After a decade-long crisis, donor funds are set to provide the Ivoirian government with enough capital to kickstart a series of public-private partnerships (PPPs) meant to re-launch its weakened economy. The government’s roadmap, including billion-dollar infrastructure projects, and a deficit of about 400,000 homes offer many opportunities in the construction sector.
Perhaps the most symbolic construction project is the renovation of the International Commercial Centre of Abidjan. The skyscraper in the city’s business district will be a temporary home to the African Development Bank until its permanent location on Joseph Anoma Avenue is completed. The bank moved its headquarters to Tunis 10 years ago amidst the riots in Côte d’Ivoire, but is now in the process of moving back. The Ivoirian government is counting on the return of many more former companies and institutions, as well as the arrival of new ones, to help the country transition into an era of prosperity following a decade of stagnation.
The bank is to contribute $1bn out of the $8.75bn pledged by development partners at the Consultative Group (CG) meeting held in December 2012 in Paris. The funds are to help Côte d’Ivoire’s government carry out its 2012-15 National Development Plan (Plan National de Développement, PND), which aims to turn the country into an “emerging economy” by 2020. To reach that goal, the construction sector has an important part to play. However, construction requires long-term funding to finance projects and for now liquidity remains limited, both locally and globally.
“Since the end of the post-electoral crisis in 2011, construction activity has picked up significantly, largely thanks to the Presidential Emergency Programme.” Pascal Kra Koffi, the managing director of the National Bureau of Technical Studies and Development, told OBG. “However, building activity has not yet reached the levels that characterised the period running from the 1960s to the 1990s.”
NATIONAL PLAN: According to the PND, CFA565.2bn (€847.8m) has been earmarked for housing and urban development between 2012 and 2015, representing 5.1% of the PND’s overall CFA11trn (€16.5bn) budget. Another CFA2.82trn (€4.23bn) is to be invested in infrastructure and transport, while education, water, power and mining projects will also receive funding.
As the West African nation struggles with external debt in spite of recent relief efforts, certain projects have been adopted by donors, reducing pressure on the Treasury. Of the $8.75bn committed by donors at the CG meeting, the World Bank is funding a $94m emergency programme to develop urban infrastructure, upgrade transportation and assist in post-conflict rebuilding. The EU is funding a fourth post-crisis rehabilitation and reconstruction programme as well.
KEY PLAYERS: Aside from Sonitra, jointly owned by the Ivoirian state and Israeli partner Solel Boneh, and Construction Métalliques Ivoiriennes, big-budget public projects are typically awarded to foreign firms or their subsidiaries since local builders’ often lack the needed capital. The authorities typically require a minimum turnover that puts Ivoirian construction firms, hit by a decade of economic stagnation, at a disadvantage.
For small and medium-sized enterprises (SMEs), access to credit is difficult and as a result, they tend to target projects with guaranteed donor funding, like schools or health facilities. In addition, they frequently work as subcontractors for larger foreign firms. Sé djougou Coulibaly, the general manager of Banibah, told OBG, “Ivoirian construction firms face stiff competition from multinational construction companies. Assisting Ivoirian SMEs through subsidies and a more supportive business environment would help them grow large enough to win more tenders.”
In terms of international players, French companies in particular are active. Bouygues works via its subsidiaries, Sogea-Satom, DTP Terrassement and Socoprim, and is building the third bridge, Henri Konan Bédié, connecting Abidjan’s Riviera and Marcory communes. French builders Colas, Vinci and Razel-Bec of the Fayat group have also taken on projects locally recently.
FINANCING MISMATCH: Contractors do not access donor funds directly, but rather via the government after winning the bid for a specific project. Bank funding is scarce for construction projects, which require loans that typically take between 15 and 20 years to repay. Both foreign and domestic banks lack the long-term deposit structure required to provide adequate long-term funding. “As a bank, we cannot use short-term resources to make long-term investments,” said Kibé gnary Yéo, director of sales, marketing and communications at the Banque de l’Habitat de Côte d’Ivoire. “We are just now developing products that will generate long-term resources to develop the sector,” Yéo added.
CALL FOR TENDERS: The main client for construction projects in Côte d’Ivoire is the state. Some projects are funded by the Treasury and others are funded by donors; construction firms tend to be paid more quickly for the latter than the former. While according to the industry players interviewed by OBG, the state always pays ultimately, the delays can stretch out to several months.
Under a 2010 reform, the state must make a call for tenders for any contract with a budget of more than CFA30m (€45,000). The selection process is managed by the Directorate of Public Procurement (Direction des Marchés Publics, DMP). Calls for tenders in 2012 more than doubled compared to those in 2011, from 733 to 1906, and they jumped 83% from 2010’s 1041 tenders, an all-time high before 2012.
DMP considers financial standing as well as technical expertise among the criteria when it awards contracts, but financing is exactly what many SMEs lack. It is, however, crucial because banks in Côte d’Ivoire seldom offer long-term loans. Contractors therefore bear the costs of the early stages of a project. The state pays by instalment as the project progresses, but it is not uncommon for those payments to be delayed, leading many contractors to take waiting periods into consideration when submitting quotes.
