By Vivian Ihechu
Stakeholders in the Engineering Procurement and Construction (EPC) have called on governments in Africa to patronise indigenous firms with the capacity to deliver and grow their economy.
According to them, this will help to curb the loss of more than US$50 billion per year through capital flight in the African continent.
These were the views of panelists during a session on Sunday at the ongoing Inter-African Trade Fair, IATF 2023 Trade Conference in Cairo, Egypt, tagged “The Challenges, Opportunities and Solutions for African EPCs – Perspectives of the EPCs.’’
According to them, contracting EPC related jobs to local firms will reduce capital flight and retain funds while helping to develop human capacity.
They also called on multilateral fund agencies especially African based ones such as Afreximbank to provide funding for indigenous firms for the execution of EPC related jobs.
This, they said, would reduce the situation where Chinese and other nationals who sponsor the execution of such contracts repatriate funds and resources meant for the development of the African continent.
Speaking on the challenges faced by EPC’s companies in Africa, Hassan Allam, Chief Executive Officer, of Hassan Allam Holding, identified infrastructure deficit and lack of funding as crisis rocking the sector.
“The first challenge is the infrastructure deficit. Most of the African countries are faced with infrastructure challenges which include logistics and that of supply chain which is impacted on project executions.
“The second, which is limited access to finance and skill gap in the African space and its contractors.”
On what should be done, the Chairman/GCEO, Oilserv Group, Engr Emeka Okwuosa, called on Afreximbank to step up its continued effort in ensuring more access to fund more African EPC companies.
“This will enhance growth and competition in the African economy against other world powerful economies today.
“When we talk about finance and funding, for us, in the oil and gas sector, we have a success story of the ongoing construction of the AKK pipeline at $2.4billion
“The issue of funding is not about access, but the cost of the funds. Most African countries are not in a position to access funding in a way to be able to compete in terms of cost when relatively compared to the Chinese companies.
“This is because, if you are bidding for an EPC contract and the cost, apart from your ability to execute in terms of your technical capacity, the cost enables you to win and executive the project profitably.
“Competing with the European, and Chinese companies is quite difficult because at the end of the day, the margin of an African company does not come close to competing with the financial muscles of the Chinese which often than not, does not build indigenous capacity.
“But rather, giving way to capital flight which are repatriated to develop their countries rather than injecting such in Africa.’’
Okwuosa said: “I believe, the Afreximbank should step up and create more access to funding for African EPC companies, and at a good rate because that is the only avenue capacity can be built.
“Also, we are looking at Afreximbank to solve problems and there are ways to go about it.
“When we talk about financing, from placement of guarantee for a project of a billion dollars project, the Chinese would present less than the budget because it’s being backed up by their government.
“Afreximbank can leverage its position of strength and be able to work with other financial institutions across African countries like the NEXIM banks of these countries.
“I will take into account the African Continental Trade Agreement and I’m sure some protocols can be taken into account for a better synergy to be able to provide the basis for a more competitive financial system for such projects by Africans which will make a lot of difference.
“However, when you talk about Chinese and others coming in to run a project, they come in with finance at a cheap rate. However, these funds are being met with difficult conditions.
“And part of which would be the minimum involvement of local content to provide finance for labour, materials and equipment. If Afreximbank can take up the challenge, the value system will be improved.’’
According to Okwuosa, another challenge is the ease of moving labour across Africa as well as building up of local content.
He said that when these challenges are addressed very well, capacity will be built.
“The ease of moving labour in Africa is very poor. For instance, Nigeria has, to a greater extent grown capacity but the ease of navigating this capacity across Africa is not too welcoming and seems impossible.
“This should not be so as we can grow the capacity of Africa for African development.”
On his part, the Chief Executive Officer, Elsewedy Electric, Ahmed Elsewedy, frowned at the current inconsistency in the political system in Africa, as many projects were either delayed or frustrated by the system.
According to him, the political uncertainty in Africa has made it challenging for EPC projects.
“For instance, in a switch from one government to another after an election, often times, projects are dragged backward thereby undergoing renegotiation.
“This process can sometimes take more than two years to be approved. That alone is a major setback to the EPC projects across Africa and this does not look good, but because we are ready to work, most times we continue with the project despite being unattractive and profitable.’’
On capital flight, he said: “Capacity is never achieved when the projects are contracted to the Chinese or European companies.
“Africa has the capacity and the idea of taking the money back to China or Europe to develop is a system and challenge that will never grow capacity.”
The Chairman of Lee Engineering and Construction Company Limited, Dr Leemon Ikpea, also spoke on the sideline of the event on funding challenges in the EPCs’ project,
He said that funding had been a very serious issue in the execution of the various projects undertaken in the industry in recent time.
The firm, which is on the verge of inaugurating a fabrication factory in Warri, Delta, Nigeria, said sourcing for funds to execute projects had been successful through its partners and God.
“Like other big enterprises working in a Nigerian economy that is dollarised, the price of materials rises unpredictably within days or weeks. It’s difficult to go back to a client to discuss new terms regarding change in Forex”.
He, however, expresses optimism about the government’s efforts to woo investors into the country.
“The challenge may soon become a thing of the past.
“We are optimistic, that the federal government’s economy team, would open more opportunities for the industry and its economy respectively,’’ Ikpea said.
