Company information

Private players to lead the next phase of Brazil-Africa ties

Brazil’s strategy in Africa incorporates the three-pronged desire to access key pockets of natural resources, develop and synergise alliances to foster a wider south-south geopolitical dialogue, and create new avenues for the expansion of its considerable agro-based commercial offering.

Infrastructure assistance in Africa broadly tracks and intersects each of these objectives, with the immediate thrust centring on natural resource extraction.

Much like India and in contrast to Russia and China, the overwhelming thrust of Brazil’s current offering in Africa originates from its dynamic private sector. In infrastructure, firms such as Odebrecht and the Camargo Corrêa Group have carved out meaningful niches. Clearly, Brazil’s revived diplomatic play in Africa is providing cogent new opportunities for private sector investment, particularly in countries such as Mozambique and Angola, where commercial incentives are latticed with cultural affinities.

In May this year the Brazilian government pledged to support infrastructure development in the East African Community (EAC). Areas of interest included energy, railways, environment, construction and the agricultural sectors. Other announced intentions include Brazil’s desire to invest USD300 mn to develop infrastructure in Mozambique to support its coal and biofuels projects in that country. Projects include the upgrading of the Nacala airport (at an estimated cost of USD50 mn) as well as the building of a coal terminal in the central port city of Beira. Brazil has also reportedly pledged to invest in the construction of a 1 000 km north-south power line, linking hydro-electric, and coal- and gas-fired power stations in central and northern Mozambique with the main consuming areas in the south.

Moreover, in January this year, Brazil agreed to partner Nigeria on infrastructure development, offering both technical and capacity-building assistance. The focus of Brazil-Nigeria infrastructure cooperation will be on the development of public-private partnerships.

Odebrecht

With revenues breaching USD21 bn in 2009, Odebrecht, a Brazilian conglomerate in the fields of engineering, construction, chemicals and petrochemicals, is clearly well placed to engage internationally. In Africa, Odebrecht has completed projects in Angola, Botswana, Gabon, Liberia, Libya, Mozambique, the Republic of Congo and South Africa.

Highlights include:

Liberia: Odebrecht is discussing the rehabilitation of the Mount Coffee hydro plant in White Plains and the development of the St. Paul River Basin’s hydropower potential. In addition, Odebrecht is the sub-contractor for ArcelorMittal for the rehabilitation of the Yekepa – Buchanan rail line. (Odebrecht is restoring virtually half of Liberia’s railway infrastructure.)

Libya: Odebrecht is building two new terminals for the Tripoli International Airport, at an estimated project cost of USD700 mn, and is also working on the Third Beltway, also in Tripoli, estimated at USD180 mn.

Angola: Odebrecht has emerged as a core partner in Angola’s post-war economic renewal agenda. Having signed its first contract in Angola in 1984 to construct the Capanda Hydroelectric Power Plant, the company has since then built dams, airports, railways, and roads, and undertaken water projects.

Mozambique: Odebrecht constructed an outdoor coal mine for Brazil’s mining giant Vale in the Tete province. Vale’s investment in coal mining in the region totals almost USD1.5 bn.

South Africa: Odebrecht has constructed a 6.7 km tunnel to carry drinking water to Pietermaritzburg.

Camargo Corrêa Group (CCG)

Camargo Corrêa Group (CCG) operates in construction and engineering, and in the operation of energy and highway concessions. The company doubled in size between 2005 and 2007, with international cash flows driving growth of revenue, which last year surpassed USD9 bn. CCG has longstanding relations and operations in Lusophone Africa.

Zambia: CCG is responsible for all the stages of building the USD3.2 bn hydroelectric plant at Mepanda N’Kuwa in the Zambezi River Valley, which is expected to produce power by 2015. The project includes 1 400 km of power lines between the future station (with its capacity of 1 500 MW) and Maputo. An estimated 1 000 MW of electricity will be exported to the Southern Africa Power Pool.

Angola: CCG has a cement plant in Angola, aiming to benefit from Angola’s national reconstruction programme that is currently underway. The plant has a target production of 1.6 mn tonnes. This latest deal has made CCG the third-biggest Brazilian company in Angola (in terms of total contracts).

