FOSTERING DEVELOPMENT OF CONSTRUCTION INDUSTRY IN IDB MEMBER COUNTRIES SEMINAR
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1 FOSTERING DEVELOPMENT OF CONSTRUCTION INDUSTRY IN IDB MEMBER COUNTRIES SEMINAR For a multi-disciplinary approach in fostering the Construction Sector in IDB countries Dr. Zohra Merabet, NSCE, June 8, 2015
2 DEVELOPMENTAL ROLE OF THE CONSTRUCTION INDUSTRY The construction industry is a major contributor to the overall national and regional economic growth in developing countries. The private sector assume an important role in improving the quality of life for People through the translation of Government s socio-economic policies into social and economic facilities and services.
3 CASE OF AFRICA CONSTRUCTION SECTOR
4 CONSTRUCTION SECTOR IN AFRICA 100 billion US$ annual investments for the next decade in the construction sector in Africa,, of which a third for maintenance means strong opportunities for employment growth and corporate profits for firms from the IDB member countries. while Mega investments in mining construction projects are still important in the African market, better GDP & fast urbanization have attracted significant investments in transport, water, real estate and social construction projects (KPMG, 2013). Increased participation of private financial sources in infrastructure projects is filling funding gaps of public and international institutions in many cases and giving a larger space for a PPP formula
5 Market Overview: value Infrastructure Stock Per Country
6 Some Trends in the Market Four countries have 50% of the fixed capital in infrastructure Stock: South Africa, Algeria, Egypt, Morocco 44 countries share 25% of the fixed capital of Africa infrastructure stock Where is the Market? Maintenance and Expansion in countries with large infrastructure stock 10 low infrastructure stock countries with fastest growth: Angola, Ethiopia, Ghana, Kenya, Lesotho, Mozambique, Nigeria, Tanzania, Uganda, Zambia. (KPMG, 2013)
7 Dominant Subsectors & Construction Groups Nationality by Sub-Region Sub-Region Dominant sub-sector Dominant Contractor nationality North Africa energy and power European, Chinese Southern Africa large real estate and mixed use developments projects East Africa Mega constructions, 4 out of every 10 are transport related European, intra-african European, American, Chinese Central Africa Mega mining projects Chinese, African West Africa healthcare and social services Source:The KPMG Global Construction Survey. (2013). Sector Report: Construction in Africa European, American
8 Emerging Africa Construction Sector Profile 1. Mega projects in mining, energy and transport 2. Long term growth in water& sanitation to sustain fast urbanization 3. Large real estate and mixed use development projects 4. Dominance of European, US and China construction groups in Mega projects 5. Significant presence of IDB member countries firms in large to medium size projects 6. Increased role of PPP model for project financing and operation
9 AFRICA INTERNAL CONSTRUCTION SECTOR CHALLENGES Cumbersome legal frameworks for tendering, land acquisition, labor, building codes, taxes Limited public financial resources and high dependency on international organizations financing Relatively young private sector actors in the construction industry, operating as sub-contractors to foreign larger firms Limited education and training facilities hinders the development of a competitive and responsive human resources to the emerging sector trends.
10 CHALLENGES FOR THE VALUE CHAIN MANAGEMENT OF THE CONSTRUCTION INDUSTRY
11 CONSTRUCTION SECTOR VALUE CHAIN LAYERS AND STAKEHOLDERS
12 MAPPING THE NEEDS FOR CONSTRUCTION SECTOR DEVELOPMENT The construction value chain leading to an operational infrastructure is the result of a complex multilayers of sub-value chains which support and ensure the delivery of its ultimate expected services to the users. Multiple definitions of the construction sector /industry: each one can lead to a range of choices for a fostering strategy. The construction of an infrastructure drives the value chain dynamic, however its performance is highly dependent on the end delivery of many other sub-sectors and of a well functioning regulatory framework.
13 STAKEHOLDERS ROLE The construction industry value chain, involves multiple stakeholders at different stages of the value chain and key sectors that can: facilitate the execution of the infrastructure construction and its sustainable operation or, stand as major bottlenecks, delaying the process and decreasing the quality and life cycle of the targeted infrastructure services.
14 Elements for a Fostering Strategy The Construction Output is a growth-trigger and growth-dependent (Drewer, 1980). Fostering the development of the construction sector requires a complex and interdisciplinary approach to fulfill immediate needs for reducing Africa infrastructure gap while contributing to an inclusive and sustainable economic growth at sectorial and national level. Infrastructure requires more than raising money to ensure an efficient and effective use of the funding and contribute to the targeted developmental impact, (Guttman, 2015).
15 KEY QUESTIONS What are the strategies to be adopted by the public, private and international organizations to foster a sustainable development of the construction sector in IDB member countries and in Africa? What are the pertinent accompanying measures for governments and international organizations to introduce to ensure that the growth of the construction sector is an effective driver for poverty reduction and economic empowerment? What are the strategies and measures, the private sector of IDB member countries, should adopt to strengthen their competitiveness and capture a larger share of the construction sector opportunities?
16 STAKEHOLDERS SUSTAINABILITY PRINCIPLES All the players in the construction industry value chain need to collaborate through a multidisciplinary approach to build a coherent and effective business models in the construction sector. A value chain analysis, or a Life Cycle Assessment (LCA), should be introduced at policy, program and project development levels to optimize the contribution of economic and social infrastructure to a green, inclusive and sustainable economic growth.
17 Recommendations
18 GOVERNMENT LEVEL ACTION Formulate, implement and monitor a long-term strategy for the national construction sector Foster linkages between multinational firms & domestic private sector with targeted conditional incentives Develop contracts and procedures models for equitable Public Private Partnership OBJECTIVE / RESULTS Drive the growth of this vital sector & improve its regulatory framework Facilitate the transfer of knowledge and skills to and the capacity building of the national and local businesses. Facilitate the mobilization of private investments in public infrastructures
19 ACTION IDB GROUP Capitalize on its unique position within the Arab Funds & International Development Organizations Develop a more adaptive approach to contract and procurement management Support development of innovative capacity building solutions Introduce SMART monitoring indicators OBJECTIVE / RESULTS Address in an integrated manner, funding of major infrastructure & capacity building of stakeholders Improve projects & programs implementation efficiency Strengthen the dialogue & cooperation among stakeholders at national and regional levels Measure outcomes infrastructure funding in terms of socio economic & environmental sustainability
20 FCIC AND FOCIC MEMBERS ACTION Recruit personnel with good managerial and technical competencies Capitalize on FCIC &FOCIC members networks, standardized partnership practices Invest in the development of strategic business tools OBJECTIVE / RESULTS To penetrate new and emerging market to upscale the capacity to capture successfully large projects to sharpen the corporate agility & business models to respond to the continuous transformation of the construction sector.
21 Thank You for Your Attention Questions?
22 References Guttman, J.( January, 2015). Foresight Africa 2015: Infrastructure Requires More Than Raising Money. Retrieved from infrastructure-foresight-africa-gutman#ftnte2 KPMG. (2013). Global Construction Survey. (2013). Sector Report: Construction in Africa Ortiz.O, Castells.F, Sonnemanne.G. (2007). Sustainability in the construction industry: A review of recent developments based on LCA. ElSEVIER, Construction and Building Materials 23 (2009) Retrieved from Sy, A. 2013b. Financing Africa s Infrastructure Gap. Up Front, October 9. Washington, DC: Brookings Institution. ( financing-africa-infrastructure-gap-sy
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