The Infrastructure Industry in Mozambique Contents Siccode 502

THE INFRASTRUCTURE INDUSTRY

Siccode 502 September 2015

Compiled by: CAROLE VEITCH [email protected]

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DIRECTORS: MAUREEN MPHATSOE (CHAIRPERSON), MICHELLE BEETAR (EXPERIAN), PAXTON ANDERSON (EXPERIAN), ANDREW MCGREGOR (MANAGING) The Infrastructure Industry in Mozambique Contents Siccode 502

CONTENTS

1. INTRODUCTION ...... 1

2. DESCRIPTION ...... 1 2.1. Supply Chain ...... 2 2.2. Geographic Position ...... 3 2.2.1. Key Cities and Regions ...... 4

3. SIZE OF THE INDUSTRY ...... 5 3.1. Key Indigenous and Foreign Players ...... 6

4. STATE OF THE INDUSTRY ...... 18 4.1. Local ...... 18 4.1.1. Corporate Actions ...... 21 4.1.2. Regulations ...... 22 4.1.3. Opportunities for the Construction Industry ...... 23 4.1.3.1. Transport ...... 24 4.1.3.2. Energy/Power ...... 28 4.1.3.3. Water Supply and Treatment ...... 29 4.1.3.4. Healthcare ...... 30 4.1.3.5. Education ...... 30 4.1.3.6. Telecommunications ...... 31 4.1.3.7. Residential Building ...... 31 4.1.3.8. Commercial ...... 32 4.1.3.9. Retail ...... 33 4.1.3.10. Hotels and Tourism ...... 33 4.1.3.11. Mining and Industrial ...... 34 4.2. Continental ...... 35 4.3. International ...... 39

5. INFLUENCING FACTORS ...... 41 5.1. Economic Environment ...... 41 5.1.1. General ...... 41 5.1.2. Effects on the Construction Sector ...... 44 5.2. Socio-Political and Socio-Economic Environment ...... 44 5.3. Infrastructure Deficit ...... 45

5.3.1. Government Infrastructure Programme Spend ...... 46 5.3.2. Foreign Direct Investment (FDI) ...... 46 5.3.3. Private Sector Investment ...... 46 5.3.4. Public-Private Partnerships ...... 47 5.4. Urbanisation ...... 47 5.5. Local Content ...... 47 5.6. Corruption ...... 48 5.7. Construction Equipment and Materials: Capacity, Quality and Security of Supply ...... 48 5.8. Input Costs ...... 50 5.9. Cyclicality ...... 51 5.10. Health and Safety Concerns ...... 51 5.11. Technology ...... 51 5.12. Labour Resources ...... 52 5.12.1. Training and Skills Development ...... 53 5.12.2. Licensing ...... 53 5.12.3. Skills Shortages...... 53 5.12.4. Opportunities for Foreign Professionals ...... 54 5.13. Environmental Concerns ...... 54

6. COMPETITION ...... 56 6.1. Barriers to Entry ...... 56 6.2. Public Procurement and the Tendering Process ...... 57 6.3. Research & Development (R&D) and Innovation ...... 57 6.3.1. Research & Development ...... 57 6.3.2. Innovation ...... 58

7. SWOT ANALYSIS ...... 59

8. FUTURE OUTLOOK ...... 60 8.1. Construction Industry Forecast ...... 60 8.2. Macroeconomic Outlook ...... 60 8.3. Political Outlook ...... 60

9. INDUSTRY ASSOCIATIONS ...... 61

10. REFERENCES ...... 61 10.1. Publications ...... 61 10.2. Websites ...... 62

APPENDIX 1 ...... 64 Investment Opportunities in the Mozambican Construction Sector ...... 64

COMPANY PROFILES ...... 66 AECOM TECHNOLOGY CORPORATION ...... 66 ANHUI FOREIGN ECONOMIC CONSTRUCTION (GROUP) CO LTD ...... 69 AURECON MOZAMBIQUE LDA ...... 70 AVENG GRINAKER-LTA MOZAMBIQUE LDA...... 72 BASIL READ HOLDINGS LTD ...... 74 BECHTEL CORPORATION ...... 81 BRITALAR - SOCIEDADE DE CONSTRUCOES SA ...... 83 CAMARGO CORREA MOZAMBIQUE LDA ...... 84 CETA CONSTRUCAO E SERVICOS SA ...... 86 CHINA ROAD & BRIDGE CORPORATION ...... 88 CLM CIVIL CONTRACTORS MOZAMBIQUE LDA ...... 90 CMC AFRICA AUSTRAL LDA ...... 92 CONSTRUCOES JJR & FILHOS MOZAMBIQUES LDA ...... 94 GABRIEL COUTO MOZAMBIQUE SARL ...... 96 INGEROP MOZAMBIQUE LDA ...... 98 ITALIAN-THAI DEVELOPMENT PUBLIC COMPANY LTD ...... 100 KENTZ ENGINEERS & CONSTRUCTORS LDA ...... 105 MOTA-ENGIL ENGENHARIA E CONSTRUCAO SA ...... 107 MURRAY & ROBERTS HOLDINGS LTD ...... 109 NCC MOZAMBIQUE LDA ...... 113 ODEBRECHT SA ...... 115 OPWAY ENGENHARIA SOCIEDADE DE CONSTRUCOES MOZAMBIQUE ...... 117 PENTA-OCEAN CONSTRUCTION CO LTD ...... 119 PROCONSTROI MOZAMBIQUE LDA ...... 123 SOARES DA COSTA MOZAMBIQUE SARL ...... 125 STEFANUTTI STOCKS MOZAMBIQUE LDA ...... 127 VM CONSTRUCTION ...... 129 WILSON BAYLY HOLMES-OVCON LTD ...... 130

1. INTRODUCTION

This report focuses on the building and construction sector in the Republic of Mozambique. The former Portuguese colony, which, in June 2015, celebrated 40 years of independence, currently finds itself in the midst of a renaissance as it endeavours to rebuild its battle-scarred economy. In recent years, positive political and economic reforms, boosted by the discovery of prolific quantities of natural gas, have seen Mozambique emerge as an increasingly attractive investment destination. While admittedly coming off an extremely low base, the resource-rich country is one of the fastest growing frontier economies on the African continent. Indeed, sustained levels of strong Gross Domestic Product (GDP) growth suggest that one of Africa’s "sleeping giants" is on the rise.

With an estimated value of approximately US$600m, the Mozambican construction sector is small and underdeveloped by global standards. However, the industry plays a pivotal role in the country, as it supports all sectors of the local economy and is one of the main drivers of economic expansion and job creation. Infrastructure development, with a particular focus on the country’s burgeoning extractive and real estate industries, has been prioritised. With projects totalling almost US$30bn in the pipeline or in the process of being rolled out, business in the construction sector is booming.

2. DESCRIPTION

The construction industry is a complex and multi-faceted sector that comprises a diverse spectrum of activities, ranging from the design of new construction projects through to post-construction maintenance and repairs. The sector’s main subgroups are general residential building construction; commercial building construction; industrial construction; and civil construction. Activities in the sector also include the rehabilitation, renovation, extension and demolition of existing structures, as well as the erection and dismantling of prefabricated buildings and structures of a temporary nature. Unlike most other sectors, construction output takes place on-site, at the point of consumption. As such, the industry demands a high degree of workforce mobility.

Mozambique’s formal building and construction industry comprises indigenous and indigenised firms, as well as numerous major foreign civil engineering and construction companies. Individual contractors and building firms are required to be registered with either the Ministry of Public Works & Housing, the Ministério de Óbras Púbicas e Habitação (MOPH), or with the relevant professional body, such as the Institute of Engineers of Mozambique, Ordem de Engenheiros de Moçambique, which registers

and authorises the activity of engineers in Mozambique. The country’s burgeoning informal sector is characterised by the presence of a multitude of unregistered construction companies, as well as a great number of independent artisans and contractors, who do not comply with the country’s registration requirements.

Key areas of infrastructure development include the following: ♦ Transport infrastructure, including roads, railways, stations, bridges, airports, waterways and canals, maritime ports and harbours; ♦ Public utilities, such as water supply, sanitation and sewerage works, power stations, telecommunications networks and waste disposal; and ♦ Public works, including the provision of social housing, sports and recreation facilities, hospitals and clinics, as well as educational institutions.

2.1. Supply Chain

The Mozambican construction sector is characterised by upstream and downstream linkages to a broad spectrum of different industries. Many building firms that specialise in residential construction are also involved in the real estate development market. The supply chain supporting the construction industry is extensive and includes manufacturers and importers of components and building materials, as well as suppliers of tools, equipment, scaffolding, heavy construction machinery and construction vehicles.

Most of the major players in the Mozambican construction industry have developed a high level of self-sufficiency with regard to the industry supply chain. While service providers such as architects, surveyors and structural engineers, as well as independent artisans and tradesmen are generally sub- contracted on a project-to-project basis, many of the larger companies have achieved a relatively high degree of vertical integration. This has largely developed due to the logistical challenges associated with the Mozambican operating environment.

Foreign construction companies usually source skilled labour from their parent companies, which generally have their own in-house professionals. Large companies also own and operate their own fleets of construction vehicles. Although construction materials are generally imported, some construction companies have diversified into the manufacturing sector. Construction companies with a high level of vertical integration include:

♦ CMC Africa Austral Lda, one of Mozambique’s largest civil contractors, which has expanded its complementary activities across the supply chain. These include the manufacture of timber products, the production and sale of concrete mix, quarrying, as well as the processing and sale of aggregates for civil construction and real estate construction. ♦ VM Construction, which provides turnkey construction solutions in logistically challenging and remote locations, operates from bases in Maputo, Vilanculos and Pemba. The company has its own plant and building equipment, as well as a fleet of vehicles, barges, dhows and boats, which enable it to access sites using waterborne transport. Stressing the importance of securing the supply chain, Reinier Meyjes, Director of VM Construction said, “What makes us unique is our ability to manage and deliver high quality construction in logistically challenging environments. We have had to plan out and invest in cost effective and reliable supply chains to our projects.”

2.2. Geographic Position

Mozambique, which covers an area of 801,590 km², is situated on the east coast of Southern Africa. The country shares land borders with South Africa, Swaziland, Zimbabwe, Zambia, Malawi and Tanzania, serving as a gateway to the coast for its landlocked neighbours. Bordered by the Indian Ocean in the east, Mozambique also shares maritime borders with the Comoros, the French island of Mayotte and Madagascar, from which it is separated by the Mozambican Channel. Numerous islands lie off the coast of Mozambique. These include the Quirimba Archipelago, which falls under the jurisdiction of the Cabo Delgado Province, Mozambique Island in Nampula Province, Chiloane Island in Sofala Province, the Bazaruto Archipelago in Inhambane Province and Inhaca Island in Maputo Province. The Mozambican coastline, including islands, measures 2,470km. The map below shows Mozambique’s international borders, the country’s provincial boundaries, the national and provincial capitals, major cities, as well as the major roads, railroads and airports.

[Source: United Nations Cartographic Section]

2.2.1. Key Cities and Regions

Mozambique is divided into ten provinces. Its national capital city, or cidade capital, also has provincial status. The nation’s provinces are divided into 129 distritos, or districts, which, in turn, are subdivided into 405 postos administrativos, or administrative posts. Localidades, or localities, are the lowest level of state administration.

Mozambique’s Regional Capital Cities Province Provincial Capital Cabo Delgado Pemba Gaza Xai-Xai Inhambane Inhambane Manica Chimoio Cidade de Maputo City of Maputo Maputo Provincia Matola Nampula Nampula Niassa Lichinga Sofala Beira Tete Tete Zambézia Quelimane

The topography of Mozambique comprises coastal lowlands, highlands in the central region, a plateau in the northwest and mountains in the west. The Zambezi River flows through the north-central part of the country. Mozambique’s north-central provinces of Zambézia and Nampula are home to around 45% of the country’s population. The most populous urban centres are Maputo, which has a population of almost two million inhabitants, and Matola, an outlying district of the national capital, which has an estimated population of 893,000 people. Other major cities are Beira, which is an important business and transport hub for the central region of the country, Nampula, Chimoio, Nacala, Quelimane, Mocuba, Tete and Xai-Xai. The country’s port cities are at risk from cyclones, coastal surges and rising sea levels.

3. SIZE OF THE INDUSTRY

During the 2014 financial year, activities in Mozambique’s formal construction industry contribute approximately 3.5% to the country’s Gross Domestic Product (GDP). Although the sector is currently only valued at around US$600m, the value of infrastructure projects that have broken soil in recent years or that are pending is estimated to be almost US$30bn.

Foreign companies, particularly South African, Chinese and Portuguese contractors, undertake the majority of high-value Mozambican construction projects, while indigenous firms, which have limited

market share, are more active in low-value residential and/or non-residential projects. According to stakeholders, only around 5% of local construction companies are in a position to bid for projects that require a high level of financing. Mota-Engil Mozambique, a wholly-owned subsidiary of Euronext Lisbon-listed Mota-Engil SGPS, is the country’s leading construction company, while Ceta Construções e Serviços S.A. is the largest indigenous civil engineering and construction company.

3.1. Key Indigenous and Foreign Players

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover AECOM ♦ Head office ± 45,000 $8,000.0m ♦ This Fortune 500 company is one of Technology located in the (Group) (2014) the world’s leading fully integrated Corporation United States. infrastructure and support services ♦ Operates firms. (Formerly BKS worldwide. ♦ Specialises in the provision of civil Mozambique Lda engineering and construction advisory in Mozambique) services. ♦ Projects include transportation networks, dams, roads and bridges, power, structures, civil services and industrial developments. Anhui Foreign The Chinese group 334 ♦ AFECC is a large multi-operational Economic has established (Group - Chinese enterprise. Construction branches in more Permanent) ♦ Focal areas include real estate (Group) Co. Ltd than 20 countries, development, the construction of (AFECC) including France, roads, stadia, hotels and government Belgium, Grenada, buildings. Madagascar, Ivory ♦ Mozambican projects include the new Coast, Zimbabwe, international terminal at Maputo Togo and International Airport and a Ministerial Mozambique. office building.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Aurecon ♦ Operates 7,500 $950.0m ♦ Provides civil engineering, Mozambique globally. (Group) 2014 construction supervision and Lda ♦ Headquarters (Group) specialist technical services to both in Australia the public and private sector. and South ♦ Services cover the conceptual, Africa. feasibility and planning phases of the project, through to design and construction supervision. ♦ Ancillary services include advisory and project management services. Aveng Grinaker- ♦ Aveng 25 $8.3bn – ♦ Part of JSE-listed construction and LTA Grinaker-LTA (Permanent) (Aveng Ltd’s engineering group, Aveng Ltd. Mozambique operates in (7,006– Construction ♦ Specialises in the energy, power, Lda sub-Saharan Aveng & Engineering: infrastructure, transport and mining Africa. Grinaker-LTA South Africa sectors. ♦ The Group has Group) and rest of a presence in Africa more than 30 Segment.) countries across Africa, Asia and Australasia.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Basil Read ♦ Head office in 2,959 $607.8m ♦ JSE-listed construction, mining, Holdings Ltd South Africa. (Group) 2014 development and engineering group. Operates in (Group) ♦ Specialises in civil engineering, road sub-Saharan construction, mixed integrated Africa, South housing developments, commercial America and property development, bitumen Australia. distribution, opencast mining, blasting operations, engineering design, procurement and construction management. Bechtel ♦ Headquarters 58,000 $37,200.0m ♦ Global engineering, construction, and Corporation in the United (Group) 2014 project management company. States. (Group) ♦ The group’s portfolio includes ♦ Operates in projects in the energy, transportation, around 50 communications, mining, oil and gas countries and government services sectors. worldwide. BRITALAR- ♦ Group head 200 The Portuguese BRITALAR Group’s Sociedade de office in (Est.) business portfolio includes: Construções SA Portugal with ♦ Civil engineering and Public Works; offices in ♦ Real Estate Development; France, Brazil ♦ Tourism; and and ♦ Health services. Mozambique.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Camargo Corrêa ♦ Group 52,000 ($6,589.7m - ♦ The Camargo Corrêa Group is one of Moçambique headquarters (Camargo Group; Brazil’s largest privately-owned Lda located in Correa $1,596.7m - companies. Brazil. Group) Engineering & ♦ The group’s portfolio includes civil ♦ Operates in Construction engineering and construction, real more than 20 Segment) estate development, cement countries. manufacturing, energy and transport concessions, as well as other activities unrelated to the construction sector. Ceta ♦ The 3,146 ♦ Ceta is Mozambique’s largest Construções e company’s indigenous civil engineering and Serviços S.A. headquarters construction company. The is located in Mozambican group, Insitec, holds Maputo. 75% of the shares and the balance is ♦ Involved in held by Mozambican investors. projects across ♦ The company specialises in public Mozambique, works, roads, railways, ports, notably in the concrete and steel structures, school provinces of buildings, hospitals, water supply and Tete and Cabo sanitation. Delgado.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover China Road and ♦ Head office in 1,500 ♦ The state-owned company has Bridge China. (Est. Per undertaken large infrastructure Corporation ♦ Operates Project) construction projects financed by the (CRBC) globally, with Chinese government since 1958. offices in over ♦ The international project contracting (Wholly-owned 50 countries. specialist became a wholly-owned subsidiary of subsidiary of China Communications China Construction Company Limited (CCCC) Communications in 2005. Construction ♦ Specialises in the construction of Company Ltd roads, railways, harbours, bridges, (CCCC)) airports, tunnels, dredging, water conservancy projects and public works. CLM Civil ♦ Head office is ♦ Privately-owned civil engineering Contractors based in the company. Moçambique British Virgin ♦ Services offered include road and dam Lda Islands. construction, bulk earthworks and ♦ Regional plant hire services. (Part of the CLM offices have Group) been established in South Africa, Malawi, Zimbabwe, Zambia and Mozambique.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover CMC Africa ♦ Head office in 3,000 $335.6m ♦ CMC Africa Austral Lda (formerly Austral Lda Italy. (CMC Group’s CMC) is a limited liability company ♦ Offices in Southern incorporated according to the laws of (Part of the CMC Europe, Asia, Africa Mozambique. Group) Africa and Segment) ♦ Core business is civil contracting. North Complementary activities include the America. manufacture of timber products, the production and sale of concrete mix, quarrying, the sale and processing of aggregates for civil construction, as well as for real estate construction. ♦ Ranked as one of Mozambique’s largest civil contractors. ♦ The company has expanded its regional footprint into South Africa, Swaziland, Malawi, Angola and Lesotho.

