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Repairing the damage of the past, Building for the future

Article - December 9, 2014

The construction business is flourishing in Angola, as the government moves to repair the damage to infrastructure left by the civil war and to meet the needs of a growing middle class for housing, hospitals and other services.

WHILE THE REBUILDING PROCESS UNFOLDS ON LAND, ANGOLA IS ALSO LOOKING OUTWARD TO HARNESS THE POTENTIAL OF ITS SEAFARING TRADE.

In terms of construction jobs, rebuilding an entire country is about as big as they come.  

The civil war that devastated Angola for 27 years until 2002 left much of the country’s infrastructure – roads, bridges, railways – in ruins. The oil-driven economic growth during the years after has brought boom times for the construction industry, as Angola struggles to repair the damage of war and to provide housing, schools, and hospitals for a growing population.  

The cranes that adorn the skyline of Luanda are evidence that the building trade is on a roll; the companies getting the business are from Portugal, Brazil, Greece and, most notably China. All have been drawn by the growth that has turned Angola into sub-Saharan Africa’s third-largest economy, after South Africa and Nigeria.  Real GDP expanded by 7.43% in 2013, according to the central bank, although the IMF puts the figure at a more conservative 6.8%. The IMF also predicts that the non-oil economy will grow by 7.3% this year.

“At this moment, Angola has one of the highest rates of growth in the whole world,” says Housing Minister Jose Silva.  “One of our main goals is to reduce the country’s dependence on oil. Other sectors -- such as manufacturing, agriculture and civil construction – are now starting to contribute strongly towards that aim.”

But infrastructure is only half of the equation; in order to grow, a country needs its workforce. And a workforce needs somewhere to live. One of the biggest challenges facing Angola is to provide adequate housing for a growing middle class. In 2008, President Jose Eduardo dos Santos pledged to build one million new homes within four years. A multi-national effort to do so was undertaken, with companies from China, Greece, Portugal and Brazil getting involved.

The China International Trust and Investment Company  (CITIC), which has been active across all sectors in Angola for many years, recently announced that ground would be broken on a new 6,000-unit development on the outskirts of the northern city of Malanje.

The project includes the construction of roads with domestic sewage and drainage systems, water and telecommunications networks, as well as electricity and a petrol station, police station, fire station and health centre. CITIC was also behind the Kilamba New City development, a vast project designed to house 500,000 people and provide services such as schools and shops and restaurants. After a slow start, the population of Kilamba has steadily grown and is estimated to stand at around 70,000 currently.

Elsewhere, Greek construction company Argon Investment is involved in a $200-million commitment to build 70,000 houses in Angola, across all the provinces of the country.   

However, Housing Minister Silva notes that problems still exist in the sector: “The main difficulty we still face relates to factors linked to logistics, as we remain strongly dependent on the import of construction materials.

Obviously, since cement is a basic raw material in the construction industry, this is one sector where companies could invest in order that the product be made locally. We do already have a cement industry here but it is just not able to keep up with the demand from a booming construction sector. We are working on containing the rise in the costs of materials and once this problem is resolved, then we’ll have prices that are much more affordable. The housing policy of the state is focused principally on the middle class and on people who are disadvantaged, but we also have within the program what we call free prices, which allows private-sector investors to still take on high-class construction projects.”

China has been by far the biggest contributor to the rebuilding effort in Angola via a bilateral agreement by which the Asian nation extends loans for construction and infrastructure in exchange for oil. However, other countries have queued up to join the vast undertaking. Obredecht, a Brazilian firm active in 35 countries, has taken a lead role on key projects such as the provision of electricity and water as well as the construction of roads.  

In May, former Brazilian president Luiz Inácio Lula da Silva (“Lula”) visited Malanje ahead of the World Economic Forum for Africa, to see first-hand some of the projects being carried out by Obredecht. The Brazilian company has been involved in Angola since 1984, when it signed a contract for the construction of the Capanda hydroelectric dam on the Kwanza river, 360 km (220 miles) from the capital. However, the civil war prevented the project from getting off the ground until 2004, when the dam started generating electricity to supply Luanda.

Unlike Chinese firms, which import their own workers under a clause signed into the bilateral agreement, Obredecht has sub-contracted many projects to Angolan firms. Likewise, the number of Angolans holding key positions within the company has risen from nine percent to 41 percent in recent years.  

