Africa's Infrastructure Market
Africa has been and will be in the future a unique partner for Europe for historical, geographical and cultural reasons. Even in an ever-globalising world, the European Union and its Member States collectively remain Africa's most important partner for either trade, development aid or investment.
Since the launch of the EU-Africa Business Forum in 2006, EIC brings the perspective and proposals of the European construction industry to European and African leader in these gatherings, which are an integral part of the Joint Africa-EU Strategy. EIC’s Working Group Africa monitors the EU’s Blending Agenda and calls for sufficient European funds for Africa’s infrastructure to strengthen the position of European construction companies in Africa.
European contractors outpaced in Africa by Chinese contenders
Over the past decade, China has greatly expanded its economic ties to the continent, in particular in the construction sector. China has become the single-largest bilateral infrastructure financier in Africa and financing comes usually in the form of tied aid loans provided by one or more of the Chinese policy banks. European international contractors are not eligible for the respective infrastructure tenders, even though European development agencies allow Chinese construction companies participate in tenders.
A recent study by the consultancy McKinsey titled “Dance of the lions and the dragons” concludes that Chinese construction contractors presently command around 50% of Africa’s international engineering, procurement, and construction (EPC) market and that African government officials overseeing infrastructure development for their countries cite Chinese firms’ efficient cost structures and speedy delivery as major value-adds.
Europe’s Infrastructure Value Proposition
Yet, Africa’s spending on infrastructure, as a share of GDP, has remained below the 4.5% that expert research has found is necessary each year until 2025, which means in absolute terms the need to double annual investment in African infrastructure to $150 billion.
Given the demographic development and the size of the continent, the future demand for infrastructure is huge and there are business opportunities for European, their local partners in Africa and as well as for trilateral cooperation. There are many good examples already where the collaboration between European and African contractors has uplifted the local construction industry. When delivering infrastructure works in Africa, the European construction industry acknowledges its responsibility:
To deliver quality infrastructure, if requested even over the entire life-cycle of the project;
To employ and train the local workforce in accordance with internationally recognised labour standards thus providing decent work conditions;
To work together with local construction companies and suppliers and thus to maximise local content; and
To protect the environment through the recycling of waste and used materials and energy efficiency measures.
McKinsey Study on the Africa-China relationship: The Dance of the Lions and Dragons