Construções JJR ♦ Head office in 250 ♦ Mozambican subsidiary established in & Filhos Portugal. (Group) 2010. Moçambique ♦ Focuses on civil engineering and Lda public works, notably the rehabilitation of roads and highways. (Part of Grupo JJR/the JJR Group)

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Gabriel Couto ♦ Head office in Over 700 $137.7m ♦ Specialises in the construction of Moçambique Portugal. (Group) 2013 roads and airports, as well as SARL ♦ Offices in (Gabriel AS environmental and renewable energy Romania, Couto SA projects. (Part of the Moldova, total) Gabriel Couto Algeria, Cape Group of Verde, Companies) Mozambique, Swaziland and Angola. Ingérop ♦ Head office in 1,700 $231.7m Business lines include: Mozambique France. Offices (Group) 2014 ♦ Infrastructure development; Lda in Europe, (Ingerop ♦ Urban planning and Public South Group) Transportation; America, Asia ♦ Water and Environment: and Africa. ♦ Building construction; ♦ Energy; and ♦ Industrial facilities. Italian-Thai ♦ Head office is 28,235 $1,457.8m ♦ One of the largest infrastructure Development in Bangkok, (Group) 2014 construction companies in Southeast Public Company Thailand. (Group) Asia. Ltd ♦ Operates ♦ Specialises in civil and infrastructure globally. construction and development.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Kentz Engineers ♦ Kentz Group 15,500 $1,657.5m ♦ Kentz is a global engineering specialist and Constructors operates in (Group) 2013 solutions provider. Lda over 30 (Group) ♦ Listed on the AIM market of the countries ($331.6m – London Stock Exchange. around the Africa Total) ♦ Specialises in the oil and gas, world, petrochemical and mining and metals including the sectors. Americas, the Middle East, Australasia, the Far East, Russia, Africa and Europe. Mota-Engil ♦ Mota-Engil 14,500 ($671.8m - ♦ The Group provides integrated Engenharia e Africa’s head (Mota-Engil Mota-Engil engineering and construction Construções office is in Africa Group) SADC services, as well as other related Moçambique Johannesburg, Segmental services. South Africa. (28,000 - Revenue) ♦ Portfolio encompasses infrastructure (Part of Mota- The Group ME SGPS) development, including roads, Engil Africa BV, operates in railways, bridges, dams, mining which is a Angola, services and public works, real estate wholly-owned Mozambique, development, logistics (including subsidiary of Malawi, Cape ports and other infrastructure Euronext Lisbon- Verde, Ghana, management) and environment and listed ME SGPS) São Tomé and services (including waste Príncipe, management and collection and South Africa, water treatment and distribution). Uganda, ♦ Civil construction projects include Zambia and residential and office complexes, Zimbabwe. health centres and hospitals, sports and leisure facilities, educational

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover ♦ The institutions, shopping malls, factories Portuguese and warehouses. parent company, ME SGPS, operates in 21 countries across Africa (through the operations of Mota-Engil Africa), Latin America and Europe. Murray & ♦ The Group 21,217 $3,513.3m ♦ JSE-listed engineering, contracting Roberts Holdings operates in (Group) 2014 and construction services company. Ltd Southern 5,666 (Group) ♦ Specialises in civil, mechanical, Africa, the (Interna- electrical, mining and process Middle East, tional) engineering, general building, Australasia, construction and infrastructure North development. America, South America and Southeast Asia ♦ Representative office opened in Mozambique in March 2014.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover NCC ♦ The Group has 2,716 ♦ Inyatsi Construction Group Holdings Moçambique operations in (Group) holds a 49% stake in NCC. The Lda Mozambique, remaining 51% shareholding is held Zambia, South by Mozambican nationals. Africa, ♦ The company specialises in the Swaziland and construction and upgrading of roads, Uganda. building projects, bridge construction, pipe laying, dams and reservoirs. ♦ Recent projects include Goba Bridge, Nampula Roads, Zambezia Roads, Gaza Roads and road maintenance in Maputo. Odebrecht SA ♦ Head office in 159,036 $41.4m ♦ The Brazilian Odebrecht Group is one Brazil. (2012) 2013 of the world's largest international ♦ Almost 200 (Group) contractors. subsidiaries ♦ Portfolio includes the construction of worldwide. large-scale projects, including buildings, dams, thermoelectric plants, hydroelectric plants, nuclear and petrochemical complexes, refineries, resorts, subways, highways, railroads, bridges, airports and irrigation systems.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Opway ♦ Head office in 250 ♦ Global engineering company, Engenharia Portugal. (Est.) specialising in road concessions, Sociedade de Operates in (650 – Group) engineering works and real estate. Construções Germany, Moçambique Angola, Algeria, Cape Verde, Congo, Spain, Macau and Mozambique. Penta-Ocean ♦ Headquartered 2,949 $3,546.9m ♦ Japanese construction company with Construction Co in Japan. (Group) 2015 an extensive global footprint. Ltd Overseas (Group) ♦ In February 2014, the company was offices in awarded the tender to renovate the Singapore, Port of Nacala. Hong Kong, Vietnam, Egypt, Indonesia, Malaysia, Sri Lanka, Thailand, UAE, Myanmar and India. Proconstroi ♦ Operates 200 ♦ Founded in Mozambique in 2006. Moçambique across (Est.) ♦ Specialises in civil construction and Lda Mozambique real estate development.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover Soares da Costa ♦ Operates 3,785 $35.2m ♦ Portuguese construction company Moçambique globally. (Group) 2013 specialising in civil engineering and SARL Headquarters construction, real estate t/a SDC in Portugal 700 development, public works, Mozambique and offices in (Local) concessions, the manufacture of Brazil, construction materials and other Romania, related activities. Israel, Angola ♦ Recent projects include the and construction or rehabilitation of two Mozambique. elementary schools in the provinces of Manica and Inhambane, a hospital in Montepuez, a hotel in Maputo, roadways and a bridge over the Zambezi River. Stefanutti Stocks ♦ Operates in 13,765 $189.7m ♦ The Group is one of the leading listed Mozambique South Africa, (Group) 2014 construction groups in South Africa. Lda Angola, (Africa & ♦ Multidisciplinary company with the Botswana, Middle East capacity to take on engineering and Namibia, Contract construction projects of any scale Mozambique, Revenue) across the built environment. Sierra Leone, ($982.3m – Swaziland, Group) Zambia, Zimbabwe, Dubai, Abu- Dhabi, Qatar and Oman.

Geographic Number of Estimated Company Nature of Business Footprint Employees Turnover VM Construction ♦ Bases in 700 ♦ Construction and project Maputo, (100 – management company, providing Vilanculos and Permanent) building solutions throughout Pemba. Mozambique. ♦ Specialises in turnkey, high-end tourism developments, luxury villas, residential homes, and industrial and commercial developments. Wilson Bayly ♦ Operates 11,192 $291.3m ♦ JSE-listed company. Holmes-Ovcon across (Group) 2014 ♦ Major player in the Southern African Ltd Southern (Africa construction landscape. Africa and in Segment) ♦ Specialises in building construction, Australia. ($2,379.2m – civil engineering, road construction Group) and earthworks.

4. STATE OF THE INDUSTRY

4.1. Local

General In 2014, revenue generated by the construction industry increased by almost 10%. The sector’s contribution to Mozambique’s GDP during the past financial year was approximately 3.5%. The Mozambican construction sector has been identified as one of the most rapidly expanding markets in sub-Saharan Africa and it currently ranks amongst the top five foreign investment destinations in Africa. Despite the challenging operating environment, analysts believe that the sector will remain on an upward trajectory and that growth will continue to be driven by heightened demand for the delivery of infrastructure. Mozambique’s construction boom has been attributed to various socio-economic factors. These include the following: ♦ The sustained growth of the Mozambican economy; ♦ The country’s abundant natural resources and the increase in exploration and extraction activities; ♦ Growing industrialisation;

♦ Rising urbanisation; ♦ Growing demand for low-cost, middle-income, as well as high end residential properties; ♦ Population growth; and ♦ The emergence of the Mozambican middle class.

While positive economic and political reforms have been implemented in recent years, Mozambique remains one of the most under-developed, aid-dependent nations in the world. Much of the infrastructure that was damaged or destroyed during the country’s protracted civil war is yet to be rehabilitated or reconstructed. Substantial capital investment is also required to construct new infrastructure to support the burgeoning coal and natural gas industries. The growing demand for improved infrastructure has seen a sharp increase in activity in the civil and heavy construction segments in recent years, with mega-projects breaking ground in the mining, transport, real estate, energy and power sectors. These include the US$1.3bn Mozal aluminium smelter near Maputo, as well as coal mines in Tete province.

The Mozambican government’s development strategy for the country has been structured in accordance with various Regional Spatial Development Initiatives Programmes (RSDIP) and Growth Poles (GP). The objective of these programmes is to optimise infrastructure investments by strategically concentrating projects in one of the country’s five main geographic corridors or in key growth nodes. The Maputo Development Corridor is one such example. It is envisaged that large-scale RSDIP and GP projects will generate economic activity by providing upstream and downstream business opportunities for small and medium-sized enterprises across the entire value chain.

Construction activity is mainly concentrated in the public works segment and many projects are still donor-funded. A significant number of infrastructure development projects have been funded by development finance institutions, including the World Bank and the African Development Bank (AfDB). Funding is increasingly being sought from private investors. According to research conducted by Oxford Economics for PricewaterhouseCoopers (PwC) investment in infrastructure development has quadrupled during the past decade. Analysts predict that infrastructure spend will increase to almost US$6bn per annum by 2025, with the transport and extractive sectors attracting the lion’s share of expenditure.

Trends ♦ The infrastructure gap between the rural and the urban areas is becoming increasingly pronounced. ♦ Urbanisation is giving rise to informal settlements. The high influx of people to the cities has resulted in urban sprawl and environmental degradation. ♦ Chinese construction companies continue to increase their market share. ♦ The energy, mining and real estate sectors continue to drive the demand for infrastructure. ♦ Mozambique’s emerging middle class and the expatriate community are driving demand for residential properties, business and leisure hotels, shopping centres, warehousing, business premises and improved transport networks.

Challenges Although the construction industry generally offers developers high returns, the operating environment is characterised by a shortage of skilled labour, high operational costs, difficulty in procuring construction materials and equipment, bureaucratic inefficiencies, power insecurity and low productivity. The infrastructure deficit in Mozambique has also prompted many companies operating in the country to construct their own infrastructure to support business operations, so that they are able to operate more efficiently.

Mozambique’s coastal areas and river valleys are high risk areas for flooding. In January 2015, the central and northern regions of Mozambique were battered by torrential storms. According to Mozambique's Deputy Health Minister, Mouzinho Saide, over 150 people were killed and more than 160,000 were displaced by the floods. The impact of the flooding was most severe in the Licungo River Basin in Zambézia Province, where flood waters caused damage to roads, bridges, power lines and electricity towers. Numerous roads and bridges have been washed away, leaving an estimated 70% of the province unreachable by land. Analysts have cautioned that damage resulting from the floods, coupled with commodity price volatility, could have a negative impact on the country’s economic growth rate.

Notwithstanding the August 2014 peace accord negotiated between the ruling Frente de Libertação de Moçambique (Frelimo) and the Resistência Nacional Moçambicana (Renamo) parties, Mozambique’s political landscape continues to be characterised by sabre-rattling and low-intensity skirmishes. Following the victory of Frelimo in the October 2014 legislative and presidential elections and the subsequent appointment of Filipe Nyusi as the country’s new president, Renamo has renewed

its call for the establishment of a separatist republic that would be known as the “Republic of Central and Northern Mozambique”. The proposed state would incorporate territory in the provinces of Sofala, Manica, Tete, Zambezia, Nampula and Niassa. Dhlakama. Although Renamo has abandoned its boycott of parliament, tensions have intensified since April 2015 and in August of this year, the official opposition declared that it would take control of the country’s six northern and central provinces “by force” if necessary. Renamo also signalled its intention to form its own police force and to establish barracks for its militia in Zambezia province’s Morrumbala district. Stakeholders in the construction industry warn that threats of this nature are likely to dampen investor confidence.

4.1.1. Corporate Actions

State-owned Mozambican port authority, Portos De Cabo Delgado SA, has reneged on a contract entered into with South African company, Muyake SA, involving the construction of a R3.7bn port at the Pemba oilfield terminal. It recently came to light that the project will now be undertaken by ENH Integrated Logistics, in which the Mozambican government has a 51% shareholding. Muyake has taken the matter to court and is claiming US$143.9m from the Mozambican government.

Other recent developments in the sector include the following: ♦ In February 2015, Mozambican company Nadhari Lda announced that it had acquired Portuguese construction company Opway for 5 million euros. ♦ In August 2014, SNC-Lavalin Group completed the acquisition of Kentz Corporation Limited. Kentz provides engineering, construction management and technical support services to clients in the oil and gas sector. ♦ In June 2014, Portugal’s largest construction company, the Mota-Engil Group, announced that its subsidiary, Mota-Engil Africa, would commence trading on the London Stock Exchange (LSE) on 16 July 2014. ♦ On 27 May 2014, Grupo Soares da Costa SGPS, S.A. was renamed SDC-Investimentos, SGPS, S.A. ♦ On 9 May 2014, Grupo Soares da Costa SGPS, S.A. announced that its subsidiary, Soares da Costa Concessões, SGPS, S.A., had sold its 40% stake in the Estradas do Zambeze (Zambezi Roads) Concession to a subsidiary of the Mota-Engil Group for €4.8m. Estradas do Zambeze is now jointly owned by Portuguese contractors Opway-Engenharia and Mota-Engil.

4.1.2. Regulations

The construction sector is subject to the Land Law of 1997 (Law 19/97), as well as the Land Law Regulations for rural areas and the Technical Annexe, containing rules on the delimitation of community lands and the rules governing fees payable by land users. Mozambique’s property ownership laws state that all land is state-owned and, as such, it may not be bought or sold. However, the right of use of the land, known as Direito de uso e approveitamento da terra (DUAT) title, may be purchased. Land tenure is obtained through usage rights. Licence holders can lease the land for 50 years, after which time the lease may be renewed for a further 50 years. Property built on leased land is owned by the licence holder, who is permitted to retain ownership, transfer, sell or rent the property to a third party.

In 2007, Mozambican property law was amended to allow foreigners to build or buy properties on government land, subject to certain conditions. Prospective foreign property owners would be required to do one of the following: ♦ Register a local company in Mozambique; ♦ Enter into a business partnership with a local citizen/company; ♦ Purchase syndicated property through an existing property developer; and/or ♦ Reside in Mozambique for more than 5 years in order to acquire local citizenship.

In terms of current legislation, any contractor undertaking public works for the State and/or civil construction for private entities requires a licence authorised by the Ministry of Public Works and Housing and issued by the Commission for Registration and Licensing of Contractors. While contractors licensed to do public works may also undertake private work, the reverse is not always possible.

The granting of licences differentiates between Mozambican and foreign contractors. Under local law, a Mozambican contractor is defined as any construction company with a registered office in Mozambique, in which a Mozambican individual or company has a shareholding of at least 50%.

Foreign contractors are defined as those construction companies of which more than 50% of the share capital is held by foreign citizens, companies or institutions.

Foreign contractors are required to meet the following conditions: (i) They must have the relevant authorisation to carry our public works;

(ii) They are required to have been operating legally in Mozambique as a civil contraction contractor for at least 10 years as a company incorporated in Mozambique, or a branch or subsidiary of a foreign civil construction contractor.

A licence will only be issued to a foreign contractor who has been awarded a public works project through either an international process, or under reciprocal government agreements in the area of civil construction, or alternatively to foreign contractors operating in Mozambique as the sub- contractors of a contractor licensed in Mozambique.

The Mozambican construction industry has to contend with numerous regulatory and bureaucratic challenges. Until recently, the issuing of construction permits was a lengthy process and it typically took 377 days for a contractor to obtain a construction permit. However, efforts to streamline the complex process have resulted in a marked improvement in the system, as reflected in the World Bank Doing Business 2015 Index, which indicates that it now takes 144 days to process the 11 procedures required to obtain a permit. Mozambique currently ranks 84th out of 189 economies on the 2015 Ease of Dealing with Construction Permits Index. Recent land registry reforms have also made it easier to register property in Mozambique. In terms of ease of registering property, Mozambique currently ranks 101st out of 189 counties on the 2015 World Bank Doing Business Index.

As part of its strategy to increase revenues and expand domestic participation, the government of Mozambique has overhauled the legal and fiscal framework for the mining and hydrocarbons sector. Stakeholders are optimistic that these regulatory changes will also have a positive impact on civil engineering and construction companies operating in the extractive sphere.

4.1.3. Opportunities for the Construction Industry

The recently released 2015 Barclays Africa Trade Index, which measures opportunities and openness to trade in 31 sub-Saharan countries, has identified Mozambique as one of Africa’s "sleeping giants". According to the findings of research conducted by Barclays Bank, continued economic development in the country is expected to drive private consumption.

Mozambique’s rapidly expanding economy, juxtaposed with Europe’s economic woes, has prompted numerous expatriates to return to the former Portuguese colony in search of better opportunities. Although the parent companies of the majority of the international players are headquartered in

Portugal, foreign construction companies from across the globe are steadily making inroads into the Mozambican construction market. China continues to expand its sphere of influence and South African contractors are also increasingly making their presence felt. New foreign entrants that established representative country offices in 2014 include South African construction giant, Murray & Roberts, and American multi-national company, Fluor, which will be providing support to projects across multiple industries, including oil, gas, chemicals, power, infrastructure development, industrial services, mining and minerals. The participation of indigenous companies in the formal construction industry remains limited.

Initiatives to diversify Mozambique’s predominantly agriculture-based economy include the development of the country’s extractive industries, the promotion of tourism, as well as the development of various manufacturing industries; notably aluminium, food and beverages, chemical manufacturing and Liquefied Natural Gas (LNG). One of the Mozambican government’s focal areas has been the integration of its poverty reduction strategy with capital-intensive mega-projects. Infrastructure development has been prioritised to fast-track the upgrading of the country’s transport systems, as well as the roll-out of basic services, notably sanitation and potable water.

The Mozambican government has provisionally earmarked the Nacala Corridor for future infrastructure development in order to support the proposed ProSavana agricultural mega-project involving Japan and Brazil. The government is expected to make a decision before the end of this year and, if approval for ProSavana is granted, 35 million hectares will be developed for commercial soybean farming.

The Investment Promotion Centre of Mozambique, the Centro de Promoção de Investimentos (CPI), provides information about current projects. See Appendix 1 for details of business opportunities in Mozambique.

4.1.3.1. Transport

Mozambique’s Transport Systems Development Strategy known as the Estratégia parao Desenvolvimento do Sistemade Transportes aims to radically transform the country’s logistics infrastructure and to eradicate transport backlogs. The government has pledged its support for the strategy and has undertaken to fast-track the development and upgrading of Mozambican road and rail networks, as well as the country’s air transportation and port infrastructure.

The map below shows major projects that have broken ground in the transport sector, as well as infrastructure development projects that are on the drawing board.

[Source: Snapshot of Mozambique. 2013. PricewaterhouseCoopers (PwC)]

Key projects that have been undertaken or approved in recent years include the following:

Ports and Railway Lines ♦ The construction of the new Ponto Techobanine deep-sea port and industrial complex in Maputo Province provides for the construction of a 1,100 km heavy-haul railway line that will link the port of Techobanine with Botswana’s eastern coal mines near Selebi Phikwe. The proposed railway, which will pass through Zimbabwe, will also serve Chicualacuala in the southern Mozambican province of Gaza. The port will have the capacity to handle 100 million tonnes of cargo per annum and will primarily be used for the export of minerals from Botswana and Zimbabwe to Asia. ♦ The development of transport corridors connecting the Mozambican hinterland, as well as the country’s land-locked neighbours, to the ports of Maputo, Nacala and Beira, with a particular focus on the logistics corridors linking the mining belt to coastal ports. ♦ The upgrading of the Beira port in Sofala Province. A new coal terminal, with the capacity to handle 30 million tonnes of coal per annum, as well as a new fertiliser terminal, will also be constructed at the port of Beira. ♦ Approval has been granted for the construction of a fishing port in Beira. ♦ The upgrading of the Sena railway line between Beira and Tete. State-owned Mozambican Railways Company, Portose Caminhos de Ferros de Moçambique (CFM), has been granted a mandate to expand the annual capacity of the Sena line to 20 million tonnes by 2016. ♦ The rehabilitation of the Machipanda railway line, linking Beira with Zimbabwe. ♦ Thailand’s largest construction firm, Italian-Thai Development Pcl, has been named as the preferred developer of a 525km US$3bn railway and deep-water port project linking the coal mining region of Tete province with Macuse in Zambézia. The development of infrastructure is expected to boost coal exports considerably. ♦ The construction of the Mocuba dry port in Zambézia Province. ♦ Leading Brazilian mining company, Vale, has invested US$4.4bn in upgrading the railway line from the Moatize coal basin in Tete province to the key import/export port of Nacala in the northern province of Nampula, via southern Malawi. ♦ The deep-water port of Nacala will be upgraded at a cost of US$300m by the Japanese company, Penta-Ocean Construction Co Ltd. ♦ Nacala Port Development Project Phase II has been put out to tender. ♦ The construction of a new port in Palma in the province of Cabo Delgado. ♦ US$500m has been allocated for the expansion of the Maputo port.

Roads and Bridges ♦ The second phase of the Road Sector Integration programme, or the Programa Integrado do Sector das Estradas (PRISE), saw investment in the country’s road transport network of approximately US$1.5bn between 2010 and 2014. Over the past five years, 19,000 km of road have been maintained and 1,500 km of roads have been paved with asphalt, with a particular focus on the Nacala Road Corridor Project (NRCP), linking the port of Nacala in northern Mozambique with Zambia and Malawi. ♦ The Mozambican government has identified sections of the national road network that will be allocated to private companies to be operated and maintained as concessions. Routes include Matola-Boane, Marracuene-Lindela, Nampula-Nacala, Vanduzi-Changara and Monapo-Ilha de Moçambique. National Road 4, linking Maputo to South Africa, was the first Mozambican route to be operated as a concession. The toll road is operated by the South African company, Trans Africa Concessions (TRAC). The establishment of public-private partnerships (PPPs) has been endorsed by the Mozambican government. ♦ In June 2014, the upgrading of the national Beira-Zimbabwe road commenced, with the primary objective of improving traffic circulation. The arterial connects the port of Beira with the border town of Machipanda in Manica province. The US$400m project, which includes the construction and repair of several bridges, as well as raising the road level, has been awarded to China’s Anhui Foreign Economic Construction Corp (AFECC) and will be funded by China’s Export-Import (Exim) Bank. ♦ A US$187m project to construct, upgrade and maintain the roads and bridges in Tete province has been awarded to Estradas do Zambeze. The operating company, which is jointly owned by Mota-Engil and Opway-Engenharia, has secured a 30 year concession to maintain and operate roads in the province. ♦ In April 2014, a section of the main highway between the town of Namialo in Nampula and the Lurio River on the Cabo Delgado border was inaugurated. The 150 km section of road was financed by the United States government, through the Millennium Challenge Corporation (MCC). ♦ The Maputo Ring Road, which is currently being constructed by the China Road and Bridge Corporation (CRBC), is scheduled to be completed in December 2015 and not in the first half of the year as initially forecast. ♦ The construction of Africa’s largest single suspended span bridge across Maputo Bay is scheduled to commence before the end of 2015. The 3 km-long bridge will be largely funded by loans from China’s Exim Bank.

