There has been a surge of foreign direct investment (FDI) and interest in starting new projects and investing in infrastructure development in sub-Saharan Africa, says privately owned research company Whitehouse & Associates.
Whitehouse & Associates director Duncan Bonnett tells Engineering News that this upswing, which started several years ago can mostly be attributed to the region’s commitment to resolving some of the infrastructure development challenges, with equity investment also becoming more available.
“From a South African perspective, the increase is mainly as a result of a decline in domestic activities, while in the rest of the region, it can be attributed to ample opportunities in the mining, infrastructure development, manufacturing and various other sectors,” he says.
Bonnett adds that the increase is also fuelled by increased consumer demand for goods that include information and communication technology (ICT) devices, cement – as more residential and business properties are being constructed in the region – and other domestic products. Increased FDI has also stimulated growth in in-country manufacturing in sub-Saharan Africa.
“The biggest constraint to domestic supply in the region is the capacity of local companies, and this is mostly because of historical reasons, such as access to electricity, water and road infrastructure, which have made it costly to manufacture goods in the region,” he explains.
However, Bonnett states that the tide is steadily turning, citing the power generation sector, where there is a notable increase in the start-up of renewable-energy and coal-fired power stations in the region. This increased activity, he says, results in other businesses becoming operational because they have access to stable and reliable power.
“For instance, we have noted the start of cement factories across the region. “ The ICT sector is also an area in which Africa is mostly excelling, with more local companies having the capability to manufacture basic devices, run a network and design products with or without any help from an external source,” he elaborates.
Whitehouse & Associates founder and MD Liz Whitehouse adds that some governments’ local-content requirements for all government projects further contribute to fuelling the growth in local production and manufacturing.
She adds that, in addition to South Africa, Kenya announced last month that, with regard to the allocation of tenders, companies using locally produced goods and services would be prioritised. “This is a huge game changer, as more governments are incorporating legislation that create an environment that allows for local production to prosper.”
Whitehouse adds that, as is evident in Mozambique, government regulations also help in creating skills development and business partnership initiatives between large international companies and local companies, whereby the internationals develop the smaller com-panies so they are able to supply the required local content.
She states that these initiatives, however, have their own chal- lenges, as the skills and edu-cation level of people in the region is often low, and busi-nesses are ven-turing into remote areas.
“For instance, areas in which oil discoveries have recently been made are mostly undeveloped, with limited access to skilled people,” she says.
Opportunities for South Africa
Whitehouse tells Engineering News that, with decades of experience and expertise in the property development sector, South Africa should seize the opportunity to make its expertise services available and accessible when cities and towns are being developed throughout the region.
“South African companies need to start developing long-term strategies for how they can best grow their businesses in the region amid increasing demand for local content and services. “Companies need to venture beyond their Johannesburg offices and start setting up offices and manufacturing plants in strategic areas across the region,”she says.
South African companies also need to start thinking about the local acquisition of developed smaller companies and forming partnerships with them to increase South African companies’ market share across the region, she concludes.