Portuguese companies are also well established in Angola’s construction sector, which represents a significant proportion of their revenue. The two largest ones are Soares da Costa and Teixeira Duarte. The latter has been active in Angola since 1976 and its international market represents 81.2 percent of a total revenues of $1.26 billion, of which Angola accounts for 46 percent.  

Soares da Costa has been awarded the tender to build the headquarters of power company Empresa Nacional de Electricidade (ENE), in Luanda, for $46.9 million. In 2013, Soares da Costa’s biggest market was Angola, which accounted for 57 percent of total revenues.

In February, it was announced that Angolan businessman Antonio Mosquito would assume a 66.7 percent stake in Soares da Costa through a capital increase of $70 million, to be underwritten entirely by Mosquito.

However, the influence of foreign companies means that relations with local Angolan firms have not always been entirely cordial. The fact that Chinese firms are paid directly from Beijing while their Brazilian and Portuguese counterparts are exposed to the vagaries of the local economy has also been a point of contention. This has in turn led to some suspect construction work, with the Luanda General Hospital a case in point. Completed in 2006 in the Kilamba Kiaxi district by the China Overseas Engineering Group, the hospital was closed in 2010 due to structural concerns. The China Tiesiju Civil Engineering Group began construction of a new Luanda General Hospital in the same location in 2012, with work slated to be completed by July 2014.  

The government in 2010 introduced a new procurement act, which a 2011 study by Norway’s Christian Michelsen Institute and the Angolan Centro de Estudios de Investigação Científica described as “a step forward in the sense of organizing a scattered legal framework and by promoting competition and procurement expertise.”

The new legislative framework consolidates two previous separate laws governing the systems for public expenditure, provision of services and the leasing and acquisition of goods while also regulating the award of public works contracts.  

While the rebuilding process unfolds on land, Angola is also looking outward to harness the potential of its seafaring trade. The government is planning on building what will become the largest shipping terminal on the continent at Dande, 50 kilometers north of Luanda. Container traffic at Luanda has more than doubled over the past five years and Angola’s aim is to challenge the port of Durban as the busiest in Africa. Angola is the gateway to the international markets for many landlocked countries with rich mineral resources, such as Zambian copper and iron ore from the Democratic Republic of Congo.

Port administrator for commercial, safety and environmental affairs Alberto Antonio Bengue told Bloomberg in April that plans are to increase the number of containers handled in Luanda to more than a million by the end of 2014, up from 912,900 in 2013.

Of course, in order to meet its goals for exports, internal infrastructure is required, with rail links to the ports and a reliable road system. Construction Minister Waldemar Pires Alexandre said in May that there are 11,000 kilometers of paved roads in Angola with a further 7,000 kilometers under construction.

Angola’s railways are modern and efficient, but lack connections. There are three main lines, Luanda, Benguela and Moçâmedes, which serve the ports at the capital, Lobito and Namibe respectively – a total of 2,761 kilometers.  At the World Economic Summit in Nigeria, Chinese Premier Li Keqian vowed to support a continent-wide rail network linking all the capitals of Africa, but such a project is a long way off. In the meantime, Angola is trying to rebuild rail links with neighboring countries to facilitate the transport of materials for export. The Benguela railway is under reconstruction with the aim of providing a direct link to Kamina in the DRC.

But housing remains the major priority for Angolans, and international cooperation is key to achieving success in this area. It is an even more crucial component of the country’s future when it is taken into account that the median age in sub-Saharan Africa is 18, compared to 41 in Europe. Africa’s workforce is predicted to swell by 163 million in this decade. By 2035, it will be bigger than China’s, and by 2050 one-quarter of the world’s workers will be African, according to Director Magazine’s Africa Rising report.

According to Housing Minister Silva, “There are many good examples of countries that have undertaken housing programs that have been very noteworthy, such as, for example, Brazil and Colombia, whose experiences in this area have been very positive. In Africa, you have Morocco, whose experience has been very interesting and deserves our careful study and attention. Here, what has in fact really caught our attention is the financing of housing, and in this respect we have been considering how to adapt the examples of Morocco and Brazil to our own sociocultural reality.”

The road to recovery in Angola has been a hard one, but few could have predicted that just a decade on from a devastating civil conflict the country would be in the state of health it is now. There is still plenty to do but the cooperation of the international community and the entrepreneurial spirit of the Angolan people - the building blocks of a prosperous future - are firmly set in place.

By Rob Train

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