♦ Contractors have been invited to submit bids for the construction of a bridge over the River Nacatile.

Airports ♦ Chinese construction company AFECG was awarded the tender to modernise and expand Maputo International Airport. The project incorporates the construction of new domestic and international terminals. ♦ The construction of Nacala International Airport was completed in the first quarter of 2015. ♦ The construction of an intercontinental airport hub in Pemba. ♦ The construction of a new airport in Tete.

4.1.3.2. Energy/Power

Energy Mozambique’s energy boom has provided a stimulus for all segments of the building and construction sector. Substantial discoveries of natural gas in the offshore Rovuma Basin have raised the country’s proved natural gas reserves to 100 trillion cubic feet (Tcf) and demand for support infrastructure and related services has soared. Despite the current weakness of the oil price, the Mozambican government recently launched a fifth international tender for the exploration of new oil and gas fields. Analysts believe that further hydrocarbon discoveries will further boost construction activity.

The Anadarko Petroleum Corporation and Eni, Italy’s largest oil and gas company, have joined forces to develop offshore gas fields in northern Mozambique. The companies, in cooperation with the government of Mozambique, will be commissioning the construction of a major onshore LNG plant in the Cabo Delgado province. On completion, the US$50bn project will have the capacity to produce approximately 50 million tonnes of LNG per annum, making it the second largest LNG plant in the world. Fuel production is not expected to commence before 2020. The remote village of Palma in the province of Cabo Delgado will become the logistics base for the natural gas industry.

The China Harbour Engineering Corporation (CHEC) recently announced the launch of the first phase of construction of the Integrated Hydrocarbon Logistics Centre in Pemba. The first phase of the project involves the construction of a 300-metre pier, as well as the development of a 60-hectare industrial area to serve the logistical requirements of the oil and gas industry. Work on the first phase is expected to be completed before the end of 2016.

Subject to obtaining the necessary approval, South African-based Sasol, will be expanding its presence in the Mozambican oil and gas sector. According to David Constable, Chief Executive Officer of Sasol, the petrochemical giant is currently engaged in securing approval to develop two oil reservoirs, as well as two gas reservoirs, which have the capacity to supply a 400-megawatt power plant.

Power The Mozambican government, through the Low Cost Rural Electrification Plan (LCREP) formulated for Electricité de Moçambique by AECOM, aims to connect 20% of the population to the national grid by 2020. The increase in industrial activity is also placing additional pressure on the national grid, with demand for electricity rising by between 10% and 15% per annum. The electrification of Mozambique has necessitated the development of new power generation, distribution and transmission infrastructure.

In 2013, approval was granted for the construction of a 600MW thermal-power plant at Moatize in Tete Province. The operating company, Acwa Power Moatize Termoeléctrica (APMT), is a joint venture between Brazil’s Vale, Saudi Arabia’s Acwa Power, Japan’s Mitsui, Mozambique’s state-owned electricity utility, Electricidade de Moçambique (EDM), as well as the Mozambican Whatana Investment Group. The plant, with an estimated price tag of US$1bn, will be supplied with coal by Vale’s Moatize mine and will be developed on a build, own, operate and transfer basis. Ressano Garcia in southern Mozambique has been earmarked for development as a Southern African electricity supply hub. Projects include the construction of four gas-fired thermoelectric power plants. Two of these plants are already operational.

The government has made a commitment to harness the country’s hydroelectric potential more effectively. The construction of the US$2bn Mphanda Nkuwa Hydroelectric Dam on the Zambezi River, 60km downstream from the Cahora Bassa hydroelectric dam, will add an estimated 1,500MW of power to the grid. The Japanese government recently confirmed that it will provide Mozambique with a loan of US$167m to construct a gas fired power station, with the capacity to generate 100MW. The Maputo-based power station is expected to be operational in 2018.

4.1.3.3. Water Supply and Treatment

Mozambique is currently ranked 128th out of 135 countries on the Social Progress Index for access to improved sources of water. According to the World Bank, the country has one of the lowest levels of

treated water consumption in the world. Access to sanitation is also a major challenge for the majority of the population. It is reported that more than 40% of the population does not have access to proper sanitation. In an effort to address these challenges, the Mozambican government has earmarked additional funding for this sector and the provision of basic services to local communities, notably access to water and sanitation, has been prioritised.

Public works programmes include: ♦ The construction of dams, canals, reservoirs; ♦ Transmission and distribution infrastructure; and ♦ The construction of sewerage plants, urban water treatment plants and reticulation systems.

In July 2013, the US$178m Greater Maputo Water Supply Expansion Project was approved by government. On completion, the Moamba Major Dam will supply treated drinking water to around 100,000 households in the Greater Maputo area. Other water supply initiatives include Phase II of the Corumana Dam in Maputo Province; the Pavua Dam project in Sofala Province; and the Chimezi and Sussundenga Dam projects in Manica Province.

4.1.3.4. Healthcare

The state of healthcare in Mozambique is poor and the construction of new hospitals is of critical importance. The country’s Health Infrastructure Development Programme aims to provide the nation’s population with access to healthcare services. In April 2012, the United States Agency for International Development (USAID) awarded AECOM a five-year contract that is intended to support the programme. In terms of the US$14.7m contract, AECOM will provide planning, design and construction advisory services for rural health centres, district and regional pharmaceutical warehouses, a pharmaceutical quality-assurance laboratory, as well as a health sciences training centre.

New healthcare facilities currently under construction include a 600-bed hospital in Quelimane. The facility, which is being developed by a consortium of South Korean companies, is scheduled to be completed before the end of 2015.

4.1.3.5. Education

There are currently approximately 41,000 classrooms in Mozambique. According to the findings of research conducted by UN-Habitat, 60% of Mozambican schools are situated in areas that could be

affected by natural disasters. Mozambique has a high level of exposure to natural disasters and each year, between 200 and 1,000 classrooms are damaged or destroyed by cyclones and/or floods. Damage to buildings is frequently exacerbated by poor structural design, use of sub-standard construction materials, as well as poor quality building methods. The increasing frequency of extreme weather events has prompted the Mozambican Ministry of Education to adopt measures to make local schools more resilient to adverse weather conditions. The initiative provides for 800 new weather resilient primary school classrooms and 150 weather resilient rural secondary school classrooms to be constructed each year.

4.1.3.6. Telecommunications

Mozambique’s telecommunications system is still characterised by a high degree of state control. The sector is uncompetitive and operating costs are high. However, mobile-cellular networks are expanding rapidly and coverage has been extended to all major cities, as well as to certain national roads. Fixed line tele-density in Mozambique remains very low, but mobile penetration is expanding rapidly. There are currently over 10 million cell phone users in the country. Although Internet usage increased by around 16% year-on-year in 2014, penetration remain low at 1,467,687 users, representing only around 5.54% of the population. Mobile operators MTN, Vodacom and Movitel have expanded their service offering to include Internet access.

4.1.3.7. Residential Building

There is currently an estimated deficit of more than 2.5 million homes in Mozambique. Although policies contained in the government’s 2014 Plano Nacional de Planificação em Moçambique prioritise the development of low-income housing, securing home loans in Mozambique remains a significant challenge. Furthermore, a disproportionately high number of new real estate development projects target prospective middle and upper-income buyers and tenants, as well as the expatriate market. According to Gonçalo Marques of Pam Golding Properties in Maputo, “Every developer in town wants to develop high-end properties, which have the biggest margins of profit. One can build for US$1,000 per square metre and sell at US$4,000 per square metre.” Furthermore, rapidly escalating property prices have effectively shut locals out of the property market and are driving low-income earners from their homes. It is not uncommon for low-income residential suburbs to be bulldozed to make way for new high-rise developments to accommodate expatriate communities.

Large-scale residential projects in Maputo include the following: ♦ Rani Towers, a high-end residential, commercial and hotel development, which is scheduled to open for business in November 2015; ♦ The construction of the US$45m Maputo City Tower, which commenced in April 2014. The project, which is a partnership between the Mozambican government's Housing Promotion Fund (FFH) and Dubai's Signature Group, is scheduled to be completed by the beginning of 2017. The discovery of natural gas reserves in the Rovuma Basin has attracted numerous companies to the province of Cabo Delgado. In Pemba, property developer, Pembaland, has indicated that it is planning to build apartments to accommodate people working in the energy sector. The value of the proposed residential project is US$6m. To serve the diverse needs of the burgeoning gas hub, investment company African Century, has undertaken a mixed-use development, which combines residential units, retail premises, as well as commercial space. The Mahate Ridge development is situated in close proximity to the Pemba airport.

The village of Palma, which is likely to be the logistics hub of the LNG industry, is preparing for an influx of around 10,000 workers. African Century, in collaboration with VM Construction, pre-empted the anticipated influx and commenced work on the “Palma Residences” condominium project in August 2013.

4.1.3.8. Commercial

High quality office space in Mozambique’s major business centres is in high demand. Multipurpose high-rise buildings, which do not require large plots of land, have become an increasingly popular solution for commercial real estate developers. Mega-projects include: ♦ Ex-Facim Place, an ambitious US$1.16bn commercial development incorporating offices, retail space, residential apartments and two hotels; ♦ The new high-rise Banco Central de Moçambique, BCI and Standard Bank headquarters in Maputo’s financial sector; ♦ The Maputo Business Tower, which at 47 floors, currently makes it the capital’s tallest building; and ♦ The iconic Polana Twin Towers, which is a multifunction development, combining office space, residential apartments and high-end hotel accommodation.

4.1.3.9. Retail

Mozambique’s burgeoning expatriate community, together with the country’s emerging middle class, is growing a culture of consumerism. Demand for retail space is highest in middle and upper income residential areas, particularly in the cities of Maputo, Matola, Beira, Pemba, Tete and Nacala. Developments in the retail sector include the following: ♦ In 2014, the South African property development company, Atterbury Property Developments, announced that the company intended to construct three shopping malls in Mozambique. The retail developments will be located in the port cities of Beira, Pemba and Nacala. ♦ Belgium-based developer, Pylos, has also signalled its intention to enter the Mozambican retail sector. The company plans to build more than a dozen shopping malls nationwide. ♦ Terrace Africa is constructing a new shopping centre in Tete. Supermarket group, Shoprite, will be the centre’s anchor tenant.

4.1.3.10. Hotels and Tourism

In recent years, infrastructure development and improved transportation networks have helped to restore Mozambique’s reputation as a tourist destination and both leisure tourism and business travel are booming. Hotels, lodges and resorts catering for the leisure tourism market have mushroomed along the length of the country’s coastline and the Mozambican islands are also popular travel destinations. Developments range from budget backpacker accommodation to premium luxury lodges.

The shortage of hotels in major centres has driven up room rates, making Mozambique an expensive destination. Demand for mid-market and high-end business accommodation is particularly high in Maputo and several new hotels have been planned, including a five-star hotel to be constructed adjacent to the Joaquim Chissano International Conference Centre. The US$250m project will be undertaken by Chinese firm, Anhui Foreign Economic Construction Corp (AFECC). In the second half of 2014, Minor Hotel Group (MHG) announced that it had entered into a joint venture with Rani Investment LLC and would be involved in a major hotel and mixed-use property project in Maputo. The development comprises the existing 154-key Radisson Blu Hotel, together with a residential tower and a 21-storey office tower of approximately 20,900 square metres, which are under construction. The project is scheduled to be completed by the end of 2015.

In Pemba and Palma, the energy boom is also driving demand for beds. The Spanish developer, Nexar Group, is currently building a US$1m hotel targeting people employed in the energy industry. The hotel, Karibu Residence 1, will provide much-needed business-class amenities in the remote African village. The investment company, African Century, is collaborating with VM Construction on a US$2m project in Palma comprising a hotel, serviced apartments and an industrial park. According to stakeholders, the Carlson Rezidor Hotel Group, which is headquartered in the United States and Belgium, is currently exploring the possibility of building new hotels in Pemba. In the third quarter of 2015, the Portuguese-Mozambique investment fund, InvestimoZ, confirmed that it would be underwriting the construction of a hotel complex in Pemba.

In July 2015, The Southern African Development Agency in partnership with the German development finance institution and Lindner Hotels Real Estate GmbH announced that they were exploring the feasibility of constructing a 200-room eco-hotel, which would operate in tandem with an attached hospitality staff-training academy. The proposed location of the hotel has not been revealed. Negotiations are ongoing.

4.1.3.11. Mining and Industrial

Mozambique’s management of its natural resources has improved significantly in recent years and the country has achieved Extractive Industry Transparency Initiative (EITI) compliance status. Abundant untapped coal deposits have attracted major multinationals to the country. According to the International Energy Agency (IEA), Mozambique's Tete Province is estimated to hold untapped coal reserves of 25 billion short tonnes. Vale, Rio Tinto and Indian group Jindal currently operate coal mines in the Moatize district of Tete province, while the Chinese Kingho Investment-controlled consortium has been granted permission to conduct coal mining feasibility studies in the province’s Changara district. The construction of Moatize Industrial Park in Tete Province is expected to provide numerous opportunities for contractors.

Mozambique has established four Free Enterprise Zones where companies benefit from incentives and preferential tax and import tariff rates: ♦ Nacala Special Economic Zone; ♦ Beluluane Industrial Park, located within the Free Enterprise Zone in Maputo province; ♦ Manga-Mungassa Free Enterprise Zone in Sofala Province; and

♦ Mocuba Industrial Duty Free Area in Zambézia province, which operates within the Special Economic Zone of the same name.

In March 2015, the International Finance Corporation (IFC) of the World Bank announced that it would be investing in the construction of a new steel mill to be located in the Nacala Special Economic Zone. On completion of the project, MM Integrated Steel Mills Mozambique, a subsidiary of the Tanzanian group Motisun, will have the capacity to manufacture coloured sheets of high quality galvanised zinc, as well as products used in the construction of low cost housing. According to the IFC, “MMI Steel will be the first roofing sheet manufacturing plant in Mozambique with integrated facilities from cold rolling to profiling”.

4.2. Continental

General With GDP growth of 5% in 2014, the growth rate of the African economy was 1.5% higher than the global average. However, the risks associated with doing business on the continent have risen sharply in recent months and numerous analysts have warned that Africa’s construction boom could be under threat. In 2015, analysts predict that economic growth in the region will decline to between 4% and 4.5%. The slow-down has largely been attributed to falling commodity prices, the prevailing weakness of the region’s currencies and the impact of the Ebola Virus Disease (EVD) crisis centred in the West African nations of Liberia, Sierra Leone and Guinea. Although the threat posed by the EVD outbreak has abated, the impact of the epidemic has been profound. Between 22 March 2014 and 09 September 2015, 28,183 suspected EVD cases have been reported. Of these, 11,306 cases have been fatal. Liberia, Sierra Leone and Guinea now face the daunting prospect of trying to rebuild their economies.

African oil-producing countries are highly exposed to oil price volatility and have been hard hit by the crude oil price plunge. The World Bank has cautioned that the consequences of the price slide could be dire for the public finances, as well as the economic growth and inflation outlooks of African oil- exporters. Public expenditure cut-backs are expected to result in the mothballing of numerous construction projects. Moreover, many analysts say that new investment and exploration activities in the energy sector could be placed on the back-burner.

In many African countries, building and construction regulations are seldom enforced. Occupational safety is therefore a major concern, as is the scourge of building collapse, which is not uncommon on

the continent. The region’s most recent major building failure involved the collapse of a multi-storey guesthouse at the Synagogue Church of All Nations (SCOAN) founded by the Nigerian televangelist and faith healer, T.B. Joshua. The tragedy claimed the lives of 116 people, 85 of whom were from South Africa. A Coroner's inquest into the SCOAN tragedy found that SCOAN had not sought planning approval for the construction of four additional storeys to the guesthouse.

Investment in Africa Africa has emerged as the fastest growing region for foreign direct investment (FDI) in the world. According to fDi Intelligence, a data division of the Financial Times Group, foreign direct capital investment inflows into Africa amounted to around US$87bn in 2014, representing a year-on-year increase of 65%. FDI inflows into the sub-Saharan African region increased from US$42bn in 2013 to US$61bn in 2014, while FDI inflows into North Africa increased from US$10bn in 2013 to US$26bn in 2014.

In 2014, FDI inflows into the continent’s energy sector amounted to around US$33bn, with the real estate and communications sectors attracting US$12bn and US$6bn in investment respectively. The African countries that dominated FDI investment in 2014 are shown below.

FDI in Africa by Capital Investment, 2014* — Top Five Destinations Country Capital investment Egypt US$18bn Angola US$16bn Nigeria US$11bn Mozambique US$9bn Morocco US$5bn

[Source:fDi Markets]

Findings of the Deloitte on Africa - African Construction Trends Report 2014 are presented below: ♦ As at 1 June 2014, the number of African infrastructure construction projects valued at over US$50m that had broken ground, but that were yet to be commissioned, decreased from 322 in 2013 to 257 in 2014. Of these, 143 were public sector projects, 88 were private sector projects and 26 were Public Private Partnerships (PPPs). ♦ With 119 mega projects valued at US$144.8bn, Southern Africa retained its position as the leading African region followed by West Africa with 66 projects totalling US$74.8bn.

♦ The total number of mega projects under construction across the continent declined during the year under review. However, the total investment value of these African mega projects rose by 46.2% year-on-year, increasing to US$326bn in 2014 from US$222bn in 2013. ♦ In 2014, sectoral market share determined according to project value, was as follows:

o Transport – 40% o Energy/Power – 39% o Oil & Gas – 5% o Mining – 5% o Water – 5% o Technology, Media and Telecommunications (TMT) – 3% o Real Estate – 3%

Challenges Challenges currently facing companies operating in Africa include the following: ♦ Poor infrastructure, notably transport network inadequacies; ♦ Political and/or economic instability; ♦ The erratic supply of power; ♦ The escalation of insurrection, banditry and acts of terror in several African countries, notably Nigeria, Libya, Mali, the Central African Republic (CAR), the Democratic Republic of the Congo (DRC), Somalia, Sudan, South Sudan, Kenya and Burundi; ♦ Health risks, notably malaria, cholera and Ebola; ♦ Weaker commodity prices; ♦ The shortage of skilled workers; ♦ Technological constraints; ♦ Lack of availability of certain construction materials in some countries; ♦ Difficulty in accessing finance; ♦ High import duties; and ♦ The high level of crime and corruption in certain countries.

Opportunities Notwithstanding the challenging operational landscape, many of Africa’s frontier economies are still regarded as attractive investment destinations. Growth drivers include the following: ♦ The continent’s abundant natural resources;

♦ Significant oil and gas discoveries; ♦ Substantial areas of arable land; ♦ The rapid rate of urbanisation; ♦ Africa’s rapidly growing population, which is predicted to reach 1.9 billion people by 2050; ♦ Africa’s burgeoning middle class; and ♦ The mobile communications revolution.

With less than 40% of Africa’s population of one billion people having access to electricity and only about a third of the continent’s rural population having access to roads, the infrastructure and basic services deficit presents lucrative opportunities for civil engineering and construction companies. There are also many opportunities for construction companies in the energy, heavy industrial, mining, commercial and residential sectors.

Continental Trends In the first edition of PricewaterhouseCoopers’ Into Africa – the continent’s cities of opportunity, which was released on 17 March 2015, five continental trends have been identified: ♦ Demographic change; including the growth of the middle class; ♦ Urbanisation: 50% of the population on the continent will live in cities by 2030; ♦ Technological evolution, with the uptake of innovations such as mobile payments; ♦ The transfer of economic power; and ♦ Climate change.

The report ranks Cairo, Tunis, Algiers, Casablanca and Johannesburg as Africa’s top five cities. Other African cities that ranked highly in various sectors include Accra, Dar es Salaam, Douala, Lagos, Nairobi, Abidjan and Kigali.

Sustainable Building Practices The “Development of Sustainable Infrastructure in Africa” was the main theme of the World Engineering Conference 2014 on Sustainable Infrastructure (WECSI 2014) hosted by the Nigerian Society of Engineers (NSE) from the 2nd to the 7th November 2014. Delegates acknowledged that although substantial progress has been made, Africa continued to face a critical infrastructure deficit and that it was unlikely that African countries would achieve the minimum global benchmark standards for human and societal development by 2015, enunciated in the Millennium Development Goals

(MDGs). They further stated that although the concept of “green infrastructure” has gained currency globally, the uptake of sustainable building practices in Africa has been slow.

4.3. International

General Civil engineering and construction activities in most developed and emerging economies have staged a modest recovery on the back of relatively robust private sector activity. Despite improved sentiment, the global construction industry continues to be plagued by project delays and cost escalations. According to the findings of KPMG’s Global Construction Project Owner’s Survey that was released in June 2015, 75% of the large construction projects surveyed were over budget and were also not completed on schedule.

