Back from the brink

The output value of the construction industry in North Africa is largely on the rise, albeit from a low base. Governments in key countries in the region have prioritised infrastructure in their budgets, as well as seeking inward investment to drive economic growth.

Whether that is enough to tip the risk-reward balance for international construction firms remains to be seen.

In Egypt, the government is in a financially weak position and faces a number of deep structural challenges. Furthermore, the security risks within the country – starting with the revolution in 2011, and running through to the downing of Metrojet 7K9268 in 2015 – have decimated the tourism industry.

Nevertheless, there has been a recent shift in the international attitude to Egypt, and Moody’s Investor Service currently calls the outlook for the country ‘stable’.

In terms of construction, the government is prioritising plans to boost real estate, hospitality and tourism, with real estate – seen as the most resilient sector – at the very top of the agenda.

Within that sector, according to Mostafa Madbouly, the Minister of Housing, Utilities and Urban Communities, almost 50 tenders are set to be offered for residential developments in New Cairo, Egypt’s proposed new administrative and financial capital, located to the east of Cairo itself.

When complete, New Cairo will cover a total area of 700 km2, and the potential to host a population of more than five million people.

Developments currently planned or underway within the city limits include CityGate, a mixed-use community spread over 8.5 million m2, Palm Hills, a 25 million m2 development which is planned to break ground this year, and Hyde Park, a 533,000 m2 development valued at around $563 million.

Within the current capital, the government is seeking investment of over $15 billion to progress its planned rail and metro projects.

The vast majority of the investment sought – just shy of $14 billion – is intended for the development of high-speed rail lines between Cairo and Luxor, Cairo and Alexandria, and Luxor and Hurghada.

The 700 km Cairo to Luxor line alone is set to cost almost $7 billion, and could be delivered in five years, although, according to Egypt’s transport minister, Hesham Arafat, it is yet to be decided whether the financing model will be BOT (build, operate, transfer) or direct financing.

German Chancellor Angela Merkel and Egyptian President Abdel Fattah El Sisi, recently attended the formal inauguration of the first phase of two power plants in Egypt, New Capital and Burullus.

Cairo-based Orascom Construction and German firm Siemens are working jointly on the project, and have already connected a total of 2,400 MW to Egypt’s national grid at both plants.

Once complete, each plant will generate a total of 4,800 MW, making them the largest gas-fired combined cycle power plants in the world.

The latest project is a demonstration of Egypt’s strong power sector development, and builds on power plant construction work already undertaken by Orascom. In fact, the firm is currently converting two power plants in the country from simple cycle to combined cycle, which will increase their capacity by 50%.

And Orascom itself has established itself as a major player in the power generation market, currently boasting as much as 10,000 MW of capacity under construction.

Of the other power generation projects in the country, one of the most intersting is the Dabaa Nuclear Power Plant, situated 3.5 km from the country’s northern coast, around 300 km from Cairo.

The Egyptian Nuclear Power Plant Authority has agreed that the 4,800 MW plant will be constructed under the auspices of the russian company Rosatom, a world leader in uranium enrichment, and owner of around 17% of the world nuclear fuel market.

Russia has granted Egypt a loan of $25 billion to build the $30 billion plant.

The project will include the installation of steam generators, reactor coolant pumps, high-pressure re-heaters, a low-pressure re-heater, and a steam generator blow-down tank, four VVER-1200 nuclear reactors and the laying of vtransmission lines.

It was recently announced that Egyptian companies will have the opportunity to bid for civil and electrical work at the plant, which will make up around 20% of the total project cost, while Russian agencies will tackle the reactors and technologies. Egyptian companies in the running for the work include Orascom Construction Industries, Elsewedy Electric, Hassan Allam, Petrojet, and Arab Contractors.

The project is expected to be completed in 2026.

Industrial-scale developments

While Egypt seeks international investment for many of its largest projects, Morocco is moving closer to an agreement with a Chinese group, Haite, to assist with the development of a $10 billion industrial city.

Situated on the coast, close to Tangiers, the as yet unnamed project will be based on a model similar to the ‘special economic zones’, such as Shenzhen, that China developed in the 1980s.

It is hoped that the project – which could eventually cover over 2,000 hectares – will include both industrial sites and apartment blocks, and host some 300,000 local workers.

Morocco is ahead of the game in the region with its recent moves to upgrade its transport infrastructure. Following significant improvements to its road network (the national highway network groew from 100 km in 1999, to 1,772 km last year), high-speed rail links have been a recent priority, with a line between Tangiers and Kénitra set to open by 2018.

Another headline project in Morocco is Zenata, Africa’s first eco-city. Situated outside Casablanca, this urban development project which focuses in its design on tackling air quality, sewage and transport issues.

Although still in its infancy, the primary sewage system for the first development zone (around 800 hectares) is complete, and the first road interchange and major link roads already provide access to the development.

As well as residential, educational and retail developments, Zenata is expected to house a large industrial zone, and could provide up to 100,000 jobs.

To date, financing for Zenata has come from a combination of the European Investment Bank and Agence Française de Développement, which has each financed the first development zone to the tune of $161 million.

Projects unveiled

In November last year in Tunis, the Tunisia 2020 conference was held, at which 82 projects were presented to foreign investors, with an overall value of over $19 billion.

According to an analysis prepared by Targa Consult, a consulting firm specialising in system integration, the transport sector presented more than 20 projects with a total cost of approximately $4.6 billion.

These projects included numerous potential roadbuilding contracts, such as a 188 km stretch of highway, which will link Tunis with Jelma. The value of the project is said to be around $510 million.

Another large project that has been hotly debated for a number of years is the $934 million deepwater port of Enfidha. While detractors say such a port development would be more advantageous in the north of the country, it would appear there is now a groundswell of opinion driving the project forward at Enfidha.

Chinese influence

In Algeria, some 80 km west of Algiers, work is set to begin imminently on an even larger deepwater port – the $3.3 billion El Hamdania port – after the project recently received government approval.

A report on the new development said it would include up to 23 berths, giving the port a combined capacity of 25.7 million tonnes per annum (mtpa), and a handling capacity of 6.3 million TEUs.

China Harbour Engineering Company and China State Construction Engineering Corporation were given the green light to proceed with the port’s construction, following a $900 million loan from the African Development Bank. Within the contract, the Chinese firms are set to take a 49% stake in the operating company, while the remaining 51% will belong to the Algerian Port Authority.

Another significant construction project in Algeria, completed this year by two subsidiaries of the Chinese construction firm CSCE, is the Djamaa El Djazair mosque, which has the world’s tallest minaret at a height of 265 m.

The 20,000 m2 mosque (the world’s third largest) project is valued at around $1.5 billion, includes a one million book library and has the capacity to accommodate up to 120,000 worshippers.

Having broken ground in October 2011, the project has suffered a number of setbacks – largely financial – but was finally completed earlier this year.

Similar to the situation in Morocco, Algeria is making its transport infrastructure a priority and one of the major projects for the country’s National Highways Authority (ANA) is a

44 km stretch of highway in the northern central province of Tizi Ouzou.

The project includes the construction of a new link from the city of Tizi Ouzou to the East-West Highway, plus eight interchanges, more than 9 km of viaducts and 1.5 km of tunnels.

The project is being overseen by Italconsult, an Italian design, engineering and project management consultant, whch is providing the ANA with design and technical assistance, as well as performing quality control monitoring of the construction works and even training courses in Italy, concerning tunnel construction and management.