From Nigeria to Kenya, potential profitability in the African building materials industry

Several businessmen and investors interviewed by How we did it in Africa in 2021 highlighted the potential of the building materials and service industry of their respective countries.

In Nigeria, businessmen could target either cheap building materials for the mass market or supplies for high-end finishes, according to Thessa Bagu, managing director of consulting firm Naijalink. “The country needs building materials and equipment, from cranes to tiles and everything in between, because most of them are currently imported. For example, businessmen can focus on the large mansions and apartments under construction here in Lagos, which require beautiful finishes, such as faucets and doorknobs. [Read more: Opportunities in Nigeria: From building materials to health supplements]

Côte d’Ivoire also has a vibrant construction industry. While private equity firm Adiwale Partners is enthusiastic about the industry, their team lacks the expertise to invest directly in construction and development. However, Adiwale has found a way to participate in the growth of the sector through a recent investment in the air conditioning business Maintenance Air Conditioning Technique, focused on the installation and maintenance of industrial, commercial and residential air conditioning solutions. Demand for air conditioning in Côte d’Ivoire is driven by major new industrial and commercial developments as well as the renovation of existing buildings. [Read more: Opportunities in French-speaking West Africa: Insights from private equity investor]

While the East African investment firm Ascent Capital Africa is also avoiding direct real estate transactions, it will support companies that provide part of the real estate value chain. For example, it invested in Kisumu Concrete, which manufactures construction products such as ready-mixed concrete and concrete blocks. It is the largest player in western Kenya and enjoys little competition given the difficulty and cost of shipping building blocks from Nairobi or other locations.

Ascent has also invested in Metro Plastics in Kenya, which produces PVC and PPR pipes as well as gutters and wastewater disposal products. “These are not products that are going to make the headlines but they are essential if you are going to build a building or collect rainwater, which is very important in this part of the world. Those types of businesses that meet constant local demand and are seen as somewhat “immune” from potential import threats are generally attractive to us. For example, it is not cost effective to ship pipes from China to Nairobi – they are lightweight but take up a lot of space, ”says David Owino, founding partner of Ascent. [Read more: Investor reveals East Africa’s most attractive opportunities]