Chinese construction firms are darlings of East Africa

Audit and financial advisory firm Deloitte is to release its fourth Africa Construction Trends report on Wednesday.

Prepared by the international firm's Southern Africa office, the report monitors progress on capital intensive infrastructure projects in the continent. Transport and energy projects have dominated previous reports but last year saw an increased focus on the former, which governments view as key catalyst for economic growth.

In the third report released in early March last year, Chinese firms came out as the darlings of East African countries by building 31 percent of the 51 projects under review in the region. This translated to about 16 projects while European and Americans companies build only nine.

China surpassed Western firms who previously clinched top position in 2013. This translated to about $19 billion worth of projects.

Deloitte Director for Infrastructure and Capital Projects (Kenya) Gabriel Ouko termed China's jump from 19 percent in 2013 a big increase.

"The Chinese government and companies have increasingly looked at the African market as an attractive and fast growing market with good returns for their investment and large surpluses. Africa has some of the fastest growing economies in the world and will remain attractive for anyone looking for a good return," he said.

While noting a decline in the number of total projects from 322 in 2013 to 257 in the year under review, the total value of projects under construction had increased by 32 percent to $326 billion from $223 billion in 2013.

For projects to qualify, they must be valued at more than $50 million and have broken ground, but not been commissioned as at 1 June 2014.

Overall, European and Americans continued to dominate the African construction sector. The 2014 report showed that Western countries dominated in funding, ownership and were responsible for building projects worth more than $50 billion.

International development finance institutions accounted for 26 percent of funding, the United States 10 percent, China 7 percent and Europe 3 percent.

In ownership of such projects, African governments accounted for 52 percent, Western countries 13 percent and domestic private companies 24 percent, double the figure in 2013, suggesting indigenous firms are coming of age. Chinese concerns had a total stake of 1 percent in the 257 projects reviewed.

Analysts predict China's visibility in the construction sector to grow. According to Kwame Owino, chief executive of the Institute of Economic Affairs, an economic think tank in Kenya, China is a late comer that has smartly capitalized on Africa's infrastructure deficit. "It was not until the 1990s that its companies ventured out of their country. They immediately identified Africa's construction sector as an easy target or low-hanging fruit,” said Owino.

Mary Kipkemoi, an economic lecturer at Strathmore Business School, said looking east has been more lucrative to the region. "China offers man power, funds and even builds and operates the assets," she said.