China-Africa: You want it; they can build it

http://www.theafricareport.com/index.php/20120823501817580/sectors/china-africa-you-want-it-they-can-build-it-501817580.html

China-Africa: You want it; they can build it
Thursday, 23 August 2012
The Africa Report

Chinese contractors have become the dominant force in African
construction over the past decade, but new competitors could bring even
lower costs and improved quality.

The symbols of Africa's growth dynamic, from Algiers' Great Mosque to
the headquarters of the African Union in Addis Ababa, have been or are
being built by Chinese contractors. In late May, Uganda's National
Social Security Fund announced the shortlist of construction companies
to build the Pension Towers: the China Civil Engineering Construction
Corporation East Africa, China National Aero-Technical International
Engineering Corporation and Sinohydro Corporation. At 25 storeys,
Uganda's tallest building will be built by a Chinese construction company.

Chinese companies have made strong headway over the past decade. Backed
by national policy banks, companies such as Sino-hydro and China Railway
Construction Corporation are now the most active firms in African
infrastructure, bringing China's share of Africa's construction market
to 36.6% in 2010, according to Engineering News Review.

The largest share of Chinese construction contracts has been in large
state-to-state deals, be it mines for infrastructure in Angola and the
Democratic Republic of Congo or road, stadium and dam projects in
Cameroon and Malawi. The competition to build Uganda's tallest building
and hundreds of other tenders show that Chinese contractors can beat
their international rivals. Trouble in the US and European economies has
created more room for emerging-market competition in construction.

Americans and Europeans pull back

Chinese companies tend to favour Chinese state-backed projects, for an
important reason: many African governments struggle to pay contractors
on time. In May, several Chinese road projects ground to a halt over
unpaid arrears. In Botswana, Sinohydro stopped working on the 115km
Kang-Hukuntsi road with about 40km left to complete. The 20 odd
construction companies represented by the Chinese International
Contractors Association in Tanzania have been lobbying the government to
make payments on some of the TSh400bn ($254m) in debt that started
accumulating in 2009. Chinese firms are pav-ing about two-thirds of all
roadworks currently under construction in Tanzania, representing about
2,400km.

North American and European financiers have pulled back from dam
financing, which means that almost all recent dam contracts have been
awarded to Chinese firms. Sinohydro is working on the Memve'ele and Lom
Pangar dams in Cameroon, Grand Poubara in Gabon and F�lou in Mali. Peter
Bosshard of the non-governmental organisation International Rivers,
which has worked with Sinohydro to establish an environmental policy
framework, says that there has been a steep learning curve for Chinese
companies in Africa but that environmental and social practices are
improving. "Big state-owned enterprises have often adopted their own
standards, while smaller companies may still try to maximise short-term
profits without regard for their long-term perspectives and China's
reputation," says Bosshard.

Mirroring the technology-transfer practices that have enabled Chinese
cities to host high-tech manufacturing plants, Chinese dam builders
learned from the contractors on the Three Gorges Dam and are taking that
know-how to Africa. The same skill-building for Chinese companies goes
on in Africa, too. The $684m, 300MW gas-fired power plant at Mnazi Bay
in Tanzania is being financed by China Export-Import Bank. It is being
built by China Machinery Engineering Corporation and Germany's Siemens.
African governments have not yet insisted that Chinese and other
partners transfer their knowledge and skills to local players.

Quality concerns

As the years pass, Chinese companies are taking on more complex
projects. The China-Africa Development Fund's first project, the Asogli
gas-fired power plant in Ghana, is a combined cycle plant, meaning that
its power-generation mechanism runs off both the gas being burned and
the steam created as a by-product.

China-Africa researcher Lucy Corkin notes that while state-owned
enterprises take up the main contracting work, "smaller private Chinese
companies fill in the value chain in terms of service providers. Chinese
companies have successfully bid for World Bank projects and other non-
Chinese tenders, but there has in some cases been some resistance,
notably from the European Association of Construction Contractors."

Just as the influx of cheap and counterfeit Chinese goods has raised
concerns among consumer advocates, cracks in the wall of a newly built
hospital in Luanda and a washed-out road in Zambia have added to
criticisms about the quality of Chinese construction. Corkin explains
that Chinese construction projects in Africa face other problems: "Two
issues that are of huge importance are maintenance and compatibility, as
often the standards, components, voltage and plug sockets are imported
wholesale from China without any regard for local requirements."

The arrival of competition from other emerging markets should force all
players to improve their performance. In 2011 Turkish company Kolin
Insaat Turizm Sanayii Ve Ticaret won the contract to tarmac the
Hoima-Kaiso-Tonya road in Uganda, and Summa completed the African Union
Summit Convention Centre in Equatorial Guinea. Turkey's Export-Import
Bank announced $750m in new financing for construction projects in Libya
and Tunisia in January 2012. Brazil's Odebrecht is working on several
projects in Angola and plans to set up an office in South Africa this year.
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