Globally, construction companies are increasingly seeking opportunities in the emerging world where factors such as population growth, rising urbanisation, infrastructure development and economic growth are driving construction activity. China, the largest domestic construction market in the world, dominates the global construction industry and is heavily invested in infrastructure development projects in developing countries. Many analysts have warned that the impact of the faltering Chinese economy on the construction industry could be significant.

The rapid rate of urbanisation is changing the global construction landscape. According to the findings of a report published by the McKinsey Global Institute, ‘Urban world: Cities and the rise of the consuming class’, more than half of the world’s population will be urbanised and will be living in mega- cities, each with a population of at least 10 million people by 2025. Analysts believe that sustainable urbanisation is one of the greatest challenges currently facing the construction industry worldwide.

In recent years, various strategies have been implemented in an effort to bridge the global infrastructure gap. The formation of a Global Infrastructure Hub that will promote and facilitate private investment in infrastructure projects, was adopted at the G20 Summit held in Brisbane, Australia in November 2014. Governments worldwide have recommitted themselves to tackling global infrastructure disparities.

Global Construction Trends ♦ The transformation of urban areas into “smart cities” through the integration of various technologies and information technology solutions. ♦ Private sector investment in infrastructure is expected to increase; ♦ The delivery of projects is expected to be accelerated; ♦ Governments are expected to adopt an increasingly interventionist approach to infrastructure development; ♦ Globally, investors are becoming increasingly wary of the potential risks associated with political and regulatory uncertainty; ♦ The expansion of construction companies into new markets, resulting in an increase in merger and acquisition activity within the sector; ♦ China will continue to pursue opportunities in both developed and emerging markets, with a particular focus on the Middle-East, sub-Saharan Africa, South-East Asia, Latin America and Eastern Europe; ♦ Urban planners are increasingly focusing on urban mobility, with a view to improving the flow of people, goods and capital within cities. ♦ The skills deficit, notably the shortage of engineers and project managers will continue to constrain delivery.

Global Construction Outlook Qatar, the host nation of the 2022 Football World Cup, has been identified by engineering and construction contractors as one of the world’s most important construction markets. However, the Gulf state has come under intense scrutiny, following recent revelations that at least 1,800 migrant construction workers from India, Nepal and Bangladesh have died in the country over the past three years. Some sources have attributed the high death rate to the harsh working conditions on Qatari construction sites, where workers are typically required to work long hours in temperatures as high as 50 degrees Celsius. Global Construction 2025, published by Global Construction Perspectives and Oxford Economics, has made the following forecasts: ♦ By 2025, global construction output is expected to reach US$15 trillion, representing an increase of over 70%. ♦ Emerging markets, which currently account for 52% of the world’s construction activity, are expected to account for 63% of projects by 2025.

♦ Global growth in the construction industry will be driven by China, the United States and India. ♦ With global market share of 18%, China is the world’s largest construction market. Analysts predict that China will further strengthen its dominance, increasing its market share to 26% by 2025. ♦ Vietnam, Indonesia and the Philippines have emerged as lucrative construction markets, with construction growth averaging over 6% per annum. ♦ Analysts predict that the Western European construction market will continue to contract and that by 2025, the market will be nearly 5% smaller than it was in 2007.

5. INFLUENCING FACTORS

5.1. Economic Environment

5.1.1. General

The IMF reports that Mozambique’s economy remained robust in 2014, with Real Gross Domestic Product (GDP) growing by 7.6%. In the first half of 2015, growth slowed and the Mozambican economy expanded by 6.1%. Mozambique’s Real GDP forecast for 2015, which was projected at around 7.5%, has since been downwardly revised by the IMF to around 7%, while Standard Bank has lowered its projection for 2015 to around 6.5%, slowing to 5.5% in 2016. The anticipated slowdown has largely been attributed to the negative impact of the weak coal price, as well as damage and losses resulting from the devastating floods of January 2015.

Annual inflation, as measured by the Consumer Price Index (CPI), remains in check and is expected to remain below the Bank of Mozambique’s 2015 target of 5.5%. The graph below tracks the country’s GDP growth rate and the inflation rate over the past five years.

[Sources: IMF; Deutsche Bank Research]

The Mozambican meticais/metical (MZM)/US dollar (USD) exchange rate, which averaged 30.29:1 during the five year period between 2009 and 2014, continued its slide against the American currency, falling sharply to 35:1 in December 2014. Between 01 January 2015 and 31 July 2015, the metical lost further ground, devaluing by 22% against the US dollar. However, according to the Bank of Mozambique, the depreciation of the local currency has not had a significant effect on inflation. As at 14 September 2015, the MZM /USD exchange rate was 43.08:1.

Mozambique’s economic growth trajectory, albeit coming off an extremely low base, has remained strong over the past decade. However, despite the buoyancy of the economy, declining donor funding and the implementation of sound economic reforms, the country remains heavily reliant on foreign aid and continues to be supported by several countries and institutions. The Mozambican economy continues to be characterised by a lack of diversity, with the agriculture sector accounting for approximately 30% of GDP and around 80% of the country’s labour force.

Strategies aimed at promoting inclusive economic growth include rural infrastructure development projects, initiatives to improve agricultural productivity, as well as job creation in the private sector. The IMF has advised the government of Mozambique to implement structural economic reforms aimed at strengthening the management of public resources across all sectors, with a particular focus on construction, extractive industries, transport and communication, commerce and financial services. Economists have reiterated the importance of implementing policies that promote fiscal and public debt sustainability.

Factors that continue to have a negative effect on the investment climate in Mozambique include the following: ♦ Corruption, poor governance, bureaucratic inefficiencies and the weak rule of law; ♦ An underdeveloped financial sector and difficulty in accessing finance; ♦ The shortage of skilled labour; ♦ State-sanctioned monopolies; ♦ One of the world’s highest poverty headcounts; ♦ Unemployment of approximately 17% of the working population; ♦ Regulatory uncertainty; and ♦ High fiscal deficits.

The Estratégia para a Melhoria do Ambiente de Negocios II (EMAN II), which was implemented by the Mozambican government in 2013, aims to improve the Mozambican business environment by means of the following measures: ♦ Stimulating the productivity and growth of small and medium-sized enterprises (SMEs); ♦ Improving access to finance; ♦ Providing workforce training and skills development; ♦ Formalising the economy; and ♦ Enhancing the regulatory and business environment.

With an electronic platform for the registration and licensing of new businesses already launched and a website for information pertaining to legislation, procedures, documentation, and complementary services scheduled to be implemented in 2015, Mozambique’s Business Environment Improvement Strategy (2013-17), aims to significantly accelerate the registration and licensing of economic activities.

Although Mozambique’s business environment remains extremely challenging, the World Bank’s 2015 Doing Business economy profile reports that improvements have been made in certain areas. In the 2015 Doing Business Index, Mozambique is ranked in 127th place overall out of the 189 economies surveyed. The survey, which comprises 11 indicators that measure a country’s business regulations, property rights, tax burdens, access to credit, as well as the cost of exporting and importing, found that progress had been made in the areas of starting a business; dealing with construction permits; registering property; obtaining credit; and resolving insolvency.

The 2015 Index of Economic Freedom awarded Mozambique a score of 54.8 points for economic freedom, ranking the country’s economy 125th out of the 186 countries surveyed. The country is currently ranked 24th out of the 46 countries surveyed in the sub-Saharan Africa region. The 2015 rating is 0.2 points below the 2014 score. According to the Index, economic freedom in Mozambique has been on a downward trajectory, contracting by 2.0 points over the past five years. Areas of concern include the management of government spending and ongoing fiscal intransigence, an ineffective judiciary that lacks independence, pervasive corruption in the public sector, as well as high levels of unemployment and underemployment.

5.1.2. Effects on the Construction Sector

Although the country’s substantial infrastructure deficit continues to constrain economic growth, proposed infrastructure development projects provide significant opportunities for the construction sector. The industry’s primary growth drivers are government infrastructure expenditure and foreign capital investment. Notwithstanding the commitment of the Mozambican government to promote diversification and industrialisation, the IMF has cautioned that the decline in the price of coal, oil and other commodities could have a negative impact on foreign investment inflows. Furthermore, given that Mozambique's credit rating is currently classed as highly speculative by the international rating agencies Fitch, Moody's and Standard & Poors, analysts caution that raising the financing required to actualise projects is not likely to be without considerable challenges.

5.2. Socio-Political and Socio-Economic Environment

Mozambique gained independence from Portugal in June 1975. After Frelimo came to power, fighting erupted between government forces and rebel Renamo fighters, plunging the country into a lengthy civil war, which continued for more than 15 years until a peace accord was brokered by the United Nations in 1992. In addition to substantial loss of life, the civil war resulted in the destruction of infrastructure and means of production, effectively decimating the Mozambican economy. Development was further retarded by Frelimo’s Marxist policies. These were eventually abandoned in 1989 to make way for political and economic reforms. Severe droughts and floods also took a toll on the country and, despite its vast natural resources Mozambique was reduced to one of the poorest and most aid-dependent countries in the world.

In 2014, Mozambique was ranked 178th out of 187 countries in the Human Development Index (HDI). The nation is still plagued by high levels of poverty and inequality. Significantly: ♦ More than 50% of the population is believed to live below the poverty threshold; ♦ Life expectancy is 50.3 years; ♦ Although infant and child mortality rates have improved, mortality rates remain extremely high; ♦ The incidence of malnutrition is increasing; ♦ The risk of contracting malaria is high; ♦ Approximately 66% of the population lives in rural areas and the majority of Mozambicans work as subsistence farmers;

♦ Housing construction in Mozambique is generally informal in nature. In the urban areas, it is estimated that around 75% of city-dwellers lives in rudimentary concrete shelters, known as “bairros", while the majority of the country’s rural population continues to live in straw huts; ♦ Access to sanitation and potable water remains amongst the worst in the world; ♦ An estimated 17% of the working population is unemployed; ♦ Child labour remains a serious problem in Mozambique; and ♦ The critical skills shortage in the country is exacerbated by the country’s low adult literacy rate, which is estimated to be only 56%.

Stakeholders believe that if productivity and living standards in Mozambique are to be improved, the bridging of the country’s infrastructure gap needs to be prioritised. The substantial social housing deficit provides opportunities for local contractors operating in the housing, power and public works segments, while Mozambique’s emerging middle class and the growing expatriate community will continue to drive the construction boom in both the residential and non-residential segments.

In October 2014, Frelimo, which has retained control of Mozambique since independence, was returned to power with a significantly reduced majority in the presidential and parliamentary elections. The ruling party won 144 seats in the National Assembly, while the opposition, made up of Renamo and the Mozambique Democratic Movement, won 89 and 17 seats respectively. As was the case in 2009, the elections were marred by allegations of vote rigging and political tensions duly resurfaced, with Renamo leader, Afonso Dhlakama, threatening to carve out a separatist republic, comprising the central and northern provinces of Sofala, Manica, Tete, Zambezia, Nampula and Niassa. On 15 January 2015, Frelimo’s former Minister of Defence, Filipe Nyusi succeeded Armando Emilio Guebuza as the president of Mozambique. Tensions flared up again in April of this year and in August Renamo renewed its threats to assume control over Mozambique’s central and northern provinces.

5.3. Infrastructure Deficit

Mozambique’s infrastructure deficit constrains economic activity. Notwithstanding the considerable progress that has been made in recent years, urban-rural infrastructural disparities remain pronounced. Failure to maintain, rehabilitate and repair existing infrastructure is also a significant problem.

5.3.1. Government Infrastructure Programme Spend

In 2014, 50% of Mozambique’s major infrastructure projects were funded by the state. However, with President Nyusi’s new government committed to reining in public spending, alternative funding models, such as Private-Public Partnerships (PPPs), are expected to become increasingly attractive. In an effort to control investment expenditure and associated external borrowing, Mozambique’s public investment projects are now assessed more rigorously. With the implementation of stricter fiscal policies, the IMF expects investment spending and net lending to be reduced to a level of around 16% of GDP.

5.3.2. Foreign Direct Investment (FDI)

As a fast-growing, low-income country attracting high levels of international investor interest, Mozambique is a classic “frontier economy”. In 2014, the number of FDI projects in Mozambique totalled 50, representing a year-on-year increase of 67%. FDI capital investment inflows amounted to around US$9bn, up from US$5.9bn in 2013. This has largely been attributed to a surge in investment in the country’s real estate sector. Belgium-based Pylos has more than a dozen shopping malls on the drawing-board, while South Africa-based Atterbury Property Developments has made substantial investments in mixed-use developments in Pemba, Beira and Nacala.

5.3.3. Private Sector Investment

In 2014, 44% of all infrastructure projects in Mozambique were funded through private sector investment. Domestic and foreign private sector investments are subject to the principles and objectives of Mozambique’s national economic policy, as well as the provisions of the Investment Act 3/93 of 24 June 1993 and other applicable legislation. Such investments are required to contribute to the sustainable economic and social development of the country. Mozambique’s Centre for Investment Promotion, Centro de Promoção de Investimentos (CPI), offers the following services: ♦ Identification and dissemination of investment opportunities; ♦ Provision of institutional assistance to investors; ♦ Provides information regarding fiscal incentives available for the establishment of investment projects; ♦ Promotion of business linkages between domestic and foreign companies, SMEs and large enterprises;

♦ Identification of potential financial partners and/or technology for the establishment of joint ventures; ♦ Promotion of business development assistance programmes, particularly for domestic investors; ♦ Institutional assistance in the acquisition of business licences; ♦ Capacity building programs for local suppliers; and ♦ Monitoring and follow up of projects and identification of constraints.

5.3.4. Public-Private Partnerships

Public-Private Partnerships (PPPs) are generally viewed as a sustainable solution to the massive infrastructure funding challenge facing Mozambique. The government has given its support to collaborative partnerships with the private sector on infrastructure development and/or maintenance projects. National Road 4, linking Maputo to South Africa is maintained and operated as a concession by the South African company Trans Africa Concessions (TRAC). In 2014, 6% of projects were Public- Private Partnerships. The following routes recently became concessions: Matola-Boane; Marracuene- Lindela; Nampula-Nacala; Vanduzi-Changara; and Monapo-Ilha de Moçambique.

5.4. Urbanisation

Mozambique is currently the 50th most populous country in the world. According to the World Bank, the local population grew by 2.47% in 2014, reaching 26,472,977 inhabitants. Although the majority of the population resides in the country’s rural areas, Mozambique’s urban population now accounts for nearly a third of the total population. The rate of urbanisation between 2010 and 2015 is estimated to be around 4%. The influx of people to the cities, where there is already a dire housing shortage, as well as inadequate water supply, sanitation and power, has placed over-stretched urban centres under even greater pressure and the low-cost housing backlog continues to rise. By 2025, it is predicted that Maputo and neighbouring Matola, which currently have a combined population of almost 3 million inhabitants, will have in excess of four million residents.

5.5. Local Content

The construction sector is dominated by foreign firms that typically hire expatriate staff. Much of the equipment and building materials required for projects are imported, as locally made products are not competitively priced. Although Mozambique is yet to adopt an official Local Content policy, the country

is coming under increasing pressure to promote local labour and locally manufactured products. Furthermore, low-value public tenders do favour domestic companies that have Mozambican ownership of at least 50%.

The recently enacted hydrocarbon law stipulates that a 25% share of production is required to be earmarked for the domestic market. The new legislation also makes it mandatory for certain goods and services to be provided exclusively by Mozambican companies. Analysts believe that these provisions could promote greater local content. However, they caution that the new law could lead to inefficiencies, in view of the fact that most domestic suppliers are either too small to fulfil the requirements of the mega-projects or do not comply with international quality standards.

5.6. Corruption

In 2014, Mozambique retained its position on Transparency International’s 2014 Corruption Perceptions Index, ranking 119th out of 175 countries, with a score of 31 out of 100. This represents an improvement of one percentage point on the 2013 score. Although the Mozambican government has passed anti-corruption laws in an effort to crack down on corruption, the public sector is still characterised by poor governance and a lack of transparency. Cases of corruption, bribery and tender fraud involving senior public officials are not uncommon in Mozambique. However, the rule of law is often disregarded and action is seldom taken against transgressors.

One of the country’s most high-profile cases, the Cardoso case, implicated the son of former president Joaquim Chissano in the assassination of Carlos Cardoso, who had been tasked with investigating a US$14m fraud case involving the privatisation of Mozambique's largest bank. Although Nyimpine Chissano was charged with economic crimes, as well as "joint moral authorship" of Cardoso's murder, charges were withdrawn and he was never required to stand trial. According to certain stakeholders, the scourge of corruption in Mozambique has prompted several donors and investors to disengage from the country.

5.7. Construction Equipment and Materials: Capacity, Quality and Security of Supply

In Mozambique, construction equipment and materials are generally imported. This is largely due to the fact that locally manufactured products are perceived to be of an inferior quality and/or too

expensive. The high cost of domestic production has made it difficult for local manufacturers to be competitive, but in recent years, the government has tried to provide support and incentives to local industries in an effort to enhance quality and expand capacity. Manufacturers earmarked for capacity expansion in Maputo Province include GS Cimentos, ADIL Cement and Maputo Cement and Steel. Recent developments in the segment include the following: ♦ In March 2015, Germany's HeidelbergCement AG, the world's 3rd largest cement producer, announced that it is considering investing in Mozambique. ♦ In June 2015, it was announced that the Turkish company Limak Holdings was planning to invest US$150m in a new 2Mt/yr capacity cement plant in the Port of Maputo. ♦ Cimentos de Moçambique, a subsidiary of Portugal's Cimpor Cimentos group recently unveiled its plans to construct a new U$250m integrated cement plant in Nacala. ♦ In July 2015, Ambrian announced that the construction of its cement plant in Beira had been completed.

The status of existing Mozambican cement manufacturing facilities is shown in the table below. Capacity Company Location Type Status (Mt/yr) Cimentos de Moçambique 0.70 Matola I Integrated Active (InterCement) (Dry) 0.74 InterCement Dondo Integrated Active (Dry) InterCement Nacala Integrated Grinding only 0.10 China-Mozambique Cement & Mining Inhaminga Integrated Planned 1.0 (Dry) Cimentos de Moçambique Active Matola II Grinding 0.22 (InterCement) (Rented) Cimentos de Nacala SA (InterCement) Nacala Grinding Active 0.35 Cimento Nacional (Cimento Brennand) Maputo Grinding Active 0.55 Ambrian (formerly Consolidated Beira Grinding Commissioning 0.80 General Minerals) Austral Cimentos Dondo Grinding Commissioning 0.55 Under PPC Mozambique Tete Grinding 0.50 Construction Active TotaL 5.51

The manufacture of prefabricated concrete products for infrastructure, as well as the production of ceramic bricks is also a growth industry in Mozambique. Britalar Moçambique has performed well in this segment, more than doubling its turnover and securing lucrative supply contracts for commercial and residential developments.

The decline in demand for steel has resulted in weaker prices. Poor market conditions compelled global steel giant, ArcelorMittal, to close its steel rolling and iron rod (rebar) mill in Maputo in 2009. Since the closure of the mill, Mozambique has been obliged to import steel inputs. The International Finance Corporation (IFC) recently announced plans to construct a steel mill in the Special Economic Zone at the port of Nacala. The manufacturing company, MM Integrated Steel Mills Mozambique, will be the first galvanized roofing sheet manufacturing plant in the country. The project has been approved and construction is expected to commence in the near future.

5.8. Input Costs

Key inputs include the following: ♦ Local and imported building materials; ♦ Local and imported raw materials; ♦ Construction equipment and heavy machinery; ♦ Electricity, water and other utilities; ♦ Earthmoving equipment; ♦ Transportation costs, including fuel; and ♦ Labour costs.

For the most part, locally produced building materials are uncompetitive as high fuel and electricity tariffs, as well as the erratic power supply, drive up manufacturing costs. In recent years, cheaper imported inputs, particularly those manufactured in Asia and Eastern Europe, have flooded the market. Cement prices in Mozambique are variable and highly volatile, ranging from US$130 to US$240 per metric tonne. The price of cement is substantially higher in remote areas, due to high distribution costs. In 2014, the average price of a 50 kg bag of cement in Pemba was US$19.87. Imported cement products from Pakistan subsequently flooded the Pemba market, slashing the retail price by 53% to US$9.27.

5.9. Cyclicality

Given the cyclical nature of the sector, the labour force comprises a high proportion of casual workers. The direction of the cyclicality is relatively predictable and may be determined by factors such as interest rate hikes and consumer indebtedness. Declining demand acts as a catalyst for a cyclical downturn in the building and construction industry.

5.10. Health and Safety Concerns

Construction is considered to be one of the most dangerous occupations. Falls, both fatal and non- fatal, account for most occupational injuries. Electrocution is also a major occupational hazard. Occupational safety violations include working without the requisite protective clothing or accessories, such as dust or gas masks, hard hats, as well as ear and/or eye protection. In the informal sector, safety procedures, such as the use of scaffolding, safety harnesses and netting, are often disregarded in order to cut costs.

