Construction company Group Five says its strategy is strongly focused on expansion in Africa, with selected projects in Russia and Northern America also possibly on the horizon.

Outgoing CEO Mike Upton says the South African construction industry saw what appears to be “a false dawn” a year ago, but that “the last few months had been tough”, with the market going through “quite a difficult period”.

There have been pockets of activity, such as in the building and health sectors, with the power and water sectors showing signs of improvement.

However, the transport and infrastructure markets have weakened markedly, with margins under pressure and few significant tender awards.

“If we rely on the South African market, we would be going backwards,” notes Upton.

He believes there are opportunities for Group Five in Africa in the power and transport concessions and contracting environment. These include renewable projects.

Projects being pursued include a R4-billion Ghana gas project, as well as geothermal opportunities in Kenya.

Some mining projects, however, are being delayed by the spread of Ebola in Western Africa.

The oil and gas opportunity pipeline is positive, especially in East Africa, with real estate development also expanding.

Also, where industrial developments outside South Africa were “at zero” for a long time, “there were green shoots in the cement and sugar industries”, says Upton.

SA Inc Generally Welcomed in Africa
Group Five’s new CEO from December 1 is Eric Vemer.

In Africa, the JSE-listed group is focused on expanding into East Africa, West Africa, Southern Africa and Central Africa, with local country representatives already appointed in Ghana and Mozambique, he says.

Group Five is involved in more than ten countries, with active government and stakeholder engagement. In fact, a management restructuring sees Themba Mosai from Intertoll Africa promoted to Group Five’s head of Africa, with a strong focus on developing and maintaining government relations.

Vemer says Africa is a hotbed of competition, with Turkish, Chinese, European and Indian companies, among others, all active on the continent.

South African companies are generally welcome in Africa, however, especially as an alternative to Chinese firms.

The edge South African companies bring is that they tend to use local labour, leaving a legacy of skills, empowerment and development, says Vemer.

In Zimbabwe, fewer than ten of Group Five’s employee total of 1 500 people were South African.

“We build up permanent jobs and capacity, unlike other countries, which often bring in their own labour,” says Vemer.

“We have a here-to-stay attitude in our key markets.”

One obstacle to expanding into Africa, however, is access to funding and credit for the client countries, or for projects in these countries, notes Vemer.

“We will never have China’s balance sheet.”

Upton agrees, saying that Group Five could do more in Africa if funding access improved.

While Group Five has long been active in Central and Eastern Europe through several transport projects, it has now also opened an office in Moscow, Russia, with the focus on developing road projects in this country.

“We trade under the brand Intertoll there. We have been comfortable in Eastern Europe and we are comfortable in Russia,” says Vemer.

Intertoll is a toll and motorway infrastructure developer.

Sanctions against Russia regarding turmoil in the Ukraine have, however, made it more difficult to raise money in Russia, with less Russian funding also flowing to neighbouring countries, such as Bulgaria, says Vemer.

Group Five is also cautiously looking at expanding its Intertoll business into North America, along with some Eastern European partners.

However, it is still early days for this development, warns Vemer.

He adds that Group Five remains satisfied about not being in Australia – a market where some of its domestic peers have recorded a degree of success.

“We are happy with our geographic expansion.”

Group Five’s total order book at the end of September stood at R15.2-billion, with 32% of work outside South Africa.

However, Vemer says this does not yet reflect the company’s over-border replenishment effort. Should the R4-billion Ghana gas project receive the final sign-off, this could shift to 48% cross-border work.