Several entrepreneurs and investors, interviewed by How we made it in Africa, have underscored the potential in the continent’s construction and building materials industries.

Eliot Pence, co-founder of Tofino Capital – a $10 million venture capital fund focusing on early-stage businesses in frontier markets – maintains a bullish outlook on the continent’s construction sector. His firm has invested in the Nigerian startup Cutstruct, a digital marketplace specialising in the procurement of construction materials.

“We see a lot of opportunity in construction,” Pence notes. “The conventional growth estimate for the African construction market is around 7%, which isn’t that interesting – except we think that massively underestimates the scale and scope of what’s going on in the market. Africa’s infrastructure gap is well known – something in the order of $100 billion a year needs to be spent just to keep up with current infrastructure. China has been willing to fill this gap for the past two decades, but increasingly we’re seeing them pull back, leaving more space for indigenous contractors to build a resume of projects.”

“At the same time, we see this huge trend in urbanisation across the continent; something like 500 million more Africans will become urbanites by 2035. According to a recent Yale University study on African cities, the number of buildings within a city grows with population, with roughly one extra building for every 2.6 people, and most of those buildings are smaller structures – not high rises. Based on Africa’s projected demographic growth, that’s 300 million new buildings in 25 years, in roughly 60 cities across the continent.” (Read our full interview with Eliot Pence: From Nigeria to Egypt – investor Eliot Pence on backing frontier market startups)

Maris Africa, an investment holding company, has also witnessed robust performance in one of its portfolio companies, META Group, which specialises in the distribution of construction equipment across various countries on the continent.

“Over the last 12 months we have seen good growth across our group of eight dealerships in the eight countries where we operate (Angola, Zambia, Mozambique, DRC, Tanzania, Rwanda, Uganda and Kenya). The growth is part of a post-Covid recovery, but also supported by continued infrastructure development and urbanisation in these markets and a relatively strong commodities sector,” says Charlie Tryon, CEO and co-founder of Maris.

“The results of this division reflect the opportunity that exists to transition away from more expensive Western brands like Caterpillar or Hyundai towards newer economy products from India and China. We are increasingly looking at brands from lower-cost producers, and that seems to be working for us. Many of our markets are very price sensitive and an excavator from India at 25% less than the one from Europe, makes sense to them,” he adds. (Read our full interview with Charlie Tryon: Africa investor upbeat about e-mobility and affordable construction equipment)

In Nigeria, entrepreneurs have opportunities to target either low-cost building materials for the mass market or supplies for high-end finishes. This perspective comes from Thessa Bagu, managing director of advisory firm Commercium Africa. “The country needs building materials and equipment, from cranes to tiles and everything in-between as most of these are currently imported. For example, businesspeople can focus on the big mansions and flats that are being built here in Lagos, which require nice finishes, such as taps and door handles.” (Read our full interview with Thessa Bagu: Opportunities in Nigeria – From building materials to health supplements)

Côte d’Ivoire also has a vibrant construction industry. Private equity firm Adiwale Partners is enthusiastic about the sector, but its team lacks the expertise to invest directly in building and development. However, Adiwale has found a way to participate in the sector’s growth through an investment in Maintenance Climatisation Technique, an air-conditioning company focused on the installation and maintenance of industrial, commercial, and residential air-conditioning solutions. The demand for air conditioning in Côte d’Ivoire is driven by substantial new industrial and commercial developments as well as the refurbishment of existing buildings. (Read our full interview with Jean-Marc Savi de Tové: Opportunities in French-speaking West Africa – Insights from private equity investor)

While East African investment firm Ascent Capital Africa typically avoids direct property deals, it supports companies integral to the real estate value chain. For example, it has invested in Kisumu Concrete, a major manufacturer of building products like ready-mix concrete and concrete blocks, predominantly serving western Kenya. The firm benefits from minimal competition due to the high cost and challenges associated with transporting building blocks from Nairobi or other regions.

Additionally, Ascent has backed Metro Plastics in Kenya, a producer of PVC and PPR pipes, gutters, and wastewater removal products. “These are not products that are going to make the front page news but they are essential if you’re going to construct a building or collect rainwater, which is very important in this part of the world. These types of businesses that serve consistent local demand and are considered somewhat ‘safe’ from potential threats of imports are generally attractive to us. For example, it’s not cost-effective to ship pipes from China to Nairobi – they are light but take up a lot of space,” says David Owino, founding partner of Ascent. (Read our full interview with David Owino: Investor reveals East Africa’s most attractive opportunities)