Mozambique is a high risk malaria area. Malaria accounts for more deaths than any other illness. There is also a high tuberculosis infection rate in all provinces. According to UNAIDS, more than 12% of the population between 15 and 49 years of age is HIV-positive.

5.11. Technology

The uptake of technology in Mozambique is slow and the nation lags behind many of its Southern African neighbours in terms of technological performance. This has been attributed to: ♦ The country’s low level of education; ♦ Low levels of innovation; ♦ Failure to protect intellectual property rights; and ♦ The lack of private sector investment in research and development.

Although the prospect of transforming Mozambique’s urban areas into “smart cities” is daunting, local urban planners in collaboration with their Chinese partners are exploring the possibility of integrating various technologies and information technology solutions.

Prefabricated technology is increasingly being used as a construction solution, particularly in mining areas in remote areas, which are notoriously difficult to access. The use of this technology reduces

construction time, as pre-packaged materials are transported to construction sites and assembled there.

Green technologies are increasingly being adopted during the construction process to enhance energy and resource efficiencies. New technologies have also focused on the development of Structural Insulated Panels (SIPs) as a cost-effective, energy-efficient alternative to bricks and mortar. These high performance panels may be used in the construction of the foundations, walls, roofs and flooring of residential dwellings and light commercial buildings. SIPs are manufactured with a rigid foam core, comprising either expanded polystyrene (EPS), extruded polystyrene (XPS), polyisocyanurate or polyurethane foam. The middle insulating layer is placed between two outer layers of board, which are typically made of plywood, oriented strand board (OSB), sheet metal or cement.

While SIPs may cost more than traditional building materials, installation costs are considerably lower. The SIP system offers the following benefits over conventional brick and mortar construction methods. ♦ No additional insulation is required, as SIPs are pre-insulated. ♦ A reduction in labour costs of approximately 30%, as SIPs are prefabricated and delivered to site ready for construction. ♦ Electrical installations are up to 30% faster. ♦ There is no jobsite waste as SIPs panels are pre-cut. This translates into savings of approximately 30% on waste costs. ♦ Enhanced productivity, faster build time and fewer wasted days, as sub-contractors can commence working sooner. ♦ Less or no site degradation, resulting in reduced clean-up and waste costs.

5.12. Labour Resources

The current statutory monthly minimum wage rate for construction workers in Mozambique is MZM 4,483.25 (US$105.39). This rate is based on a 26 working day month or 208 hours per month. In terms of Article 85 of Mozambique’s Labour Law, the standard hours of work are 8 hours per day and 48 hours per week.

5.12.1. Training and Skills Development

Mozambique has an adult literacy rate of 56% and there are relatively few opportunities for skills development and training in the country. Large foreign-based companies prefer to import skilled labour, but many have implemented initiatives to cultivate and/or upskill the local labour force in order to mitigate the human resources challenge facing the industry. One such training and skills development programme is Odebrecht’s Acreditar programme. The programme, initially developed in Brazil, adapts learning materials to train on-site trainers in the field. Local labourers are trained so that they in turn are qualified to train the next generation of employees. Commenting on the initiative, Miguel Peres, Managing Director of Odebrecht Mozambique said, “We already have 1,300 people certified at different levels through the programme and we intend to hire most of those people. There are specific modules for developing ironworkers, masons, carpenters, equipment operators and other trades.” In Tete Province, Fluor has established an operator training centre where an integrated approach to welding, rigging, mechanical fitting and boiler-making at various levels is followed.

5.12.2. Licensing

Contractors working in the formal construction sector are divided into two categories: those licensed to undertake public construction works; and those licensed to undertake civil construction works. Civil construction contractors are required to be part of a company or commercial representation incorporated and licensed in Mozambique to undertake construction. Regulations governing public works stipulate that specific licensing for contractors and technicians is required to undertake such construction work. Contractors must be registered with either the Ministry of Public Works & Housing, the Ministério de Óbras Púbicas e Habitação (MOPH), or with the relevant professional body, such as the Mozambican Order of Engineers, Ordem de Engenheiros de Moçambique (OEM), which registers and authorises the activity of engineers in Mozambique.

5.12.3. Skills Shortages

The construction industry, which is labour intensive in nature, generates much needed employment in a country where the unemployment rate is at least 17%. The sector provides work for unskilled labourers and semi-skilled workers, skilled artisans and tradesmen, on-site managers, as well as highly skilled professionals with technical and project management skills. Skilled artisans are in high demand. These include ironworkers, masons, carpenters, plumbers and electricians. Equipment operators with valid driving licences are also required. Skilled professionals in demand include architects, quantity

surveyors, civil engineers, town planners, project managers, structural engineers, building services engineers, IT specialists and civil estimators.

5.12.4. Opportunities for Foreign Professionals

Opportunities for foreign professionals with scarce skills are plentiful in Mozambique, especially in the offshore construction arena. Portuguese-speaking civil engineers with project management experience in the transport, power, mining and industrial sectors are particularly sought after.

5.13. Environmental Concerns

Although the concept of “green infrastructure” has gained currency globally, the uptake of sustainable building practices has been slow across Africa. In Mozambique, a growing number of construction companies are adopting sustainable or ‘green’ building practices in an effort to reduce the impact of their operations on both the natural environment and human health. Initiatives include the construction of energy efficient buildings, the adoption of more environmentally-friendly building practices, the recycling of water and materials and the creation of green lungs. The Moz-Bio project seeks to improve the management of the country's conservation areas, while enhancing the living conditions of more than 11,000 households living in the surrounding areas. The project, which will be implemented between 2014 and 2019, will be financed by a World Bank grant of US$40m.

Environmental concerns relating to climate change have intensified, especially in the wake of recent natural disasters and extreme weather events. According to environmentalists, Mozambique is experiencing longer dry spells, while the severity and intensity of storms, flooding and cyclones is increasing. The resilience of buildings has come under scrutiny and stakeholders have urged developers and contractors to enhance their risk management strategies and to make better provision for possible flooding, coastal surges, mud-slides, tornados, cyclones, wildfires and earthquakes during the planning phase of proposed construction projects.

Another area of concern is the soaring rate of urbanisation, compounded by haphazard urban development and poor industrial planning policies, which has resulted in high levels of environmental degradation and urban waste pollution, particularly in the mega cities of the developing world. In many developing countries it is not uncommon for untreated domestic and industrial waste to be dumped indiscriminately in areas where it can pollute waterways and groundwater,

Green Building Practices Although the concept of “green infrastructure” has gained currency globally, the uptake of sustainable building practices in Africa has been slow. Green building promotes the following practices: ♦ The creation of safe and healthy living and/or working environments; ♦ Energy efficiency, including the use of solar and wind power; ♦ Resource efficiency and the use of natural and/or eco-friendly building materials; ♦ Responsible site management and construction techniques, in order to minimise environmental degradation; ♦ Water conservation; ♦ Responsible waste management; and ♦ Greening of the environment through the creation of rooftop gardens, ‘living’ walls and so on.

Although building a green structure is more expensive than constructing a conventional building, maintenance costs are significantly lower. The straw bale, which is low carbon and low impact, as well as a good insulator, has emerged as a viable alternative construction material. Eco-friendly Cob- houses, which are built from mud and straw, rather than bricks and mortar, are becoming increasingly popular worldwide. SIPs are considered to be a more eco-friendly method of construction for the following reasons: ♦ Use of environmentally-friendly materials; ♦ Reduced timber usage; ♦ High insulation value; ♦ Minimal wastage; ♦ Enhanced thermal performance resulting in energy savings of up to 60% over conventional construction.

Green Building Codes and Ratings Systems Green building regulations, codes and rating systems have been developed by both international and national standards organisations. These include the International Code Council’s 2012 International Green Construction Code (IgCC), the International Energy Conservation Code and ICC-700, the National Green Building Standard. The IgCC is a regulatory framework which provides for the implementation of sustainability measures from design through construction to occupancy. Green building rating systems include LEED in the United States and Canada, BREEAM in the United Kingdom, GBAS in China, HQE in France, CASBEE in Japan and DGNB in Germany.

6. COMPETITION

The Competition Law, 10 of 2013 applies to economic activities that take place in Mozambique. The Act, which governs merger and acquisition activity, as well as anti-competitive practices, prohibits certain horizontal and vertical agreements.

Prohibited horizontal agreements are those that result in one or more of the following: ♦ Direct or indirect fixing of purchase or selling prices; ♦ Dividing markets or sources of supply by allocating customers, suppliers, territories or types of goods or services; ♦ Unwarranted price oscillation; and ♦ Limiting access to the market for new entrants.

The Act stipulates that vertical agreements shall not do one or more of the following: ♦ Allow companies to abuse their positions of dominance; ♦ Apply discriminatory price conditions; ♦ Impose the acceptance of obligations which have no connection with the purpose of the contract; ♦ Impose resale prices, discounts, payment conditions, minimum or maximum quantities, profit margins or other conditions; and ♦ Impose excessive prices or increase the price of a product or service without justification.

The Mozambican construction market is dominated by large foreign players. The participation of indigenous construction companies and local project developers in the civil and heavy construction segments is limited. According to certain stakeholders, only 5% of local contractors are able to bid for large construction projects. Chinese companies have proved to be formidable competitors as they are able to undercut other companies.

6.1. Barriers to Entry

The barriers to entry range from low to very high. It is relatively easy for small contractors to enter the market. However, it becomes progressively more difficult when bidding for high-value projects. The main barriers to entry include the following. ♦ High initial capital outlay, although this is not necessarily the case for small contractors;

♦ High operating costs; ♦ Difficulty in accessing finance; ♦ Industry-specific knowledge is required; ♦ Bureaucratic inefficiency and corruption; ♦ A largely uneducated workforce; and ♦ Language could be a barrier to entry. The main languages spoken in Mozambique are Emakhuwa and Portuguese.

6.2. Public Procurement and the Tendering Process

Mozambique’s public procurement system is a complex and cumbersome process. In terms of the amended procurement statute, Decree 15/2010 of 24 May 2010, public procurement is governed by the Unit for the Supervision of Acquisitions. The Statute stipulates the following: ♦ Companies bidding for public works projects are required to comply with minimum requirements as to legal and financial standing, technical qualifications and payment of tax. ♦ All documentation relating to the procurement process is required to be in Portuguese, although tenders may be issued in other languages. ♦ In lower-value projects, the participation of foreign bidders is to be restricted in favour of domestic bidders. Margins of up to 15% may be applied. ♦ To qualify as a domestic bidder, the company must be incorporated in Mozambique and natural persons of Mozambican nationality must have at least 50% direct or indirect ownership.

6.3. Research & Development (R&D) and Innovation

6.3.1. Research & Development

Relatively little private sector research and development activity takes place in Mozambique. However, large foreign companies based in the country do benefit from R&D projects in which their parent companies are involved. Severe damage to buildings and infrastructure resulting from seasonal floods and cyclones has motivated the need for research into risk management strategies and climate-smart development. Research in this field is currently being conducted in Mozambique in collaboration with the World Bank’s Africa Disaster Risk Management (DRM) Group, UN-Habitat and the Faculty of Architecture and Physical Planning (UEM-FAPF) at Eduardo Mondlane University, Maputo. The research, funded by the Global Facility for Disaster Reduction and Recovery (GFDRR), aims to develop

effective strategies to enhance school construction across the country in order to mitigate the risks associated with floods and cyclones.

6.3.2. Innovation

While other sectors have embraced innovative technologies, the global infrastructure sector is generally viewed as a laggard that is yet to leverage new technologies to maximum advantage. Going forward, analysts believe that the advent of technologies such as 3-D printing, driverless cars and commercial drones will necessitate fundamental changes in the development of infrastructure.

A recent local innovation that was successfully implemented at the port of Beira, involved creating a solution to address problems associated with the constantly shifting seabed caused by strong tidal forces, as well as the propellers and bow thrusters of the ships berthing and leaving the port. Mozambican port authorities engaged the services of Odebrecht International, engineering consultants DHV and Technicrete, a Murray & Roberts subsidiary. The solution involved laying 35,000 concrete Armorflex blocks assembled over an area of 3,200m² of seabed. The blocks, manufactured at Technicrete’s White River plant in South Africa, had a thickness of 220 mm, as opposed to the standard Armorflex thickness of 115 mm. Individual blocks were laced together with polyrene to form mats weighing 5.8 tons and measuring 5,9m x 2,4m.

As mentioned under Research & Development, research in the field of disaster risk reduction is currently being conducted at Eduardo Mondlane University in Maputo in collaboration with the World Bank’s Africa Disaster Risk Management (DRM) Group and UN-Habitat. Innovative construction methods that have been developed to mitigate the risks associated with floods and cyclones include the following: ♦ Elevated flood-resistant buildings, using the support-platform concept; ♦ Low-cost cyclone resistant housing and school buildings constructed using ferro-cement roofing techniques; ♦ Cyclone-resistant dome houses using stabilised soil blocks; ♦ Reinforced cyclone-resistant wooden structures using an A–frame shape; and ♦ Non-engineered earthquake- resistant houses using traditional techniques and local materials.

7. SWOT ANALYSIS

Strengths Weaknesses ♦ The construction industry serves all sectors ♦ The operating environment is characterised of the Mozambican economy and is a key by bureaucratic inefficiencies, corruption driver of socio-economic development, and an apparent lack of resolve to enforce providing shelter, employment and regulations. infrastructural development. ♦ Operational costs are high and it is difficult ♦ The sector has delivered a strong to procure construction materials and performance over the past five years. Its equipment. order books are healthy and it is on a ♦ There is a shortage of skilled manpower and sustainable growth path. productivity is low. ♦ The industry’s major players are well- ♦ The country’s communications and established companies. technology network is poorly developed. ♦ FDI capital investment inflows remain ♦ R&D activity is limited and there is little robust. innovation. ♦ The industry encourages small business ♦ The country’s credit market is development. underdeveloped and it is difficult to procure mortgage and construction loans. Opportunities Threats ♦ The Mozambican government has ♦ An escalation of political tensions. prioritised infrastructure development. ♦ Domestic and/or global recessionary ♦ The diversification of the Mozambican pressures. economy presents many new opportunities ♦ Sustained exchange rate volatility. for contractors, with the development of ♦ The weakening of the rule of law. Mozambique into a major LNG producer ♦ The high level of corruption and tender continuing to fuel the construction boom. fraud. ♦ Rising urbanisation presents construction ♦ Continued weakness of commodity prices. opportunities. ♦ Funding shortfalls and delays in the ♦ The emerging middle class is driving demand implementation of infrastructure projects. across a multitude of sectors. ♦ Demand for high-end housing is high and is expected to rise further.

♦ Market demand for low-cost, energy- efficient housing, creates opportunities for new innovations and product lines such as SIPs.

8. FUTURE OUTLOOK

8.1. Construction Industry Forecast

Mozambique’s construction sector is predicted to sustain growth of around 10% until 2016. Barring the occurrence of any major event that could derail the country’s positive growth momentum, stakeholders generally remain confident that the construction boom is set to continue. However, given the government’s resolve to tighten public expenditure, measures will need to be implemented to promote the development of a sustainable and stable investment climate. Notwithstanding the prevailing weakness of commodity prices, coupled with China’s economic woes, most analysts remain positive that Mozambique will continue to attract significant foreign capital investment inflows. Although investment will continue to be driven by the country’s extractive industries, demand for residential, commercial and retail property is expected to remain high.

8.2. Macroeconomic Outlook

The IMF remains confident that Mozambique will continue on a robust path of economic expansion and diversification. While the country has successfully restricted inflation within its target range, sustained strong economic growth and increased foreign capital investment inflows, the IMF reiterates that greater exchange rate flexibility, strong liquidity management, as well as fiscal adjustment are imperative for the preservation of macroeconomic stability. Although foreign donor aid is expected to decline over the medium term, foreign capital investment is expected to rise. According to IMF projections, investments in the oil and gas sector over the next ten years could reach US$100bn.

8.3. Political Outlook

Renamo’s repeated calls for the establishment of an independent "Republic of the Centre and North" have dampened investor confidence. Moreover, numerous contractors are reluctant to operate in Renamo strongholds due to security concerns. While many political analysts have dismissed the

renewed sabre-rattling of Renamo leader, Afonso Dhlakama as “hot air”, others have warned that a resurgence of low-intensity conflict would derail the country.

9. INDUSTRY ASSOCIATIONS

♦ Centro de Promoção de ♦ Ordem dos Engenheiros de Investimentos (CPI) / The Investment Moçambique (ORDEMO) / The Promotion Centre Institute of Engineers of Mozambique Website: www.cpi.co.mz Website: www.ordeng.org.mz

♦ Federação Moçambicana de ♦ Sindicato Nacional dos Trabalhadores Empreiteiros (FME) / The da Industria de Construcao Civil, Mozambican Federation of Madeira e Minas de Mocambique Contractors (SINTICIM) / National Union of Civil Website: www.fme.org.mz Construction Workers, Woodworkers and Miners of Mozambique Website: www.sinticim.kabissa.org

10. REFERENCES

10.1. Publications

♦ Emerging Trends for 2015: Trends that will change the world of infrastructure over the next 5 years Foresight: A Global Infrastructure Perspective / January 2015. KPMG International. ♦ 2014 Corruption Perceptions Index. 03 December 2014. Transparency International. ♦ African Economic Outlook 2014. Organisation for Economic Co-operation and Development. ♦ Capital project and infrastructure spending: Outlook to 2025. Research conducted by Oxford Economics for PricewaterhouseCoopers (PwC). June 2014. ♦ Deloitte on Africa - African Construction Trends Report 2014. Deloitte & Touche. ♦ Doing Business 2015. Economy Profile. Mozambique. 2015. The World Bank and the International Finance Corporation. ♦ Global Construction 2025. July 2013. Global Construction Perspectives and Oxford Economics. ♦ Global Construction Survey 2013. KPMG International. ♦ Into Africa – the continent’s cities of opportunity. 2015. First edition of the Global Cities of Opportunity series. PricewaterhouseCoopers (PwC).

♦ Mozambique. 2015. African Economic Outlook. Organisation for Economic Co-operation and Development, African Development Bank and United Nations Development Programme. ♦ Mozambique Frontier Country Report. May 2015, Deutsche Bank Research. ♦ Mozambique Rising: Building a New Tomorrow. 2014. International Monetary Fund. ♦ Mozambican Snapshot. 2013. KPMG International. ♦ Mozambique Economic Update. April 2014. The World Bank. ♦ Nhabinde, V., et al. The Challenges and the Way Forward for the Construction Industry in Mozambique. 2012. International growth Centre Mozambique. ♦ Private sector investment decisions in building and construction: increasing, managing and transferring risks. A Background Paper produced by Development Planning Unit (DPU), University College London, for the United Nations National Strategy on Disaster Risk Reduction (UNISDR). 2013. Global Assessment Report for Disaster Risk Reduction (GAR13). ♦ Republic of Mozambique: Fourth Review under the Policy Support Instrument and Request for Modification of Assessment Criteria - Press Release; Staff Report; and Statement by the Executive Director for the Republic of Mozambique. 04 August 2015. International Monetary Fund. ♦ Republic of Mozambique. IMF Country Report No. 15/12. January 2015. International Monetary Fund. ♦ Snapshot of Mozambique. 2013. PricewaterhouseCoopers (PwC) ♦ The Broll Report 2014/2015. Broll Database and Broll Research Division. ♦ The FDI Report 2015 – Global Greenfield Investment Trends. FDI Intelligence. ♦ The Global Competitiveness Index 2014–2015. World Economic Forum. ♦ Urban world: Cities and the rise of the consuming class. June 2012. McKinsey Global Institute.

