Construction

Over the past decade, competition in the construction sector has intensified. Tier-one construction companies bidding for projects have come under increasing pressure as budgets are cut, margins have narrowed and some of the established and listed entities have gone into business rescue.

Locally, South African infrastructure projects had propped up tier-one construction enterprises, however with government expenditure curbed since 2010 – and even larger restrictions expected as a result of the Covid-19 pandemic – opportunities are now being sought across the continent.

Water, energy and transportation projects remain critical to the development and growth of African economies, and because these initiatives are underpinned by infrastructure, they represent an opportunity for the Construction sector.

These deals however, herald both reward and peril, it is therefore essential to understand the local markets including legal and regulatory factors in the relevant jurisdiction. This requires working with a knowledgeable partner with on-the-ground expertise to ensure that all risks are understood and accounted for.

The Mozambican Liquified Natural Gas (LNG) project, for instance, presents significant opportunities for firms in terms of contributing to infrastructure in Mozambique, participating in the project itself and developing the value chain for LNG in South Africa, however it is critical to understand the intricacies of these projects to unlock their value.

Because Absa CIB supports large civil and infrastructure projects with guarantees, it is incumbent on us to understand the opportunities, risks and nuances associated with a project in the context of the broader market.

Our risk assessments provide value in detecting issues that may compromise a project, affording our clients an opportunity to re-evaluate and either mitigate the risks or seek more attractive projects in other markets.