The numbers are looking good. Investment by value of mega-projects under construction grew by 46.2% in 2014, and Africa is expected to host nearly a quarter of the global urban population by 2050 – proof that the continent continues to present foreign investors and development companies with many inviting opportunities.
However, converting these into sustainable solutions that meet Africa’s needs will require a different philosophy and a new long-term approach from many players, according to Darryll Castle, chief executive of PPC.
He was speaking at a Gordon Institute of Business Science Forum event. In order to deliver on the continent’s vision of “sustainable success”, companies cannot simply adopt a “final frontier” philosophy and expand into the continent accordingly. They have to take both a macro and micro view – redefining return on investment such that it affects all stakeholder communities positively, he said.
As rising income and increasing levels of urbanisation continue to support economic growth across large portions of Africa, construction companies in emerging markets look set to grow well into the medium term.
“Investment by value of mega-projects under construction alone tripled from $103 billion (about R1.6 billion) to $326 billion in 2014 [according to Deloitte’s African Construction Trends Report 2014],” noted Castle.
“The latest Mo Ibrahim Foundation Report additionally forecasts that the next 35 years will see the continent accommodate 900 million new urban dwellers. Both of these paint an enticing picture for foreign investors, developers and construction firms – one which many have already started gearing to respond to.”
Expanding into Africa brings its own unique set of opportunities and challenges. It also moves continental “newcomers” into a development space – where a business as usual approach cannot meet non-negotiable growth and sustainability imperatives.
“Dumping building products cheaply, extracting resources without local beneficiation or any other form of business that is purely profit-oriented cannot be construed as ‘good for Africa’, especially against the back of the continent’s critical needs: reducing the cost of energy and mobility, job creation for youth and women as a priority, and growing manufacturing capabilities and intra-Africa trade, among others,” said Castle.
“As such, a far more long-term and legacy view of return on investment has to be taken – with the starting point for this exercise being to map out an inclusive list of project stakeholders.”
Government and local investors usually fall comfortably into the stakeholder category, but Castle said that many African-expansion exercises often excluded local communities and employees as key shareholders in the business.
“This typically manifests through imported labour [which does not unionise] and a lack of local succession planning – where the more ‘valuable’ skilled jobs remain reserved for foreign nationals ostensibly because the skills are not locally available. This effectively erodes and inhibits progress and development, exacerbating the cycles of poverty and economic exclusion that many local communities already find themselves in.”
He added that the alternative – an inclusive and participatory form of partnership – can, however, have the complete opposite effect.
“This is something we’ve seen ourselves through PPC’s expansion into Rwanda at our Cimerwa facility [in Bugarama in south-western Rwanda]. In this instance, we set a greater context for the partnership – notably that of ‘sustainable modernisation’.”
This enabled committed collaboration between all stakeholders: PPC and the Rwandan government, the Bank of Kigali, KCB Bank of Rwanda, the Eastern and Southern African Trade Development Bank, the local community, and up and downstream partners (including logistics providers) in the greater value chain.
“By setting critical milestones together and taking a purpose-driven approach, we have been able to roll the project out in a way that ultimately speaks to our collective legacy objectives,” said Castle.
These include extending Cimerwa’s production capacity from its previous 100 000 tons a year to 600 000 tons to meet the capacity needs of the Rwandan market and greater region, and implementing an extensive skills transfer programme that will ensure that over 95% of the total workforce employed at the new facility will ultimately be local.
“Investing in Africa requires ‘building’ Africa,” said Castle.
“To truly ‘build’ Africa, companies have to move beyond simply growing their asset base to creating meaningful capacity around them that will ensure communities remain self-sufficient well into the future. This is critical if we’re to realise the continent’s economic potential and uplift local communities so as to stimulate greater collaboration, growth and sustainable development for all of Africa’s peoples,” he concluded.