10.2. Websites

♦ www.aecom.com ♦ www.constructionreviewonline.com ♦ www.afdb.org ♦ www.constructionweekonline.com ♦ www.afecc.com ♦ www.cpi.co.mz ♦ www.africa-asia-confidential.com ♦ www.dbresearch.com ♦ www.africaneconomicoutlook.org ♦ www.deloitte.com ♦ www.allafrica.com ♦ www.doingbusiness.org ♦ www.aurecongroup.com ♦ www.economist.com ♦ www.avenggroup.com ♦ www.engineeringnews.co.za

♦ www.estradasdozambeze.co.mz ♦ www.odebrecht.com ♦ www.ey.com ♦ www.oecd.org ♦ www.fm.co.za ♦ www.opway.pt ♦ www.fme.org.mz ♦ www.pwc.com ♦ www.globalconstruction2025.com ♦ www.sinticim.kabissa.org ♦ www.insitec.co.mz ♦ www.skyscrapercity.com ♦ www.kpmg.com ♦ www.theafricareport.com ♦ www.lexisnexis.com ♦ www.theconstructionindex.co.uk ♦ www.mckinsey.com ♦ www.worldbank.org ♦ www.mota-engil.pt

APPENDIX 1

Investment Opportunities in the Mozambican Construction Sector

Name of the Amount Location Ministry Contact Project (US$) PEMBA US$450m Ministry of Transport and Tel: (258) 21430152/5 INTERCONTINENT Cabo Delgado Communications Fax: (258) AL HUB Province National Directorate of 21431028/424109 (Pemba) Economy and Investment Website: www.mtc.gov.mz MONTEPUEZ Cabo Delgado US$125m Ministry of Public Works Tel: (258) DAM PROJECT Province and 21430028/429871/ (Montepuez) Housing 428108 Fax: (258) 21421369 Website: www.moph.gov.mz MANDIMBA DAM Niassa Province US$150m Ministry of Public Works Tel: (258) PROJECT (Mandimba) and 21430028/429871/ Housing 428108 Fax: (258) 21421369 Website: www.moph.gov.mz MOATIZE DRY Tete Province US$7m Ministry of Transport and Tel: (258) PORT (Moatize) Communications 21430028/429871/ National Directorate of 428108 Economy and Investment Fax: (258) 21421369 Website: www.moph.gov.mz MOATIZE Tete Province US$12.5m Investment Promotion (+258) 21313310 INDUSTRIAL PARK (Moatize) Centre Email: [email protected]

Name of the Amount Location Ministry Contact Project (US$) TECHOBANINE Maputo US$500m Ministry of Transport and (+258) 21359822 PORT Province Communications National Directorate of Economy and Investment BEIRA FISHING Sofala Province US$21m Ministry of Transport and (+258) 21359822 HARBOUR (Beira) Communications National Directorate of Economy and Investment CONSTRUCTION Zambézia US$5m Ministry of Transport and (+258) 21359822 OF MOCUBA DRY Province Communications PORT (Mocuba) National Directorate of Economy and Investment PAVUA DAM Sofala Province US$600m Ministry of Public Works (+258) 21312697 and Housing CORUMANA DAM Maputo US$25m Ministry of Public Works (+258) 21312697 PHASE II Provinve and Housing (Moamba) SUSSUNDENGA Manica Province US$350m Ministry of Public Works (+258) 21312697 DAM PROJECT (Sussundenga) and Housing CHIMEZI DAM Rio Chimezi, US$120m Ministry of Public Works (+258) 21312697 PROJECT Manica Province and Housing

[Source : Centro de Promoção de Investimentos (CPI)

COMPANY PROFILES AECOM TECHNOLOGY CORPORATION

Updated: 2015-09-20

Postal Address: Physical Address:

555 South Flower Street, Suite 3700, Los Angeles, 555 South Flower Street, Suite 3700, Los Angeles, CA 90071-2300 CA 90071-2300

Tel: +1 213 593-8419 Fax.: +1 213 593-8730

Email: Website: www.aecom.com

Branches

Branch Area Head Tel

AECOM Algeria Algeria +213 21 681-133

AECOM Benin Benin

AECOM Botswana Botswana +267 390-0711

AECOM Bujumbura Burundi

AECOM Burkina Faso Burkina Faso +226 50 308-931

AECOM Egypt Egypt

AECOM Guinea Guinea +224 670-10120

AECOM Kenya Kenya +254 20 387-6533

AECOM Libya Libya +218 21 360-2409

AECOM Mozambique Mozambique +258 21 498-797

AECOM Senegal Senegal +221 33 867-6596

Algiers - RSWA - AECOM Algeria +213 21 369-037 / +213 555 031-750

INOCSA – AECOM – Bamako Mali +223 213-5585

Kampala – Davis Langdon – AECOM Uganda +256 259-676

Shareholders Shareholder Percentage FMR LLC 15.84 Wellington Management Company LLP 8.59 Vanguard Group Inc (The) 6.89

Greenlight Capital Inc 4.61 Invesco Ltd 3.92

Directors

Appointment Name Designation Date

Mr Michael Burke Executive Chairman & Chief Executive Officer

Ms Carla Christofferson Executive Vice-President - General Counsel

Mr John Dionisio Non-Executive Director

Mr Michael Donnelly Executive President - End Markets

Mr James H Fordyce Non-Executive Director

Dr William Frist Non-Executive Director

Ms Linda Griego Non-Executive Director

Mr David Joos Non-Executive Director

Mr Stephen Kadenacy Executive President & Chief Financial Officer

Mr John Livingstone Chief Executive Officer - AECOM Capital

Executive Vice-President & Chief Strategy Mr Kevin Lynch Officer

Mr Daniel P McQuade Executive President - Construction Services

Executive President - Energy, Infrastructure & Mr George Nash Industrial Construction

Mr William Ouchi Non-Executive Director

Mr Robert Routs Non-Executive Director

Mr William Rutledge Non-Executive Director

Mr Clarence Schmitz Non-Executive Director

Mr Douglas Stotlar Non-Executive Director

Mr Daniel Tishman Executive Deputy Chairman

Executive President - Design & Consultancy Mr Frederick Werner Services

Ms Janet Wolfenbarger Non-Executive Director

Mr Randall Wotring Executive President - Management Services

History of Business

AECOM Technology Corporation was established by Richard G Newman, and some members of Ashland Inc. On 6 April 1990 the company became an independent firm formed by the merger of five Ashland entities. Aecom has been active in Africa since the 1960s.

Nature of Business

AECOM Technology Corporation provides civil engineering as well as construction advisory services in over 150 countries. Projects include transportation networks, dams, roads and bridges, power stations, structures, civil services and industrial developments. Aecom Mozambique, formerly known as BKS Mozambique Lda, provides civil engineering projects in the country. The company's projects in Africa include: • Ghana National Gas Company for the Western Corridor Gas Infrastructure Development Project (WCGIDP) in Ghana • The Mozambique Health Infrastructure Development Program in Mozambique • Low-Cost Rural Electrification Plan in Mozambique

Nr. of Employees 43300 (Group)

Company Secretary Ms C Ching

Turnover [2014] $ 8,356.80m (AR2014) (Other African Countries U$735.6m)

Profit $232.80m (Net)

Company Year End September

Brandnames

Aecom

Direct Subsidiaries, Associates & Investments Company Name Percentage Aecom Global Inc 100.00 Aecom Inc 100.00 Aecom SA (Pty) Ltd 80.00 Aecom South Africa (Pty) Ltd 80.00 Aecom Technical Services Inc 100.00 Aecom USA Inc 100.00 McNeil Technologies Inc 100.00 Tishman Construction Corporation 100.00

ANHUI FOREIGN ECONOMIC CONSTRUCTION (GROUP) CO LTD

Updated: 2015-09-20

Postal Address: Physical Address:

No 28 Dongliu Road, Hefei, Anhui, 230051, China No 28 Dongliu Road, Hefei, Anhui, 230051, China

Tel: +86 551 6349-2558 Fax.: +86 551 6349-2537

Email: [email protected] Website: www.afecc.com

Directors

Appointment Name Designation Date

Ms Jiang Dairu Executive President

Mr Jiang Qingde Non-Executive Chairman

History of Business

Anhui Foreign Economic Construction (Group) Co Ltd was established in 1992.

Nature of Business

Anhui Foreign Economic Construction (Group) Co Ltd (AFECC) is a multi-operational Chinese entity. The company specialises in real estate development, road construction, construction of stadia, hotels and government buildings. AFECC operates through a global branch network including France, Belgium, Grenada, Madagascar, Ivory Coast, Zimbabwe, Togo as well as Mozambique.

Mozambican projects include: • Mozambique National Stadium • New Office Building for Foreign Affairs Ministry of Mozambique • Maputo International Airport • Mozambique N6 Highway • Maputo MBS Shopping Centre • Maputo Granary Project • Polana Hotel • Vilankulo Airport AFECC is currently building a hotel next to the Joaquim Chissano International Conference Centre in the capital city of Mozambique.

Nr. of Employees 334 (Group - Permanent)

AURECON MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Caixa Postal 4108, Maputo, Mozambique Rua dos Desportistas No 833, 9° Andar (Centro), Edificio JAT V-1, Maputo, Mozambique

Tel: +258 21 306-056 / 84 302-0430 Fax.: +258 21 306-071

Email: [email protected] Website: www.aurecongroup.co.za

Branches

Branch Area Head Tel

Aurecon Tete Mozambique +258 25 222-211

Shareholders Shareholder Percentage Aurecon Africa Ownership Trust 100.00

Managers

Appointment Name Designation Date

Mr Jose Camba Country Manager

History of Business

Aurecon Mozambique Lda established an office in Maputo in 1993. However Aurecon has been operational in Mozambique since the 1980s.

Nature of Business

Aurecon Mozambique Lda provides civil engineering, construction supervision as well as specialist technical services to both the public and private sectors in Mozambique. Services cover the conceptual, feasibility and planning phases of the project, through to design and construction supervision. Ancillary services include advisory and project management services.

Projects include: • Upgrading of National Road EN1 from Gorongosa to Caia • Feasibility Update and Development of Studies for the Transport of Coal from Moatize to Nacala • Joint Maputo River Basin Water Resources • Phase 1 of the Moatize Coal Mine

Nr. of Employees (7,500 - Aurecon Group)

Turnover [2014] ($950.0m - Aurecon Group revenue)

Corporate Governance in Relation to SED & ED

Aurecon grants yearly bursaries to local students to study at South African universities.

Influencing Factors

The country gained its independence in 1975 and was considered to be one of the world’s poorest countries. Until the mid-1990s Mozambique’s development was interrupted by numerous factors, including drought, civil war as well as heavy economic dependence from its neighboring country South Africa. The Mozambican economy began to grow due to increased political stability as well as donor aid. The focus remains on improving sanitation, roads, agriculture and the business regulation environment to stimulate economic growth.

Brandnames

Aurecon

AVENG GRINAKER-LTA MOZAMBIQUE LDA

Reg. Number: 400060142 Updated: 2015-02-20

Postal Address: Physical Address:

Rua Jose Craveirinha 141A, Maputo, Mozambique Rua Jose Craveirinha 141A, Maputo, Mozambique

Tel: +258 21 488-703 Fax.:

Email: [email protected] Website: www.avenggroup.com

Shareholders Shareholder Percentage Grinaker-LTA Construction and Development Ltd 100.00

Directors

Appointment Name Designation Date

Executive Managing Director - Construction & Mr Christiaan De Wet Botha Engineering

Mr Stephen Patrick Duggan Executive Director - Africa & International

Managers

Appointment Name Designation Date

Mr Luis Sousa General Manager

Nature of Business

Grinaker-LTA Mozambique Lda is a multi-disciplinary construction and engineering company, operating in the power, mining, infrastructure, commercial, retail, industrial, oil and gas industries.

Projects include: • Nacala Corridor Project • Construction of a railway sleeper plant in Mozambique • Moma heavy mineral sands recovery plant

Nr. of Employees 25 (Permanent) (7,000 - Aveng Grinaker-LTA Group)

($8.3bn - Construction & Engineering: South Africa and rest of Africa Turnover [2015] Segment. Aveng Ltd's AR2015)

Company Year End June

Influencing Factors

In Mozambique, the construction sector is highly influenced by the public investment trends in the development of infrastructure. The government has increased efforts to carry out public investment specifically in the building and rehabilitation of infrastructure such as bridges, schools and roads. The challenge for the government in relation to construction lies in the need to develop infrastructures that support production and trade. Essentially, there is a need to develop infrastructure that promote the movement of agricultural produce to the different regions of the country. There has also been a notable growth in private self-build activities.

Set up costs and capital commitments to construction projects are far higher than in SA. The capital cost of a project can be up to three times that of SA. While the construction industry is high risk (with equipment etc) it typically does not require high level skills of the bulk workforce and it is possible to train local people to do the job.

Brandnames

Grinaker-LTA

BASIL READ HOLDINGS LTD

Reg. Number: 1984/007758/06 JSE Code: BSR VAT Number: 4490185529 BEE Rating: Not Rated Updated: 2015-02-20

Postal Address: Physical Address:

Private Bag X170, Bedfordview, The Basil Read Campus, 7 Romeo Street, Johannesburg, 2008 Hughes, Boksburg, 1459

Tel: +27 11 418-6300 Fax.: +27 11 418-6334

Email: [email protected] Website: www.basilread.co.za

Branches

Branch Area Head Tel

Basil Read - Cape Town Western Cape +27 21 946-4664

Basil Read - Durban KwaZulu-Natal +27 31 566-4770

Basil Read Mozambique Mozambique Mr Jose Delgado +258 21 496-539

Divisions

Division Area Head Tel

Basil Read Construction Gauteng Mr Christopher John (Chris) Erasmus +27 11 4186300

Basil Read Developments Gauteng Mr Des Hughes +27 11 4186300

Basil Read Engineering Gauteng Mr Digby John Glover +27 11 4186300

Basil Read Mining Gauteng Mr Antonie Fourie +27 11 4186300

Shareholders Shareholder Percentage Allan Gray (Pty) Ltd 20.50 Amabubesi Investments (Pty) Ltd 6.71 Industrial Development Corporation of South Africa Ltd 5.50 PSG Collective Investments Ltd 5.03 SIOC CDT Investment Holdings (Pty) Ltd 4.77 Public Investment Corporation SOC Ltd 3.68 RMB Morgan Stanley (Pty) Ltd 2.72 Pictet et cie Banquiers 2.07

Directors

Appointment Name Designation Date

Independent Non-Executive Mr Paul Cambo Baloyi 2015-01-01 Chairman

Independent Non-Executive Ms Doris Liana Theresia Dondur 2014-06-24 Director

Independent Non-Executive Mr Mahomed Salim Ismail Gani 2015-04-15 Director

Mr Terence Desmond (Des) Hughes 2015-01-01 Non-Executive Director

Independent Non-Executive Dr Claudia Estelle Manning 2012-08-23 Director

Mr Andrew Conway Gaorekwe (Connie) Molusi 2013-03-14 Non-Executive Director

Mr Neville Francis Nicolau 2014-09-01 Chief Executive Officer

Mr Sango Siviwe Ntsaluba 2006-07-01 Non-Executive Director

Mr Thabiso Alexander Tlelai 2006-07-01 Non-Executive Director

Ms Amanda Wightman 2014-10-13 Chief Financial Officer

Managers

Appointment Name Designation Date

Mr Greg Badenhorst Manager - MD: Roadcrete Africa

Mr Nillesh Bhima Administration Manager - Buildings

Mr Deon de Jager Manager - MD: Basil Read Roads

Mr Eugene du Toit 2006-00-00 Manager - Executive: Concessions

Manager - SHEQ - Basil Read Mining and Ms Vanessa Duncan Group IT Manager

Chief Operating Officer Manager - Mr Christopher John (Chris) Erasmus 2010-00-00 Construction

Mr Antonie Fourie 2009-00-00 Manager - MD: Mining and B&E

Mr Peter Gerolemou Manager - MD: Buildings

Mr Digby John Glover 2010-00-00 Manager - MD: Engineering

Ms Erica Gretel Grace 2010-00-00 Human Resources Manager

Mr Bernard Melvin Johnson Human Resources Manager

Mr Mohamed Saleem Aziz Joosub Manager - FD: Buildings

Mr Stephen Marx Manager - Contracts Director: Mining

Mr Mthawelanga Webster Mfebe 2009-10-01 Manager - Stakeholder Relations

Mr Ravikumaran Michael Manager - Purchasing Manager

Mr Vinayagam Kumarasamy Moodley Manager - Group Cost Control Director

Mr Vinesh Moodley Manager - MD: BR Oil & Gas

Mr Brian Mulherron Technical Manager - Developments

Manager - Head: Group Risk and Mr Avi Naidoo 2011-00-00 Compliance

Manager - Performance Monitoring Mr Morwangwato Donald Nkadimeng Manager: Transformation

Mr Reinoud Cornelis Oranje Manager - MD: Building

Manager - Executive: Developments - Mr Yusuf Patel Special Projects

Mr John Russell Manager - TWP Holdings

Mr Kgomotso Bontle Sekgobela 2009-00-00 Business Development Manager

Mr Malachi Setati Manager - FD: Plant

Dr Ramchunder (Manny) Singh Manager - MD: BR Energy

Mr Steven Owen Single Manager - MD: SprayPave

Mr Chris Sladden Manager - MD: Sladden International

Mr Francois Stock Manager - FD: Mining

Mr McDonald Letlhogonolo Tisane Manager - Senior Cost Control Manager

Mr Marco Edoardo Giovanni Valente Manager - MD: Valente Brothers Group

Mr Paul Francis Walker Manager - MD: Newport Construction

History of Business

Basil Read Holdings Ltd was established in February 1987 when a dormant company named Basreco Ltd was utilised for registration purpose and underwent a name change to Basil Read Holdings Ltd. On 1 January 1987, the company listed on the JSE. The disposal of TWP Holdings (Pty) Ltd to WorleyParsons was completed in March 2013.

Nature of Business

Basil Read Holdings Ltd, through its subsidiaries, provides civil engineering, road construction, building, mixed integrated housing developments, property development, bitumen distribution, opencast mining, blasting, engineering and project management solutions to clients throughout Africa and internationally.

Current Projects include:

• Civils: - South Africa: Civil works at Medupi power station for Eskom valued at R917m - South Africa: Civil works at Kusile power station for Eskom in joint venture - South Africa: Civil works at Venetia mine for De Beers.

• Roads: - South Africa: R637m upgrade Standerton-Greylingstad road - Namibia: R170m access road, Swakop Uranium - Mozambique: R335 million joint venture for Gaza project.

• Building & Development Projects: - Various buildings at Medupi and Kusile power stations – combined value R1,2bn - New TWP headquarters – R300m - Mediclinic Centurion – R266m - Asidi Schools – R200m - Central workshop for Anglo American – R70m - Savanna City, Gauteng - Malibongwe Ridge, Gauteng - Klipriver Business Park, Gauteng - Rolling Hills Estate, Mpumalanga - Munis Square, Lusaka, Zambia

• Mining: - South Africa: Joint venture contract at Beeshoek mine for Assmang

- Namibia: Five-year contract for Weatherly International plc at the Tschudi copper project – value R1.8bn - Botswana: Contract for phase 2 at Jwaneng mine for Debswana as part of the Majwe Mining joint venture.

Nr. of Employees 2959 (2013 - Group)

Company Secretary Ms A Ndoni

First National Bank (a division of FirstRand Bank Ltd); Nedbank Ltd (a Banks division of the Nedbank Group Ltd)

Auditors PricewaterhouseCoopers Inc

Attorneys Ramsay Webber Inc.

Insurance Brokers Marsh South Africa (Pty) Ltd

Turnover [2014] R 6,584.81m ($ 607.78m) INET Financials

Profit -R742.22m (-$68.51m) (Net Loss)

Company Year End December

Transfer Secretaries

Name Physical Address Postal Address Tel

Link Market Services 13th Floor, Rennie House, 19 Ameshoff PO Box 4844, +27 11 South Africa (Pty) Ltd Street, Braamfontein, Johannesburg, 2001 Johannesburg 713 0800

Corporate Governance in Relation to SED & ED

A CSI subcommittee was established during the year to ensure that this philosophy and any supporting initiatives are both met and further developed. In 2013, Basil Read contributed almost R3 million towards specific projects, organisations and NGOs focused on education, enterprise development and upliftment.

One of the more significant CSI projects is in partnership with Eskom on the Medupi power station to develop communities affected by the project in the Lephalale area in Limpopo.

Other CSI focus areas include:

• Through a partnership with Khuthaza (a non-profit agency), the company provide focused training and development to develop the entrepreneurial skills of women and enable them to participate more effectively in economic opportunities in the construction industry • Through Ambassadors in Sport, a non-profit public-benefit organisation, the company helps develop young people through sport. The programme endeavours to uplift and develop young people from disadvantaged communities, counter crime and addictions, and inspire players of all ages to make a difference in their communities • Basil Read made a substantial contribution towards building materials to assist the Mpumalanga provincial government in building houses in rural areas • Basil Read supported a road-safety project for four schools in Standerton through Active Education, which initiates scholar–patrols so that children are trained and educated to ensure safe road crossing in rural areas • A successful project in the Eastern Cape is providing solar lighting in township areas to make communities safer and contribute to the development of residents through work opportunities.

Corporate Risk Management in the Industry

Global climate change (caused by GHG) has been identified as a risk where detrimental weather and temperature extremes will have a direct effect on construction operations, rendering sites unworkable (floods) and affecting the health and safety of the company's workforce. Its operations in the civil, roads and buildings divisions particularly are highly vulnerable to the short and long-term effects of climate change. The group has acknowledged this risk; monitoring its carbon emissions is the first step to reaching its carbon emission reduction target. Climate change-related risks include: • Carbon tax – driven by changes in regulation • Delays in projects, damage to sites, concrete pouring hampered by extreme temperatures – driven by physical climate parameters • Irreversible damage to projects, lack of available water – driven by extreme changes in precipitation (flash flooding, drought).

