Focus: Construction

A Structured Approach

A Structured Approach

May. 9, 2013

As local companies vie for a share of the construction pie, international enterprises encourage the growth of the domestic workforce and the availability of building materials for large infrastructure projects.

Mozambique's construction sector has one of the strongest growth outlooks across the Sub-Saharan Africa region. Today, the industry is driven by the huge investments pledged to infrastructure improvements that are designed to support the country's rapidly developing oil and gas and mining sectors. Alongside those participating in major natural resources projects, construction companies, foreign contractors, electricity providers, and transportation enterprises are contributing tothe overall growth of Mozambique.

Currently, there is more than $25 billion worth of projects planned or underway. Accordingly, the country's administration anticipates strong growth in the construction sector, reaching figures of around 10% on average per year between 2012 and 2016. Current estimates peg the value of the construction industry at approximately $500 million.

In addition to the bustling activity of Portuguese construction firms in Mozambique, much of the interest in Mozambique is sourced from other emerging economies, such as Turkey and South Africa. As more foreign investors pour into the country in search of opportunities in mining, oil, and gas, the development of infrastructure projects, ranging from roads and airports to the so-called “Nacala Corridor," is vital for the future of the country.

Meanwhile, building materials, as well as the workforce to produce and use them, are becoming an increasingly important aspect of the local construction industry. In 2013, new factories, training programs, and import quotas will continue to boost the up-and-coming production of building materials, with cement likely to lead the segment.


CEMENT & MORE

Although competitively priced cement from abroad and a lack of local supply has long characterized the cement trade in Mozambique, government incentives to decrease imports and launch more domestic production sites are beginning to turn the tide. As a reflection of improved public assistance, domestic cement production in Mozambique reached a record high of almost 280,000 tons in 1Q2012, with imports falling to 79,000 tons during the same period.

According to official statistics, the annually production capacity of cement in Mozambique reached 2 million tons in 2011, marking a 43% increase year on year. As part of a plan to increase local production levels, the administration is aiming for the country to produce 4 million tons of cement annually by the end of 2013. To do this, the Mozambican government has publicized plans to build three new plants: GS Cimentos, which would boast an annual capacity of 500,000 tons, ADIL Cement (120,000 tons), and Maputo Cement and Steel (130,000 tons). All three factories are to be built in Maputo province. Along with the expected increase in supply, the government expects the price of cement sold locally to stabilize in the coming years.

Also seeing an increase in production capacity, Cimentos de Moçambique is the largest cement factory in the country. In 2012, the facility inaugurated a new mill with an annual capacity of 400,000 tons. Largely foreign owned, 82% of the company is controlled by Cimentos de Portugal (Cimpor), with the remaining shares held by Mozambican state companies Portos e Caminhos de Ferro and Empresa Moçambicana de Seguros.

Leading new developments in the cement industry, Cimpor will add 700,000 tons to its annual production of 600,000 tons once a new grinding unit comes onstream, injecting approximately €18 million into the cement industry. The company is seeking to wrap up investments in the €32 million grinder facility by the end of 2013. Another €100 million project spearheaded by Cimpor is part of a strategic decision to create supply lines for large developments in the exploitation of natural resources in and around Beira.

However, cement is not the only segment of the construction industry set to expand, and companies such as BRITALAR Moçambique have discovered opportunities in other lines of building materials. “There is a huge opportunity to produce prefabricated concrete products for infrastructure, as well as ceramic bricks," Eduardo Samuel, Administrator of BRITALAR Moçambique, explained to TBY. “We're in the process of negotiating a loan to buy all of the necessary equipment from a factory located in Matola." In 2012, the company's turnover reached $22 million, and Samuel expects a 100% increase to around $45 million in 2013. In the coming year, companies such as BRITALAR Moçambique are also expecting a number of large contracts for the construction of offices, hotels, and apartments.

Nonetheless, current supply levels in the sector are still low compared to the booming local construction sector. Despite the presence of five local cement factories, a large quantity of cement continues to be imported from South Africa, Egypt, China, and Ukraine. In addition, the attractive prices offered by newcomers such as India and China are dominating the market in Maputo, as well as other parts of the country. Furthermore, a lack of developed customs and border laws continues to allow for the easy transit of the commodity at tax-free rates.

INFRASTRUCTURE

Since 2010, activity regarding the development of infrastructure and other public works projects has increased steadily in Mozambique, with government expenditure growing by 29% in 2011. Huge investments and initiatives in remote areas of the country has driven both local and international enterprises to begin equipping the nation with a wider and more efficient network of roads and bridges, as well as airports and maritime infrastructure.

To this end, companies such as Soares Da Costa Moçambique, MOTA-ENGIL, and Odebrecht Moçambique are working to establish the right infrastructure, recruit an expert workforce, and collaborate with other sectors of the local economy to provide infrastructure for a population with high expectations for the future. Aiming to increase annual turnover, Rui Carrito, the Director General of Portugal-based Soares Da Costa Moçambique, highlighted the company's motivation to complete landmark projects such as the Tete Bridge over the River Zambezi and interconnected roads in Gaza. With 700 people working for the company in Mozambique, Soares Da Costa's most recent endeavors include the construction of Pemba Airport and a network of bridges designed to serve provinces of Manica and Sofala. “We will be able to increase our turnover in Mozambique every year until 2015, when we hope to have revenues of more than €100 million annually," Carrito informed TBY.

MOTA-ENGIL is a second Portuguese company heavily involved with the construction of new infrastructure, specifically targeting projects that are not only large, but vital to the development of the country. Examples include the establishment of a road linking Massinga and Nhanchengue, the road between Chimoio and Espungabera, a village for the 10th annual All-Africa Games, and two Olympic swimming pools. According to José Zilhão, Country Manager of MOTA-ENGIL, the company is also involved in the Nacala Corridor project, and was a signatory of the final agreement in July 2012. Zilhão told TBY that the plan involves “the construction of a new 45-kilometer railway between Mozambique and Malawi," adding that the project will employ about 1,000 employees. “The corridor is part of a railway that will extend for 1,000 kilometers from the Moatize mine in Tete to the port of Nacala, beyond the border of Malawi." Meanwhile, the Bank of Brazil is currently in negotiations to provide funding for the construction of the Moamba Major dam, which will supply drinking water to the Mozambican capital Maputo in April 2013. The dam is estimated to cost $500 million, and construction could begin as early as 2014 or 2015.

Although local players have not yet reached a competitive point when compared to international construction companies, foreign-based enterprises are working to cultivate a local labor force. To mitigate the lack of human resources in the country, Odebrecht launched its Acreditar program in Mozambique, a plan initially developed in Brazil that adapts learning material to present to potential trainers in the field. In one year's time, local laborers are qualified to train the next generation of Odebrecht employees. “We already have 1,300 people certified at different levels through the program," Miguel Peres, Managing Director of Odebrecht Mozambique, told TBY, “and we intend to hire most of those people. There are specific modules for developing ironworkers, masons, carpenters, equipment operators, and other trades." According to Peres, these and a variety of other positions in the construction industry are in high demand. The growing availability of financial capital and government investment, combined with support from international companies, means that Mozambican citizens can expect to reap manifold benefits from the burgeoning construction sector.

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