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Forging a career in Morocco

James Bailey, 27, is chief executive of Prince’s Club Holdings

He left London to become a property developer in Agadir in Morocco in 2006. He is currently working on developing The Prince’s Club Agadir, a sporting, leisure and residential development over 254 hectares.

Do you think that North Africa, and Morocco in particular, will live up to expectations that it will become a booming market for property and construction?

I think that people have been seeing a buoyant property market in Morocco for the last 10 years. Places like Marrakesh and Casablanca have seen extraordinary rises in both residential and commercial property prices. The last two years have seen a significant correction in the prices of second homes, bringing average home prices more into line with underlying values.

On the other extreme, the low-income social housing development market provides a solid investment proposition as government legislation means that the ever-increasing middle class are provided credit to buy and the banks are forced to lend to the developers.

Do you think the problems in Dubai - and, more recently, Qatar and Abu Dhabi - have had a knock-on effect on the North African market?

The problems experienced in the Middle East have clearly had an impact on buyer confidence and made the central banks more wary about providing cheap and easy credit. That being said, the level of speculation experienced in most North African countries has been far more limited than in Dubai. There is underlying value in investing in places like Casablanca and Marrakesh where the product is destined for the growing middle classes and newly-created wealth in these countries.

Which are the fastest growing sectors in this part of the world?

The main growth stories from the North African countries revolve around the burgeoning middle classes. Morocco had GDP growth of over 5% last year. The wealthy are extremely wealthy, but now the middle class office workers have serious purchasing power as well. This has meant that retail firms, commercial property and internal tourism are high-growth areas.

Over the last year the Moroccan tourism figures have been extremely robust despite the slowdown in Europe. North African countries are seen as a cheaper alternative for holiday destinations. This is a trend seen throughout North Africa.

How easy is it for UK firms and individuals to break into this market?

Unfortunately, most UK firms are not very good at working in non-English speaking countries. So while certain North African countries have been huge successes for UK companies, Morocco has so far been a disappointing country for UK investment.

But the attitude to working with UK firms and individuals is very open. Most North African countries are looking for foreign investment.

How to do business in Africa

There are certainly exciting opportunities for construction professionals in Africa, but working in this part of the world can raise some questions about how best to do business safely and securely.

Kate Orviss, partner in infrastructure law firm Pinsent Masons, looks at some issues to consider if you are thinking of working in Africa, and some potential pitfalls to be aware of.

What legal issues should you consider if you are planning to work in Africa?

• Political risk/covenant. What commitment has been shown to the project in question? What is the history of procurement in the jurisdiction? Is there any form of support from institutions such as the World Bank? What is the strength of the covenant of the procuring authority?
• Legal framework. How is the project being procured? How is the procuring authority authorised to procure the scheme? How can you ensure that you can enforce any terms agreed? What are the mechanics for ensuring payment? Do you need to set up a legal entity in the jurisdiction in question? If so, how do you do that and what are the implications?
• Exchange rate and dividend expatriation risk. What currency is the project denominated in and what is the experience, pricing and liquidity of the banks in question? How can exchange rate risk be managed? Can you get any dividends out if the project is successful? If so, how and what are the tax implications?
• Licensing/environmental risk. Do you know what licences are required and how you go about getting them? How long does it take? What is the legal framework? What are your liabilities with respect to environmental matters?
• Health and safety framework and general working practices. Standards in the country may not meet the standards you require. How will you go about managing this to ensure that all workers and subcontractors adhere to the standards you expect?

What can companies do to mitigate these risks?

• Work with local partners who are familiar with local customs and practices. They will be able to offer you guidance about opportunities and the culture of the procuring authority.
• Work with experienced legal advisers, using both international and local counsel as required.
• Ensure you fully understand the risk profile for the deal as a whole before you commit. Do not assume that anything will operate on the same basis as you are used to elsewhere. Check with local counsel about dispute resolution procedures, governing law, property and licensing and environmental issues to ensure that you are fully aware of the risks. Make sure you are fully aware of the tax treatment of dividends and the ability to expatriate them, and whether and to what extent there are local issues concerning the ownership of share capital and employment of foreign nationals.
• Make sure you understand the rules of the procurement and what is expected of you at every stage - in particular whether bid bonds are required and how they can be called.

Working in South Africa

Mark Walmsley is director of Turner & Townsend, South Africa

I spent two years with Turner & Townsend, leading their UK PPP/private finance teams, but then as part of the company’s plan to grow the business internationally I was asked if I would like to transfer to South Africa to grow the PPP business in Africa.

On New Year’s Eve with my partner and our six-week-old son we flew out from Heathrow and arrived at Johannesburg airport on New Year’s Day to start new jobs and make some new friends.

Work in Africa - particularly South Africa - is booming. There was a lot of concern following the 2010 World Cup that the workload would reduce, but Turner & Townsend’s Africa business has never been so busy. In fact, we are looking to transfer staff from the UK to South Africa to help us deliver the secured and growing workload.

We are also looking for new staff to come over from the UK - particularly people with project and facilities management experience and knowledge of infrastructure, residential and commercial construction.

The advantage of working in South Africa is the different ways to enjoy life. We have the advantage of some of the world’s greatest game parks at the Kruger and near the Botswana border. The Drakensberg mountains, Cape Town offering amazing beaches for surfing and swimming, wine farms and tourist attractions like Table Mountain. The adjoining sub-Saharan countries such as Mozambique and Botswana also offer great holiday destinations.

South Africa

Together with Nigeria, South Africa represents over 50% of sub-Saharan Africa’s regional GDP. South Africa is the biggest economy in Africa with a GDP of £176bn in 2009.

The construction market in South Africa is worth an estimated £15.9bn. Infrastructure is the fastest growing sector and accounted for 54% of construction output in 2008.

Key areas for construction include energy, telecommunications, transport, water and waste water.

Eskom, the South African state-owned utility company has estimated that electricity generation capacity will need to double by 2025 to 80,000MW, at an expected cost of £111.6bn.

A total of £29.4bn investment is needed for a new generation of power stations in South Africa, the first of which will come on line by 2013. Nuclear energy is expected to make up 50% of the additional capacity required in South Africa with the first reactors expected to start generating power by 2016 and further nuclear plants expected by 2025.

A 721km high-speed rail line, linking Johannesburg and Durban, aimed at relieving congestion on the N3 highway, is under consideration, while a high-speed rail link between Johannesburg and Cape Town is also being considered.

In the sub-Saharan region more generally, the population is expected to grow by 100% to 1.75 billion by 2050, and GDP in the region stood at £639bn in 2009. In terms of the construction market, fast urbanisation is predicted to drive the expansion of key sub-Saharan cities including Lagos in Nigeria, Dar es Salaam in Tanzania, Uganda’s Kampala and Ethiopia’s Addis Ababa. This would see a significant rise in construction opportunities over the next decade, particularly in infrastructure.

(Statistics are provided by Global Construction Perspectives.)