Activities

Activity Percentage

Construction 76.85

Developments 3.25

Engineering 3.68

Mining 16.22

Direct Subsidiaries, Associates & Investments Company Name Percentage Basil Read Ltd 100.00

BECHTEL CORPORATION

Updated: 2015-02-20

Postal Address: Physical Address:

Blue Shield of California Building, San Francisco, Blue Shield of California Building, San Francisco, California, United States of America California, United States of America

Tel: +1 415 768-1234 Fax.: +1 415 768-9038

Email: [email protected] Website: www.bechtel.com

Branches

Branch Area Head Tel

Bechtel Mozambique Mozambique +258 84 713-0956

Shareholders Shareholder Percentage Bechtel Family 100.00

Directors

Appointment Name Designation Date

Mr Brendan Bechtel Executive President & Chief Financial Officer

Mr Riley Bechtel Executive Chairman

Mr Peter Dawson Chief Financial Officer

Mr Bill Dudley Chief Executive Officer

Executive President - Europe, Africa & Middle Mr David Welch East

Managers

Appointment Name Designation Date

Mr Michael Bailey Manager - General Counsel

History of Business

Bechtel Corporation was established in 1898.

Nature of Business

Bechtel Corporation is engaged in global civil engineering and construction as well as project management. The group’s extensive portfolio includes projects in the energy, transportation, communications, mining, oil and gas as well as government services sectors. Bechtel operates in around 50 countries with extensive branches throughout Africa including Mozambique. The company has been selected by Anadarko Mozambique Area 1 Lda to perform front end engineering and design (FEED) for a new liquefied natural gas (LNG) facility in Mozambique, which will be the first LNG project in the country.

Nr. of Employees 58000 (Group)

Turnover [2014] $ 37,200.00m (AR2014)

Company Year End December

Brandnames

Bechtel

BRITALAR - SOCIEDADE DE CONSTRUCOES SA

Updated: 2015-02-20

Postal Address: Physical Address:

Bairro Sommerschield, Rua Frente da Libertacao, Bairro Sommerschield, Rua Frente da Libertacao, No 56, Maputo, Mozambique No 56, Maputo, Mozambique

Tel: +258 21 485-011 Fax.: +258 21 485-012

Email: [email protected] Website: britalar.co.mz

Shareholders Shareholder Percentage Britalar Group 100.00

Directors

Appointment Name Designation Date

Mr Antonio Salvador Rodrigues Executive President - Group

Managers

Appointment Name Designation Date

Mr Alexandre Almeida 2012-09-01 General Manager

Mr Andre Peixoto 2006-09-01 Site Manager

History of Business

BRITALAR - Sociedade de Construcoes SA was established in 2011.

Nature of Business

BRITALAR - Sociedade de Construcoes SA is a civil engineering entity in Mozambique. The group's business portfolio includes civil engineering as well as public works, real estate development, tourism and health services. BRITALAR is currently reconstructing the 3.5km long Julius Nyerere Avenue which was damaged by the floods in 2000.

Nr. of Employees 200 (Est.)

Brandnames

Britalar

CAMARGO CORREA MOZAMBIQUE LDA

Updated: 2015-02-20

Postal Address: Physical Address:

Av 24 de Julho, No 7-9 Andar - Edificio Cimpor, Av 24 de Julho, No 7-9 Andar - Edificio Cimpor, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 245-100 Fax.:

Email: [email protected] Website: ww.construtoracamargocorrea.com

Shareholders Shareholder Percentage Camargo Correa SA 100.00

Directors

Appointment Name Designation Date

Mr Jorge Reis Executive Managing Director

Managers

Appointment Name Designation Date

Mr Marco Antonio de Araujo Costa Manager - Group Africa Officer

History of Business

Camargo Correa Mozambique Lda was established in 2006.

Nature of Business

Camargo Correa Mozambique Lda is part of Camargo Correa SA which operates in more than 20 countries globally. The group is involved in civil engineering, real estate development, and manufacture of cement, energy and transport concessions and specialises in hydro-electric construction. Projects in Mozambique include the construction of the Moatize Coal Mine and Project Mphanda Nkuwa, a US$2m hydro?electric project on the banks of the Zambezi. The project is expected to begin generating power in 2015.

Nr. of Employees (52,000 - Group)

Insurance Brokers Nacional Brokers Lda

Turnover [2014] ($6,589.7m - Group; $1,596.7m - Engineering & Construction Segment)

Company Year End December

Brandnames

Camargo Correa

CETA CONSTRUCAO E SERVICOS SA

Updated: 2015-02-20

Postal Address: Physical Address:

PO Box 2783, Maputo, Mozambique 3rd Floor, Av 25 de Setembro nº 420, Maputo, Mozambique

Tel: +258 21 355-6600 Fax.: +258 21 301-855 / 355-648

Email: [email protected] / [email protected] Website: www.insitec.co.mz

Shareholders Shareholder Percentage Insitec Mozambique 75.00

Directors

Appointment Name Designation Date

Mr Dipak Lalgi 2013-01-01 Executive Director

Managers

Appointment Name Designation Date

Mr Luis Antonio de Lobao Soeiro Financial Manager

History of Business

CETA Construcao e Servicos SA was established in 1999 and the company was acquired by Insitec in May 2011. The company was listed on the Mozambique Stock Exchange on 7 May 2015.

Nature of Business

CETA Construcao e Servicos SA is an indigenous civil engineering and construction entity in Mozambique. The company specialises in public works, roads, railways, ports, concrete and steel structures, school buildings, hospitals, water supply and sanitation. The main construction areas include the Restructuring of the Nacala Corridor; implementation of Mphanda Nkuwa and structuring the reversal of Cahora Bassa.

Nr. of Employees 3146

Auditors Ernst & Young

Brandnames

CETA

CHINA ROAD & BRIDGE CORPORATION

Trading As: CRBC Updated: 2015-09-11

Postal Address: Physical Address:

No 88 C, Avenue, Beijing, 100011, China No 88 C, Avenue, Beijing, 100011, China

Tel: +86 10 6428-0055 Fax.:

Email: Website: www.crbc.com

Shareholders Shareholder Percentage China Communications Construction Company Ltd 100.00

Directors

Appointment Name Designation Date

Mr Wen Gang Non-Executive Chairman

Mr Lu Shan Executive President

History of Business

China Road & Bridge Corporation was established in 1979. The international project contracting specialist became a wholly-owned subsidiary of China Communications Construction Company Ltd n 2005. CRBC established its presence in Africa in the 1960s. The company began operations in Ethiopia in 1998.

Nature of Business

China Road & Bridge Corporation specialises in the construction of roads, railways, harbours, bridges, airports, tunnels, dredging, water conservancy projects as well as public works. The corporation currently has 135 on-going projects in Africa.

Projects include: • Angola Cabinda University • No 6 National Road Bamako-Sekou Section improvement • Kyrgyzstan ADB60km Road • Chicheng Expressway • Nairobi Southern Bypass in Kenya • 14 Bid Section of Datong-Xi’an High-Speed Railway

• NASZ-5 Bid Section of Nanjing-Anqing High-Speed Railway • Zemen-Borca Bridge in Serbia • The New Chroy Changvar Bridge • Mauritania Nouakchott Friendship Expansion • Bata Harbor • The Pakbeng Mekong River Bridge • Pakistan Karakoram Highway Up-Grade • Tayan Bridge • CAXITO-N’ZETO Road Rehabilitation • NA & NR Road Rehabilitation • The Avenue of Sino-Ethiopian Friendship • Addis Ababa Ring Road Project • Sodo-Omo road project

Nr. of Employees (1,500 - Est. Per Project)

CLM CIVIL CONTRACTORS MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Caixa Postal 29, Tete, Mozambique Stand No 81, EN7, Moatize, Tete, Mozambique

Tel: +258 82 303-1135 Fax.:

Email: [email protected] Website: civils.groupclm.com

Shareholders Shareholder Percentage CLM Group 100.00

Directors

Appointment Name Designation Date

Mr Conrad King Executive Managing Director

Mr Brendan McConnell Executive Director - Plant

Mr Lawrence Muir Executive Director

Mr Dierk Treber - Site Agent

Managers

Appointment Name Designation Date

Mr Simon Mwatambudzeni Chanditeya Production Manager

Mr John Clinton Goldsmtih Commercial Manager

Administration Manager & Human Mr David Kabatebate Resources Manager

Mr Gavin McNeil Financial Manager

Nature of Business

CLM Civil Contractors Mozambique Lda provides civil contracting services which include road and dam construction, bulk earthworks as well as plant hire services.

Projects include: • Construction of Muda Dam • Land Preparations and Bush Clearing

• Coal Sampling at Moatize Coal Mine • Shrimp Farm • Implementation of Road Construction and Maintenance Programme, Zambezia Project • Sena Sugar Re-Development • Acucareira de Mozambique Development Project • Emergency Re-opening of Roads in Tete and Manica Provinces • Drainage Improvements and Intensive Maintenance of Dondo-Caia Road

Brandnames

CLM

CMC AFRICA AUSTRAL LDA

Reg. Number: MOZ94738 Updated: 2015-02-20

Postal Address: Physical Address:

Avenida da Namaacha Km 6, Matola, Mozambique Av Vladimir Lenine, 174 9 e o Andares, Matola, Mozambique

Tel: +258 1 780-357 / +258 82 327-3590 Fax.: +258 1 780-335

Email: [email protected] Website: www.cmcgruppo.com

Shareholders Shareholder Percentage CMC Di Ravenna Societa Cooperativa 99.00

Directors

Appointment Name Designation Date

Mr Claudio Conficoni 2000-00-00 Executive Chairman

Managers

Appointment Name Designation Date

Mr David Bain 2004-02-01 Commercial Manager

History of Business

CMC Africa Austral Lda was established at the end of 2000.

Nature of Business

CMC Africa Austral Lda is a civil contracting entity which operates in complementary sectors that include the manufacture of timber products, the production and sale of concrete mix, quarrying, the sale and processing of aggregates for civil construction as well as real estate development. The company is ranked as one of Mozambique’s largest civil contractors. CMC Africa has expanded its regional footprint into South Africa, Swaziland, Malawi, Angola as well as Lesotho.

Projects include: • Nampula Aqueduct upgrading and expansion • Upgrading of Ruaca Road – Montepuez • Upgrading of Rio Ligonha-Nampula Road

• Beira sanitation project • Massingir Dam rehabilitation • Rehabilitation of Road EN231 from Nampevo to Gurue • Upgrading of Montepuez Ruaca Road • Lot C – Litunde – Lichinga Road Rehabilitation and construction of five bridges between Marrupa & Litunde • Upgrading of Namialo-Mecutuchi Road • Rehabilitation of sections of road N7, Vanduzi-Changara • EN 1 Roads Periodic Maintenance, 2 Lots • Montepuez Road – Pemba • Maputo Coastline Defence Works • Pequenos Libombos Dam • Completion of two off-shore jetties in Port of Matola

Nr. of Employees 3000

Auditors Deloitte

Turnover [2014] ($406.4m - CMC Group's Southern Africa Segment)

Influencing Factors

In Mozambique real GDP is set to grow by 7.2% a year in 2015-19, although weak commodity prices pose threats to the mining and oil investment boom. To better face a possible further delay in the expected oil & gas infrastructure acceleration, the company downsized its local structure achieving significant savings, and it has been focusing on decreasing its exposure to public clients. The Massingir dam project is now generating cash and the company's outstanding receivables from the area decreased by 10% from 31 December 2014 to 30 June 2015. New projects will be focused on private clients or contracts backed by solid supranational institutions.

Brandnames

CMC Africa

CONSTRUCOES JJR & FILHOS MOZAMBIQUES LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Rua das Palmeiras No 49, Bairro Sommerschield 2, Rua das Palmeiras No 49, Bairro Sommerschield 2, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 494-130 Fax.: +258 21 494-130

Email: [email protected] Website: www.jjr.pt

Shareholders Shareholder Percentage JJR Group 100.00

Directors

Appointment Name Designation Date

Mr Joao Lourenco 2013-01-01 Executive Director - Construction

History of Business

Construcoes JJR & Filhos Mozambiques Lda was established in September 2010.

Nature of Business

Construcoes JJR & Filhos Mozambiques Lda specialises in civil engineering and public works. The company focuses on the rehabilitation of public roads and highways and waterworks. Projects include: • Repair areas of operation of the Inhambane Airfield • N101 SOFT – Chokwe • Periodic road maintenance N/C • Roundabout improvements – Rotunda da Junta • Construction of Freedom Road • Rehabilitation of roads in the Matola Municipal area • Emergency earthworks – Dike Chokwe • Periodic road maintenance – Maputo • Slopes protection – Joaquim Chissano Avenue • Roadworks – R901, N242 CRZ – Beach Bar • Roadworks – between terraced N200 Boane Belavista and Goba • R450 Road between Malehice and Mandlakazi

• Rehabilitation of Julius Nyerere Avenue • Rehabilitation of 15 km highway – Nkobe • Signs and barrier protection – Vertical Road N7 • Routine maintenance of R804 Marracuene / Macaneta • Rehabilitation of October 4 Avenue, San Jose and Street 5582 • Containment of erosion in the dam wall – Ala Dam Macarretane • Periodic maintenance of R807 – Coca-Coal / SOCIMOL • Periodic maintenance of R402 – Moamba / Sabie

Nr. of Employees (250 - JJR Group total)

Corporate Governance in Relation to SED & ED

The company donated school supplies worth 50,000 Meticais to the Government of the District of Boane, Maputo Province on 7 October 2013.

Brandnames

JJR

GABRIEL COUTO MOZAMBIQUE SARL

Updated: 2015-09-20

Postal Address: Physical Address:

Rua Frente de Libertacao de Mozambique, 268, Rua Frente de Libertacao de Mozambique, 268, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 498-159 Fax.: +258 21 498-160

Email: [email protected] Website: www.gabrielcouto.pt

Shareholders Shareholder Percentage Gabriel AS Couto SA 57.00

Managers

Appointment Name Designation Date

Mr Mario Babo 2012-03-01 Logistics Manager & Procurement Manager

Mr Tiago Couto International Manager

Nature of Business

Gabriel Couto Mozambique SARL specialises in the construction of roads and airports, as well as environmental and renewable energy projects in Mozambique.

Projects include: • Rehabilitation of N13 Nampula Cuamba – Project Nacala Corridor – Lot C – Malema Cuamba • Rehabilitation of Road N221 Canicado – Chicualacuala / Gaza Corridor / Lots II & III / Total Length 200km (Soil Cement Stabilisation) • Construction of a hospital in Mapai, Mozambique • Rehabilitation of a 180 km segment of highway between Combomune and Chicualacuala in southern Mozambique • The assembly and operation of an asphalt plant near Nampula, Mozambique.

Nr. of Employees (700 - Gabriel Couto Group)

Turnover [2013] ($137.7m - Gabriel AS Couto SA Total) (Latest Financials Available)

Corporate Governance in Relation to SED & ED

Gabriel Couto Mozambique SARL assisted with an outreach programme at the Essipe School in Gurué, Mozambique. It also organised a project to benefit a primary school in Mutuali, Mozambique. Gabriel Couto’s management provided tables and chairs to equip the school, and delivered to the Director, Mr Mainato.

Brandnames

Gabriel Couto

INGEROP MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Caixa Postal 3241, Maputo, Mozambique Avenida Julius Nyerere No 258, Maputo, Mozambique

Tel: +258 149-6650 Fax.: +258 149-8816

Email: [email protected] Website: www.ingerop.com

Shareholders Shareholder Percentage Ingerop Africa (Pty) Ltd 100.00

Directors

Appointment Name Designation Date

Mr Filipe Amaro 2009-07-01 Executive Director - Architect & Town Planner

Mr Christophe Rolland Executive Managing Director

Managers

Appointment Name Designation Date

Mr Francisco Dau 2009-03-01 Consultant Engineer

Mr Jose Serejo General Manager

History of Business

The Ingerop Group was established in 1992.

Nature of Business

Ingerop Mozambique Lda is an international civil engineering entity. Business lines include infrastructure development, urban planning and public transportation, water and environment, building construction, energy as well as industrial facilities.

Projects include: • Dona Ana Bridge • Cahora Bassa dam (total height 170m) • Cahora Bassa dam Spilway gates refurbishment (14.000 m³/S)

Nr. of Employees (1,700 - Ingerop International total)

Turnover [2014] ($231.7m - Ingerop Group Revenue)

Company Year End December

Brandnames

INGEROP

ITALIAN-THAI DEVELOPMENT PUBLIC COMPANY LTD

Reg. Number: 0107537000939 Updated: 2015-09-20

Postal Address: Physical Address:

2034/132-161 Italthai Tower, New Petchburi 2034/132-161 Italthai Tower, New Petchburi Road, Bangkapi, Huay Kwang, Bankok 10310, Road, Bangkapi, Huay Kwang, Bankok 10310, Thailand Thailand

Tel: +66 2 716-1600 / 3800-3804 Fax.: +66 2 716-1464

Email: [email protected] Website: www.itd.co.th

Shareholders Shareholder Percentage Mr Premchai Karnasuta & Family 17.87 Mrs Nijaporn Charanachitta & Family 9.38 Mr Wichai Wachiraphong 3.77 Mr Jakaphan Wachirapong 3.16 Thai NVDR Company Ltd 3.08 Mr Jessada Lertnantapanya 2.59 Mr Wichan Wachirapong 1.89 Thai Value Focus Equity-Dividend Fund 1.19 State Street Bank Europe Ltd 1.07 Mr Chaiya Sakulchaiwanich 0.90

Directors

Appointment Name Designation Date

Mr Anan Amarapala Executive Vice-President

Mr Chartachai Bunya-Ananta Independent Non-Executive Chairman

Mr Pathai Chakornbundit Executive Vice-President - Senior

Ms Nijaporn Charanachitta Executive Vice-President - Senior

Mr Yutachai Charanachitta Non-Executive Director

Mr Chatichai Chutima Executive Vice-President - Finance

Mr Woravudh Hiranyapaisarnsakul Executive Vice-President

Dr Krisorn Jittorntrum Independent Non-Executive Director

Mr Premchai Karnasuta Executive President

Mr Peeti Karnasuta Non-Executive Director

Mr Virat Kongmaneerat Executive Vice-President

Mr Taweesilp Pattanakitchamroon Executive Vice-President

Executive Vice-President - Cost Engineering Mr Sompop Pinijchai Analysis

Mr Sumate Surabotsopon Executive Vice-President

Mr Tawatchai Suthiprapha Executive Vice-President - Senior

Mr William Lee Zentgraf Independent Non-Executive Director

Other Key Personnel

Appointment Name Designation Date

Mr Thanin Bumrungsap Advisor

Mr Tawee Changpetch Advisor

Dr Nattawuth Udayasen Advisor

History of Business

Italian-Thai Development Public Company Ltd was established on 15 August 1958 and listed on the Stock Exchange of Thailand on 9 August 1994.

Nature of Business

Italian-Thai Development Public Company Ltd is one of the largest infrastructure construction companies in Southeast Asia. The company provides civil and infrastructure construction in nine development activities which include: • Buildings (office buildings, condominiums, skyscrapers and hotels) • Industrial Plants • Pipelines and Utility Works (oil, gas and water transmission pipelines, conduit and manhole systems and storage tanks) • Highways, Railways, High Speed Rails, Viaducts, Trackworks, MRT Systems, Bridges and Expressways • Airports, Ports and Marine Works • Dams, Tunnels and Power Plants • Steel Structures • Telecommunications

• Mining

Projects in Mozambique include: • Construction and operation of the railway line from Moatize-Macuse with approximate length of the railway at 530 km • Construction and operation of the deep sea port at Macuse with annual capacity of 25 million tons

Nr. of Employees 28235 (Group)

Company Secretary Mr W Hirunyapaisansa-kul

Auditors Grant Thornton Ltd

Turnover [2014] $ 1,457.80m (AR2014) (Thai Baht 47,973.3m)

Profit $11.50m (Net) (Thai Baht 379.1m)

Company Year End December

Influencing Factors

During the financial year, the public and the private sector continued to be the driving force of construction projects: the public sector focused on road network expansion both in Bangkok and upcountry, as well as refurbishment of railway lines by using a larger rail and concrete sleepers to strengthen the rail system; at the same time the private sector conducted further expansion into the country, especially in the growing business and investment areas, to such centres as Udonthani, Suratthani and Chiangrai. However, the growth of multiple construction projects in the meantime conversely put much pressure on contractors due to the high demand of construction materials, especially cement, for which the price was increasingly adjusted. Moreover, the Company had to face a labour shortage and/or shortage of skilled labour that consequently required providing training of professional workers or employing immigrant workers instead. Even though the Government’s megaprojects have been slowed down as the result of political turmoil at the end of the year, the Company took advantage from this situation to undertake the problems of the issue of the materials and the labour shortage, to be more ready in future. Nevertheless, the Government must urgently put forward infrastructure development projects for implementation to keep up with the AEC liberalisation starting in year 2017.

Corporate Risk Management in the Industry

Current risks for the company comprise political uncertainty in Thailand and the high current debt.

