Photo courtesy of Eskom
The $20.3-billion Kusile power project is one of the largest in southern Africa.

Despite inroads by the Chinese, construction firms from Europe and the U.S. maintained a major share of African infrastructure projects, a new survey reports.

Consultant Deloitte says U.S. and European companies are building 115 out of 332 projects of at least $50 million in size. Those projects have a total value of $233 billion.

State-owned firms based in the People’s Republic of China, which have taken significant African market share in recent years, remain behind, with 38 projects.

Private African-based construction contractors have taken 45, and the rest are being built by African governments or under public-private partnerships.

Long considered to be mired in poverty and unstable politically, Africa has a new allure, owing to its rising middle class and deep store of energy and other natural resources. The presence of China’s construction contractors in Africa is one of the signal events of recent global competition.

In a sign of the continuing competitive strength of U.S. firms, a state-owned company in South Africa, Transnet SOC Ltd., recently awarded Los Angeles-based AECOM Technology Corp. a contract for engineering, procurement, construction management (EPCM) and project-close-out services for up to 15 separate projects with a total value of $2.2 billion. AECOM will earn an estimated $30 million in fees from the projects.

Deloitte’s report says private investors own 39% of the sampled projects and “within this sample European and U.S. investors own 17% of the projects with 10% having private domestic ownership.”

“There is limited ownership exhibited by BRIC [Brazil, Russia, India and China] countries and by the East and intra-African investors who hold just 2% of the ownership pie, confirming sustained low levels of intra-African trade and investment,” says the report, which was prepared by Deloitte Southern Africa jointly with Deloitte Africa member firms.

Development finance institutions have provided 36% of the total funding with governments in Africa giving 8%. The Deloitte report says 7% of the projects are co-funded by international and African DFIs.

“Europe/US based stakeholders’ fund 15% of projects and Chinese stakeholders fund 10% of projects.”

The largest projects are in the sectors of energy/power, transport, mining, real estate, water, oil and gas. Many are concentrated in Southern and Eastern Africa, with 38% and 29% of the total projects respectively.

The report covers African infrastructure projects valued at more than $50 million and which have broken ground but had not been commissioned as of June 1, 2013.

Strong Historical Ties

The Deloitte team says despite China increasing its funding for infrastructure development in Africa, the region’s historical ties with Europe have created long-term partnerships that have helped shape ownership and funding of the construction sector.

“I think that the U.S. and European construction firms are just more entrenched in Africa historically,” says Andre Pottas, Southern Africa Infrastructure and Capital Projects leader at Deloitte. “The European and US construction firms have been active on the continent longer, and the colonial legacy has resulted in long-existing presence and relationships for these entities in the African markets.”

He compares them with Chinese firms which “have relatively recently started to look outside of China for construction opportunities, and have been successful in taking market share from the incumbents in this time.”