BUILDING MATERIALS: The Côte d’Ivoire cement market is dominated by two companies, Abidjan Cement and Ivoirian Cement and Materials. However, new players are set to increase competition in the sector, likely bringing down the cost of cement, which currently stands at about CFA97,000 (€145.50) per tonne. A subsidiary of Nigeria’s Dangote Group is setting up a cement import terminal in Abidjan with the capacity to import and bag 1m tonnes of cement annually. It expects to open its doors in the second half of 2013 for local and sub-regional consumption. Morocco’s Ciments de l’Afrique is also building a cement factory in Abidjan, with an annual grinding capacity of 500,000 tonnes, according to Moroccan press reports. “The demand for cement is huge and growing,” Antoine Dossou Vidjanagni, director-general of Entreprise Dossou, told OBG. “There’s room for more players in the market.”
PUBLIC-PRIVATE PARTNERSHIPS: The government is aiming to source around 60% of the overall budget for the PND from the private sector. Infrastructure lends itself particularly well to PPPs, and specifically via buildown-operate and build-operate-transfer (BOT) schemes. Construction is part of every sector’s budget: schools for education, hospitals for health care, thermal plants for energy, as well as bridges and roads for transport. Administrative changes are attractive as well. New legislation enables investors to receive a certificate within 21 days, and the Investment Promotion Agency created an office to help firms registered within 48 hours.
SCHOOLS: During the unrest that began in 2010, 224 schools suffered attacks, forcing around 67,500 students to interrupt their education. Of the total of 13,688 schools, 154 were closed. The violence worsened an already high student-to-class ratio. According to the PND, there was an average of 42 primary school students per class in 2010/11, or 64,315 primary schools for 2.7m students. This problem reflects a broader shortage of public school infrastructure in the country.
The government is now taking steps to address this, and has pledged CFA810bn (€1.22bn) over the next few years to rehabilitate the education system. While this involves a host of projects, the most relevant facet for construction firms is a goal of building around 36,000 classrooms by 2015. In addition to making donor funds available to build schools, the Ivoirian government is looking for private sector partners to carry out a series of educational projects, including the construction of a technopole in Yamoussoukro as well as university campuses and libraries.
ROADS: Road rehabilitation has been one of the drivers of the construction industry since the end of the crisis in 2011. Côte d’Ivoire has a 82,000-km road network, of which 6514 km are paved. A 2010 assessment showed that 80% of paved roads (5300 km) are 15-25 years old. Nearly half of them (44%) are over 20 years old and built to last about 15 years. Meanwhile, 4500 km of Côte d’Ivoire’s paved roads are in a poor state. Public road works are managed by the Roads Management Agency (Agence de Gestion des Routes, AGEROUTE), but mainly financed by the Road Maintenance Fund (Fonds d’Entretien Routier, FER). Created in 2001, FER was meant to have a target funding of CFA40m (€60,000) per year, but collects only about CFA10m to CFA12m (€15,000-18,000) annually, according to the PDN. The report adds that concessions to the private sector did not yield good results due to local contractors’ lack of access to funding and what the report describes as their “operational, financial, organisational and material” inability to carry out the projects.
Aid-based investments are starting to come from Gulf countries, focusing on transport infrastructure. The Singrobo-Yamoussoukro stretch of roadwork is being financed by the Islamic Development Bank, Arab Bank for Economic Development in Africa, the Saudi Fund for Development, the OPEC Fund for International Development and the Kuwait Fund For Arab Economic Development, alongside the Ivoirian government, according to AGEROUTE. The project includes nine overpasses, six underpasses and nine pedestrian crossings, and the total cost is estimated to be $33.3m.
WATER SECTOR: When it comes to the water supply, there is a significant gap between supply and demand. Basile Ebah, the director-general of Société de Distribution d'Eau de la Côte d'Ivoire (SODECI), told OBG, “The structural deficit in water supply in relation to demand is estimated at 35%, with 360,000 cu metres per day supplied to Abidjan, though needs are estimated at 550,000.” Several donor-funded projects aimed at addressing this shortfall, and according to Ebah, “By 2015 there will no longer be a deficit in Abidjan and other big cities.” At least 15 projects worth CFA195bn (€292.5m) are under way or being studied. About 40% of the works are for Abidjan, where around half of the water supply is consumed. The first of the two major projects, financed by the China Exim Bank, will supply Abidjan with groundwater from Bonoua. The first phase, set to increase water distribution to the south of the city by 80,000 cu metres per day, is to cost CFA50bn (€75m), according to SODECI. A new water plant is also being set up in Yopougon, boosting production there by 40,000 cu metres per day. Furthermore, Roger Beugre, director-general of Abidjanaise de Traitement des Eaux, told OBG, “Thanks to increased activity in the agro-industrial sector and new plants being built, demand for water treatment services is on the rise.”
PORTS: French firm Bolloré Africa Logistics won a bid as part of a consortium to run a second container terminal at the Autonomous Port of Abidjan. The group offered €122m for 21-year concession rights and €14m in annual operating fees. The construction of the terminal will be carried out as a BOT scheme.
During the concession period, the consortium, which is also composed of Bouygues and Netherland-based APM Terminals, says it will invest more than CFA300bn (€450m). It is also building a 35-ha platform adjoining a dock that will extended for some 1100 metres with 18-metre-deep foundations.
OUTLOOK: From the ashes of recent conflict, the country is making great strides in rebuilding necessary infrastructure to support development and growth. Donor aid is crucial to this progress, especially in its support of local SMEs, as is a concrete vision outlined in the PND and related legislation. PPPs and government support remain crucial as Côte d’Ivoire grows far and high.
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