With Africa’s overall economy projected to grow 5.9% this year, analysts say the continent’s construction industry could see a significant rebound. But the picture is expected to vary among countries. For example, Nigeria is expected to post a substantial increase, but South Africa’s growth is projected to be less robust.

Many countries’ investment-friendly policies, along with increased government spending and China’s determination to have a major impact on Africa’s economy, are combining to spur the continent’s growth in 2012 after the debilitating global economic crisis. 

The International Monetary Fund has said Africa’s 2012 economic growth rate is expected to climb to nearly 6%. That rate compares with 4.9% in 2011 and 4.8% in 2010.

Analysts say Africa’s rising government spending on construction and other programs is one factor driving the continent’s economy at a time when major global economies are struggling to find their footing. 

Still, many lenders have continued to keep credit tight, starving some global construction firms with projects in Africa. As a result, a few African countries have put construction projects on hold, but several other projects have proceeded as planned. 

Two factors that helped many African countries withstand the shocks of the financial crunch were the use of public-private partnerships (PPPs) and liberalization of key infrastructure sectors, especially energy and transportation.

 “Governments are looking to public-private partnerships to radically improve infrastructure networks in their countries and enhance service delivery to their people,” said the South African Institute of International Affairs, a non-governmental research organization.

The institute added, “PPPs may have the potential to solve sub-Saharan Africa’s profound infrastructure and service backlogs, where nearly 600 million people lack access to electricity, almost 300 million have no access to safe water, and there are just eight telephones per 100 inhabitants.”

The Institute of Economic Affairs of Kenya, which provides research for policymakers and parliament, said,  “Given the paucity of public funds, African countries will increasingly depend on private funding for the development of services traditionally provided by the public sector.” 

But it is China’s entry into the core of Africa’s economy that is likely to determine the fate of the continent’s construction industry in 2012. China’s quest for raw materials and energy-supply security has pushed its state-owned firms into Africa, where they have successfully negotiated a growing number of construction deals.

Chinese banks have opened their accounts to those state construction firms, helping them win lucrative construction contracts across Africa. 

Li Ruogu, chairman and president of the China Export-Import Bank, the world’s third-largest export credit entity, says 40% of the bank’s loans are in Africa. 

Executive Research Associates, a South Africa-based labor and political consulting firm, said that Chinese state funding agencies “have vast resources at their disposal and are able to provide discounted loans to Chinese corporations on the overseas acquisition trail, not necessarily subject to the same rigorous accountability and transparency constraints that govern Western business ventures.” 

But the outlook is less positive for the sub-Saharan construction industry, with South Africa, the region’s largest economy, expected to show stunted growth. The reasons include instability in the international financial markets, budget cuts by some countries and political uncertainty in others.

“Conditions in the South African construction industry remain difficult and less prosperous compared to a few years ago,” said Elsie Snyman, CEO of Industry Insight, a South Africa-based research firm.

She added that South Africa’s budget allocations are projected to be flat or marginally down, in inflation-adjusted terms, over the next three years.

Business Monitor International (BMI), a London-based market-research firm, reports, “South Africa’s construction industry will continue to face structural difficulties that limit growth,” though the firm forecasts the industry’s volume will expand 2.7% in 2012, compared with last year’s level. 

On the plus side, South Africa President Jacob Zuma has promised to make infrastructure a priority this year as part of his administration’s strategy to boost the economy and create job opportunities. 

Zuma said in his State of the Nation speech on Feb. 9, “We plan to develop and integrate rail, road and water infrastructure to unlock the enormous mineral belt of coal, platinum, palladium, chrome and other minerals.” 

Nigeria, Africa’s largest oil producer, is defying the global economic crunch and has recorded strong construction-industry increases.

BMI projects that Nigeria’s construction industry volume will reach $3.3 billion this year and achieve annual growth rates in the high single figures to 2021, when volume will hit $10.1 billion.

Countries in east Africa have made infrastructure development a priority in their national budgets as they seek to ensure their products are competitive in regional and international markets. 

Kenya, east Africa’s largest economy, has hiked its infrastructure-development budget this fiscal year by 34%, to $2.65 billion, from $1.98 billion last year.

Looking at Africa’s overall economy, the World Bank said in January, “Excluding South Africa, which accounts for over a third of [Africa’s] GDP, growth in the rest of the region was even stronger at 5.9 % in 2011, making it one of the fastest-growing developing regions in the world.”

The bank added that, in 2011, the economies of one-third of Africa’s countries grew by 6% or more and another 40% recorded growth rates of 4% to 6%.

China’s huge appetite for Africa’s natural resources and its push to dominate the continent’s construction industry will help compensate for a possible decline in migrants’ remittances to their home countries. 

Such remittances are Africa’s largest source of foreign capital after foreign direct investment and have fueled the region’s construction, especially in the housing sector.

The World Bank projects that remittances will rise to $24 billion this year and to $26 billion in 2013. However, it adds, “in the event of a sharper global slowdown, remittances could fall.”