Mozambique: In June 2010, CCG purchased a 51% stake in a cement plant in Mozambique, located in Nacala, with an installed capacity of 350 000 tonnes p.a. In addition, Camargo Corrêa Cimentos has also acquired limestone reserves near the plant. Furthermore, the company is building the Moatize coal mine, which belongs to Vale.

Construtora Andrade Gutierrez

Construtora Andrade Gutierrez (Andrade) is among the largest heavy construction companies in Latin America and amongst the top three largest construction companies in Brazil. Andrade is engaged in the construction of highways, airports, ports, and other related activities. It is also involved in manufacturing and selling of machines, equipment and materials for industrial and building installations.

Andrade entered the international market in the 1980s through building the Epena-Impfondo-Dongou highway in the DRC. Interests accelerated after the acquisition of the Portuguese contractor Zagope in 1988. Today, Andrade has presence in 20 geographical markets across Europe, Asia, Latin America and Africa, generating more than half of its overall engineering and construction revenues outside Brazil.

Algeria: Andrade built the Boussiaba Dam in Jijel province in the northeast region of the country. In addition, Andrade constructed a 3 km runway and extended another runway by 600 m at the Oran Airport.

Angola: Andrade rehabilitated the 132 km Matala road in Lubango, which included the intervention in nine water passages and bridges.

Cameroon: Andrade completed improvements to the Melong-Dschang road in 2008.

Republic of Congo: Andrade signed a contract for the construction of a 5.8 km highway (Travaux d’Aménagement et de Bituminage de la Liaison Kombo-Moukondo à Brazzaville). It is currently bidding to build an airport this year in the town of Ewo in the northern part of the country.

Equatorial Guinea: Andrade is constructing the Mongomeyen International Airport. In 2008, it completed the execution of earthworks, pavement and artworks on a runway 3 km in length and on an access road of 5.5 km.

Libya: In 2009, Andrade secured a USD600 mn tender to build urban infrastructure – ranging from road to sanitation – in Tripoli.

Ghana: Andrade recently signed an MOU for a 90 MW dam on the Oti River.

Guinea: The company is responsible for the rehabilitation of the 88 km Route Nationale No. 2 highway from Kissidougou through Guéckédou to Sérédou.

Mauritania: Andrade built the 109 km Rosso/Lexeiba section of the Boghé Highway in the south of the country, estimated to have cost around USD45 mn.

Queiroz Galvão

Queiroz Galvão is a Brazilian private conglomerate which had revenues of USD2.3 bn in 2009. Construction represents the group’s main business area, but the company’s public utilities concessions services include highway, urban waste disposal, and energy concessions’ administration. It also engages in the drilling and production of oil and gas.

The company has operations in Brazil, Latin America, and Africa. Like Andrade and Odebrecht, Queiroz Galvão operates in Libya and Angola. In Libya, the company has four contracts related to urban infrastructure for the value of USD500 mn.

Brazil’s African strategy will increasingly take on a private sector hue

To be sure, the contemporary importance Africa has enjoyed at the heart of Brazil’s foreign policy is in large part due to President Lula da Silva’s southern ambitions. With Brazilian elections on the horizon, President Lula’s anointed successor, Dilma Rousseff, will almost certainly emerge victorious, implying a relatively smooth succession and a national consensus in favour of policy continuation. Nevertheless, key areas of outstanding reform – notably in tax, labour and pensions – mean that the new administration may become more inward-orientated.

Fortunately, Brazil’s less state-centric approach to Africa will be supplanted by a number of rapidly expanding, increasingly globally-minded, corporates. These fast-globalising companies, such as those mentioned above and others like Coteminas, Embraer, Marcopolo, Natura, Petrobras, Sadia, Vale and Votorantim Group, will inevitably lead Brazil’s next phase of integration with Africa.

Granted, much like in the recent case of South Africa, the demands from the FIFA World Cup (2014) and the Olympics (2016) will necessarily divert attention towards internal affairs. Nevertheless, the infrastructure deficit in Africa will continue to present the increasingly capital flush Brazilian corporates with feasible projects.

This article is an edited extract of a Standard Bank research report titled “BRIC and Africa: New partnerships poised to grow Africa’s commercial infrastructure”.

, ,


Simple Share Buttons