement, construction (EPC), build-operate-transfer (BOT), and public-private partnership (PPP) services for the public and private sectors in China and internationally. It offers services in the areas of marine engineering, dredging and reclamation, roads and bridges, railways, airports, plants, equipment assembly, and other works including civil works, municipal engineering, environment protection, water supply, power plants, and resource exploration. CHEC has around 60 overseas branches and offices with business activities covering more than 80 countries and areas across Africa, Asia, Europe, the Americas and Oceania.

According to the CIC’s projects database, the total value of projects under execution in Africa involving CHEC is $15,173M. These projects cover the infrastructure, energy & utilities and commercial & leisure sectors.

Zanzibar Port Development - Tanzania / project status: execution

Zanzibar is a semi-autonomous archipelago off the coast of East Africa. The archipelago, part of Tanzania, includes two large islands: Unguja and Pemba. Unguja Island is home to Zanzibar’s main port, the Malindi Port, which currently handles 90% of the island’s trade.

In the last few years, the island’s growing trade and the limited capacity of the port have resulted in major congestion at the port and long delays in cargo handling. To solve this problem, Zanzibar’s autonomous government, following a number of preliminary studies, has decided to build, in phases, a new port approximately 2km north of the existing Port of Malindi in the Mpiga Duri coastal area.

The Zanzibar government has secured the funding for the first phase of the project, the majority of which comes in the form of a $200M loan from the Exim Bank of China. CHEC, the project’s contractor, has also agreed to release $30M through equity financing. The first phase will include the development of a multi-purpose terminal capable of handling containers, general cargo, and some bulk cargo as well as liquid bulk (oil) imports. The construction of phase 1 is expected to last 2.5 years.

When completed, the new port terminal will be able to handle up to 200,000TEU and 250,000t of cargo annually. It is hoped that the new port would accommodate the Island’s growing cargo traffic all the way through to the year 2030. It will play a vital role in the Island’s economy through generating income, boosting trade and job creation.

Zanzibar Harbour pictured. Unguja Island, part of the Zanzibar Archipelago is home to Zanzibar’s main port, the Malindi Port.

China State Construction Engineering Corporation Ltd

China State Construction Engineering Corporation (CSCEC) was established in the 1950 by the Chinese state. Over the years, CSCEC has evolved through continuous restructuring and a series of mergers and acquisitions to become one of the largest construction and building contractor in the world (2016 Global Contractors Engineering News-Record Ranking: 1). CSCEC is based in Beijing and is listed in the Shanghai Stock Exchange as ‘China Construction’.

Established in both domestic and international markets, CSCEC operates in a number of countries and regions around the world. The main activities of the company include building construction, international contracting, real estate development and investment, infrastructure construction and investment, prospecting and design.

According to the CIC’s projects database, the total value of projects under execution in Africa involving CSCEC is $308,753M. These projects cover the infrastructure, energy & utilities, institutional, residential buildings and commercial & leisure sectors.

Algiers Houari Boumediene International Airport Extension - Algeria / project status: execution

Developing the transport sector is a vital component of Algeria’s strategy to improve economic performance and build a diversified and sustainable economy. Despite the sharp fall in oil prices, the Algerian government continues to invest heavily in the modernisation of its transport infrastructure. In order to accommodate Algeria’s growing air transport market, a number of key airports are being upgraded, including the Algiers Houari Boumediene International Airport.

In 2014, La Société de Gestion des Services et Infrastructures Aéroportuaires d’Alger (SGSIA) has awarded the engineering, construction, and procurement (EPC) contract for the expansion of the Houari Boumediene International Airport to the CSCEC. The project involves the construction of a new terminal on a 73ha of land on the west side of the airport. It is expected to cost $830M and will be fully financed by the SGSIA.

When completed, the new terminal will increase the airport’s annual capacity from 6 to 10M passengers. Construction activities are underway and are expected to be completed in 2018.

Sinoma

Sinoma, also known as China National Materials Group Corporation, is a state owned Chinese company, Considered the world’s largest cement equipment and engineering service provider, Sinoma is composed of a number of specialized subsidiaries including consultancies, design & research institutes, construction companies and equipment manufacturers. Currently headquartered in Beijing, it has a workforce of more than 10,000 people.

Sinoma’s main services include all aspects of the cement engineering industry chain ranging from engineering design, technology and equipment R&D, equipment manufacture and supply, civil construction, equipment installation and plant commissioning to operation & maintenance.

Geographically, Sinoma classifies its operations into seven regions: China, the Middle East, Africa, other Asian countries, Europe, America, and Others. In 2015, these regions accounted for 63.1%, 6.2%, 13.5%, 10.4%, 3.4%, 2.7% and 0.7% of the company’s total revenue, respectively.

According to the CIC’s projects database, the total value of projects under execution in Africa involving Sinoma is $7,136M. All the projects are classified within the industrial sector.

Beni Suef Cement Production Plant - Egypt / project status: execution

The 2011 Egyptian revolution has negatively impacted Egypt’s economy. In order to put an end to the severe economic downturn and restore growth, the Egyptian government is investing on a number of social and infrastructure mega-projects. The expected rise in construction activity will increase the demand for construction materials and in particular cement in the coming years.  

To help meet the future demand for cement, Egypt’s Ministry of Defense & Military Production (MoDMP) is undertaking the construction of a cement production plant in Beni Suef, Egypt.

The project involves the construction of six clinker cement production lines with a total daily capacity of 6,000t. On June 2016, MoDMP signed a $1,180M turnkey contract with Chengdu Design & Research Institute of Building Materials Industry Co., Ltd. (CDI), a subsidiary of Sinoma.

The scope of the contract includes the design, supply, construction, installation, commissioning and maintenance of the cement plant. The contract period for the operation and maintenance of the six production lines is three years. The new production lines are expected to begin pilot production in December 2017.

In addition to meeting the rising demand for cement, this project along with other planned cement plants will help boost the construction sector through reducing the price of cement that has reached record prices in the last few years. The increase in cement production will also further consolidate Egypt’s position as one of the leading cement producers in the region.

* Visit the Construction Intelligence Center for more information on the construction industry.


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