Market Share

35.54%

Direct Subsidiaries, Associates & Investments Company Name Percentage APPC Holdings Co Ltd 60.00 Asian Steel Products Co Ltd 69.90 ATO Asia Turnouts Co Ltd 49.00 BhakaBhumi Development Co Ltd 99.99 First Dhaka Elevated Expressway Co Ltd 99.99 IN joint Venture 51.00 IOT Joint Venture 40.00 Italian Thai International Sdn Bhd 99.99 Italian-Thai Hongsa Co Ltd 99.97 Italian-Thai International Co Ltd 99.99 Italian-Thai Land Co Ltd 99.99 Italian-Thai Power Co Ltd 99.99 Italian-Thai-EGC Joint Venture 55.00 Italthai Marine Co Ltd 92.59 ItalthaiTrevi Co Ltd 80.00 ITD - ITD Cem Joint Venture 60.00 ITD - NCC Joint Venture 60.00 ITD - Unique Joint Venture 60.00 ITD Bangladesh Co Ltd 99.99 ITD Cementation India Co Ltd 69.57 ITD Cementation Joint Venture 20.00 ITD Construction Sdn Bhd 99.99 ITD SQ Joint Venture 50.00 ITD-ETF Joint Venture 65.00 ITD-ETF-MVM Joint Venture 55.25 ITD-ITD Cem Joint Venture 51.00 ITD-Madagascar SA 99.98 ITD-Nawarat LLC 60.00

ITD-SMCC Joint Venture 40.00 ITO Joint Venture 40.00 Joint Venture Evergreen - Italian-Thai-PEWC 25.00 KhunkaPalangthai Co Ltd 98.05 MCRP Construction Co Ltd 24.00 MCRP Holding Corporation Co Ltd 24.00 Myanmar Italian-Thai Power I Co Ltd 99.95 Myanmar ITD Co Ltd 99.99 NhaPralan Crushing Plant Co Ltd 99.99 Palang Thai Kaowna Co Ltd 99.94 Praram 9 Square Hotel Co Ltd 20.00 PT Thailindo Bara Pratama Co Ltd 99.99 Saraburi Construction Technology Co Ltd 99.93 Siam Concrete Brick & Products Co Ltd 99.80 Siam Pacific Holding Co Ltd 46.69 Sino Lao Aluminium Corporation Co Ltd 34.00 SQ ITD Joint Venture 50.00 SUNSUNG-ITD Joint Venture 24.00 Thai Maruken Co Ltd 50.96 Thai Pride Cement Co Ltd 99.99

KENTZ ENGINEERS & CONSTRUCTORS LDA

Updated: 2015-02-20

Postal Address: Physical Address:

Avenida Vladimir Lenine, Nr 174, Millenium Park, Avenida Vladimir Lenine, Nr 174, Millenium Park, 11 Andar, Escritório B, Maputo, Mozambique 11 Andar, Escritório B, Maputo, Mozambique

Tel: +258 21 302-712 Fax.: +258 21 302-713

Email: [email protected] Website: www.kentz.com

Shareholders Shareholder Percentage Kentz Corp Ltd 100.00

Directors

Appointment Name Designation Date

Mr Colin Crowley Executive Director - Country

Mr Carl Dyer Executive Managing Director - Regional

Managers

Appointment Name Designation Date

Mr Adrian Leahy Country Manager

Mr Emilio Munguambe Human Resources Manager

History of Business

Kentz has been operational in Mozambique since 1997. The company was awarded the Phase 1 Moatize Coal Project in 2009.

Nature of Business

Kentz Engineers & Constructors Lda provides civil engineering and construction services in Mozambique.

Projects include: • Nacala Corridor project in northern Mozambique • Phase 1 and Phase 2 of the Moatize coal mining project • Moma Mineral Sands

Nr. of Employees (15,500 - Group)

Turnover [2013] ($331.6m - Kentz AR2013 Africa segmental revenue.)

Corporate Governance in Relation to SED & ED

Kentz has been working in partnership with WaterAid since 2011, supporting WaterAid’s vision of a world where everyone has access to safe water and sanitation. WaterAid works in 27 countries across Africa, Asia and the Pacific region to transform lives by improving access to safe water, hygiene and sanitation in some of the world’s poorest communities. In 2013, Kentz continued to support the WaterAid project in the Namacurra District of the Zambezia Province of Mozambique.

In 2012, Kentz signed a long-term training agreement with the Mozambique Ministry of Labour to train 500 local employees in LNG and gas projects.

Brandnames

Kentz

MOTA-ENGIL ENGENHARIA E CONSTRUCAO SA

Updated: 2015-02-20

Postal Address: Physical Address:

Edificio Milenium Park, 14/15 Andar, Avenida Edificio Milenium Park, 14/15 Andar, Avenida Vladimir Lenine, No 179, Maputo, Mozambique, Vladimir Lenine, No 179, Maputo, Mozambique, 2284 2284

Tel: +258 21 321-384 Fax.:

Email: [email protected] Website: www.mota-engil.pt

Shareholders Shareholder Percentage Mota-Engil Africa BV 100.00

Directors

Appointment Name Designation Date

Mr Jose Zilhao Executive Director

Managers

Appointment Name Designation Date

Ms Sandra Bento 2013-09-01 Human Resources Manager - Coordinator

Nature of Business

Mota-Engil Engenharia e Construcoes Mozambique SA provides civil engineering projects in Mozambique which include residential and office buildings, health care facilities and hospitals, sports and recreation facilities, educational institutions, shopping malls as well as factories and warehouses. The principal projects underway are the rehabilitation of the Sena railway and the Chimoio to Espungabera road.

Nr. of Employees (14,500 - Mota-Engil Africa Total)

Turnover [2014] ($671.8m - Mota-Engil SADC Segmental Revenue)

Profit ($123.8m - Mota-Engil SADC Segmental Profit)

Company Year End December

Influencing Factors

In Africa, particularly in the Southern African Development Community (SADC), a region in which MOTA-ENGIL is present, the gross domestic product remained stable, with the estimation of a growth of 3.6%. The markets of Angola and Mozambique continue to benefit from mining and Oil & Gas activities. Nonetheless, South Africa, the main provider of raw materials and equipment in the region, was deeply affected by the currency crisis of emerging countries, undergoing a considerable devaluation of its currency.

Brandnames

Mota-Engil

MURRAY & ROBERTS HOLDINGS LTD

Reg. Number: 1948/029826/06 JSE Code: MUR VAT Number: 4550113890 BEE Rating: Level 2 EmpowerLogic Updated: 2015-09-20

Postal Address: Physical Address:

PO Box 1000, Bedfordview, Douglas Roberts Centre, 22 Skeen Boulevard, Johannesburg, 2008 Bedfordview, Johannesburg, 2007

Tel: +27 11 456-6200 Fax.: +27 11 455-2222

Email: [email protected] Website: www.murrob.com

Shareholders Shareholder Percentage Public Investment Corporation SOC Ltd 17.36 Allan Gray Investment Council 15.14 Coronation Fund Managers Ltd 10.22 Sanlam Investment Management (Pty) Ltd 5.10 Kagiso Asset Management (Pty) Ltd 5.09 Investec Asset Management (Pty) Ltd 3.36

Directors

Appointment Name Designation Date

Mr David Duncan Barber 2008-00-00 Independent Non-Executive Director

Mr Andries Jacobus (Cobus) Bester 2011-07-01 Executive Financial Director

Mr Kevin Gallagher Executive Operations Director

Mr Ralph Havenstein 2014-08-01 Independent Non-Executive Director

Mr Suresh Kana 2015-07-01 Independent Non-Executive Director

Mr Henry Johannes Laas 2011-04-01 Chief Executive Officer

Ms Nomalizo Beryl (Ntombi) Langa-Royds 2013-06-01 Independent Non-Executive Director

Mr John Michael McMahon 2004-00-00 Independent Non-Executive Director

Dr Xolani Humphrey Mkhwanazi 2015-08-01 Independent Non-Executive Director

Ms Mahlape Sello 2013-00-00 Independent Non-Executive Chairman

Mr Royden Thomas Vice 2005-00-00 Independent Non-Executive Director

Managers

Appointment Name Designation Date

Dr Orrie Fenn 2009-11-01 Operations Manager

Mr Jerome Neil Govender 2012-08-01 Operations Manager

Mr Ian Wilfred Henstock Commercial Manager

Manager - Health, Safety & Mr Thokozani Mdluli Environment

Mr Frank Saieva 2011-07-01 Operations Manager

Mr Roger Andrew Gillies (Andrew) Skudder Sustainability Manager

History of Business

Douglas Murray inherited Murray & Stewart, founded in 1902, from his father John in 1928 and co- founded The Roberts Construction Co. in 1934 with Douglas Roberts. The Roberts Construction Company had converted to a public company in 1948 and was listed on the JSE in 1951. Murray & Roberts was formed in 1967 following its merger with Murray & Stewart, but the two companies continued to operate as separate businesses until all operations were fully consolidated in 1979. A representative office was established in Mozambique in March 2014.

Nature of Business

Murray & Roberts Holdings Ltd is an investment holding company with interests in the construction & engineering, underground mining development, construction materials and related fabrication sectors. The Company does not trade and all of its activities are undertaken through a number of subsidiaries, joint ventures and associates.

Projects: • Alusaf Aluminium Smelter • Angel Platform Topside Floatover • Aquarius Partnership • Bloukrans Bridge • Burj al Arab Centre • Coal Line and Ore Line • Diavik Diamond Mine

• Dubai International Airport • Gautrain Rapid Rail Link • Gorgon LNG Project • Green Point Stadium • Medupi and Kusile • Melrose Arch • Mossgas FA Jacket: Offshore Oil Platform • Multi-Product Fuel Pipeline • National Freeway Improvement Projects • Sun City Entertainment Complex • Containerised water-treatment plant for Gold Fields Ghana at its Tarkwa operations

Nr. of Employees 21217 (Group) (5,666 - International)

Company Secretary Mr B Kok

Banks Standard Bank of South Africa Ltd

Auditors Deloitte

Attorneys Webber Wentzel Attorneys

Turnover [2014] R 38,064.40m ($ 3,513.34m) INET Financials

Profit R976.90m ($90.17m) (Net)

Company Year End June

Transfer Secretaries

Name Physical Address Postal Address Tel

Link Market Services 13th Floor, Rennie House, 19 Ameshoff PO Box 4844, +27 11 South Africa (Pty) Ltd Street, Braamfontein, Johannesburg, 2001 Johannesburg 713 0800

Corporate Governance in Relation to SED & ED

Murray & Roberts currently has four programmes as part of its South African community development strategy, which are aligned to the company’s overall business strategy and focus on education as well as community skills development as a means to unlock communities’ potential for sustainable development. R14m was spent on Murray & Roberts’ Corporate Social Investment programme.

Murray & Roberts undertook leadership and financial responsibility for two programmes within Eskom's Medupi Leadership Initiative: the Life Skills Training project and the Drylands Employment

Opportunity project. The collective expenditure on these two programmes was R4.4m during the year. By the end of FY2014, some 10,000 employees and community members had participated in the Life Skills Training programme.

Competition and Barriers

Recovery that will be focused on improving liquidity and strengthening financial position.

Corporate Risk Management in the Industry

The erosion of confidence and value caused by the under performance of South African construction entities as well as payment disputes with major clients, has been largely reversed through the Recovery phase of the group’s strategy. Murray & Roberts has undergone significant restructuring and re-energising, including the establishment of rigorous risk and commercial management systems as well as the strengthening of the operational management capacity.

Target Market

Global namely the underground mining as well as emerging markets in need of natural resources and infrastructure.

Units Manufactured

9,600,000 tons p.a.

Production Capacity

Medupi and Kusile will each have a maximum capacity of 4 800MW.

Brandnames

Murray & Roberts

Direct Subsidiaries, Associates & Investments Company Name Percentage Murray & Roberts Investments Ltd 100.00 Must Holdings (Pty) Ltd 100.00 RCS Mining Supplies (Pty) Ltd 100.00

NCC MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Postal 702, Maputo, Mozambique Av 24 de Julho, 1860 - 1 Andar,Maputo, Mozambique

Tel: +258 21 720-394 / +258 21 380-830 Fax.: +258 21 300-0794

Email: [email protected] Website: www.inyatsi.net

Shareholders Shareholder Percentage Inyatsi Construction Ltd 49.00

Directors

Appointment Name Designation Date

Executive Managing Director & Operations Mr Tommy Strydom Director

Managers

Appointment Name Designation Date

Mr Jose Cipriano Contract Manager

Mr Duarte Longuinho Commercial Manager

Ms Aurora Ricardo Human Resources Manager

Other Key Personnel

Appointment Name Designation Date

Mr Martins Massingue Chief Accountant

History of Business

NCC Mozambique Lda is a subsidiary of Inyatsi Construction Ltd which was first registered in Swaziland in 1982. Due to a number of factors,including changes in shareholding, expansion into new markets, growth and diversification, Inyatsi Construction Group Holdings (Pty) Ltd was formed in 2007 as the holding company of Inyatsi and its regional subsidiaries.

Nature of Business

NCC Mozambique Lda specialises in the construction as well as upgrading of roads, building projects, bridge construction, pipe laying, dams and reservoirs.

Projects include: • Beira Port Access Road • Zinhane Flood Repairs • Mohamba Flood Repairs • MACIA Block Pavers

Recent projects include the Goba Bridge, Nampula Roads, Zambezia Roads, Gaza Roads and road maintenance in Maputo.

Nr. of Employees (2,716 - Group)

Brandnames

NCC

ODEBRECHT SA

Updated: 2015-09-20

Postal Address: Physical Address:

Av Luis Viana, 2841 Edificio Odebrecht, Av Luis Viana, 2841 Edificio Odebrecht, Paralela, CEP 41730-900, Salvador, Brazil Paralela, CEP 41730-900, Salvador, Brazil

Tel: +55 71 2105-1111 / 3206-1111 Fax.: +55 71 2105-1112 / 3206-1112

Email: Website: www.odebrecht.com

Branches

Branch Area Head Tel

Odebrecht Infraestrutura Angola Angola +244 22 267-8000

Odebrecht Infraestrutura Equatorial Guinea Equatorial Guinea +240 33 309-0510

Odebrecht Infraestrutura Libya Libya

Odebrecht Infraestrutura Mozambique Mozambique +258 21 308-842

Odebrecht Infraestrutura South Africa South Africa +27 11 784-3080

Odebrecht Infrastrutura Ghana Ghana +233 302 733-060

Shareholders Shareholder Percentage Odebrecht Family 100.00

Directors

Appointment Name Designation Date

Mr Luiz Almeida Non-Executive Director

Mr Renato Baiardi Non-Executive Director

Chief Executive Officer - Odebrecht Mr Ernesto Baiardi Infraestrutura Africa, UAE & Portugal

Mr Aluizio Rebello de Araujo Non-Executive Director

Mr Sergio Foguel Non-Executive Director

Mr Pedro Henrique Mariani Non-Executive Director

Mr Pedro Novis Non-Executive Director

Mr Norberto Odebrecht Non-Executive Chairman - Honorary

Mr Marcelo Bahla Odebrecht Executive President & Chief Executive Officer

Mr Emilio Odebrecht Executive Chairman

Mr Rubens Ricupero Non-Executive Director

Mr Gilberto Sa Non-Executive Director

Mr Luiz Villar Non-Executive Director

History of Business

Odebrecht SA was established in 1856 by the Odebrecht family. The company dissolved in 1923 and was restructured by Emilio in 1930. The name changed from Emilio Odebrecht e Cia to Odebrecht SA in 1940.

Nature of Business

Odebrecht SA is one of the largest civil engineering entities in the Brazil. The company is involved in the construction of large-scale projects, including buildings, dams, thermoelectric plants, hydroelectric plants, nuclear and petrochemical complexes, refineries, resorts, subways, highways, railways, bridges, airports as well as irrigation systems. Odebrecht operates nearly 200 subsidiaries worldwide.

Projects in Mozambique include: • Continued expanding the industrial facilities of the Moatize Coal Mine through an alliance contract with Vale • Completed the new runway for Nacala International Airport • Signed commercial contracts for the BRT, a solution for urban mobility in Mozambique, and the Industrial Free Trade Zone, infrastructure for investors in the city of Nacala

Nr. of Employees 181556 (Group)

Turnover [2013] $ 41.40m (AR2013) (Latest Financials Available)

Profit $210.00m (Net)

Brandnames

Odebrecht

Direct Subsidiaries, Associates & Investments Company Name Percentage Nosso Super Gestao de Supermercados Lda 100.00

OPWAY ENGENHARIA SOCIEDADE DE CONSTRUCOES MOZAMBIQUE

Updated: 2015-09-20

Postal Address: Physical Address:

Rua dos Desportistas Edificio JAT5, 8° Andar, Rua dos Desportistas Edificio JAT5, 8° Andar, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 306-170 Fax.: +258 21 306-173

Email: [email protected] Website: www.opway.pt

Shareholders Shareholder Percentage Opway Group 100.00

Directors

Appointment Name Designation Date

Mr Almerindo Marques Chief Executive Officer - Group

History of Business

Opway Engenharia Sociedade de Construcoes Mozambique was established in 2008.

Nature of Business

Opway Engenharia Sociedade de Construcoes Mozambique is part of the global engineering company Opway Group which specialises in road concessions, engineering works as well as real estate development.

Projects in Mozambique include: • Central de Tratamento Carvo CHPP – BENGA • Tete River Bridge • Rehabilitation of the N211 Road between Canicado and Chicualacuala in Gaza • Rehabilitation of Moculumba Bridge • Zambeze River Bridge • Upgrading of N1 Road between Namacurra and Ligonha River, Lots 1,2 and 3 • Infrastructure development for Belulane Industrial Park • Lichinga GLC Power Station • Refurbishment of 3rd and 13th floors of the Ibis-Turismo Hotel • Periodic Maintenance of EN2 Matola – Boane

• Electric substations 100/33 KVA Cuamba and Gurue • Repairs in Mobil Office • Phase II upgrading of highways in Cabo Delgado and Nampula districts • Rehabilitation of Maputo Tourism Hotel • Civil Construction in Pemba Power Plant • Construction of 9 Buildings of TDM between Xai-Xai and Masinga • LAM – Upgrading of Entrance Mall • Upgrading of Nacala Hotel • 20 Rural Schools in the Niassa Province (Lots NI 1 and NI 2) • Upgrading of Hotel Ilha de Mozambique

Nr. of Employees 250 (Est.) (650 - Group)

Brandnames

Opway

Direct Subsidiaries, Associates & Investments Company Name Percentage Estradas do Zambeze SA 50.00

PENTA-OCEAN CONSTRUCTION CO LTD

Updated: 2015-09-20

Postal Address: Physical Address:

2-8 Koraku 2-chome, Bunkyo-ku, 2-8 Koraku 2-chome, Bunkyo-ku, Tokyo, 112-8576, Japan Tokyo, 112-8576, Japan

Tel: +81 3 3817-7181 Fax.: +81 3 3817-7642

Email: Website: www.penta-ocean.co.jp

Branches

Branch Area Head Tel

Penta-Ocean Bangkok Thailand +66 2 655-2183

Penta-Ocean Colombo Sri Lanka +94 11 269-0316

Penta-Ocean Delhi India +91 124 436-8355

Penta-Ocean Dubai United Arab Emirates +971 4 342-6930

Penta-Ocean Egypt Egypt +20 2 3345-3207

Penta-Ocean Hong Kong Hong Kong +852 2833-1098

Penta-Ocean Indonesia Indonesia +62 21 570-5484

Penta-Ocean Malaysia Malaysia +60 3 2260-6736

Penta-Ocean Singapore Singapore +65 6338-8966

Penta-Ocean Vietnam Vietnam +84 4 3824-1360

Shareholders Shareholder Percentage Japan Trustee Services Bank Ltd (Trust Account) 13.60 Master Trust Bank of JapanLtd (Trust account) (The) 7.90 BBH for BBHTSIA Nomura Funds Ireland. Plc 2.60 Mizuho Corporate Bank Ltd 2.50 Meiji Yasuda Life Insurance Company 2.30 Juniper Networks Inc 1.90 Northern Trust (Avfc) Sub A/C British Clients 1.60 Northern Trust Co. (AVFC) Re Exempt UK Pension Funds 1.60 Sompo Japan Insurance Inc 1.50 Tokio Marine & Nichido Fire Insurance Company Ltd 1.40

Directors

Appointment Name Designation Date

Mr Shinichi Igarashi Executive Director

Mr Michio Inatomi Executive Director

Mr Yoshio Murashige Executive Chairman

Mr Yuji Nakamitsu Executive Director

Mr Tetsushi Noguchi Executive Director

Mr Kunihiko Sasaki Executive Director - Representative

Executive Director - President, Chief Mr Takuzo Shimizu Executive Officer & Representative

Mr Akihiko Togo Executive Director

Mr Kazuya Ueda Executive Director

History of Business

Penta-Ocean Construction Co Ltd was established in April 1896.

Nature of Business

Penta-Ocean Construction Co Ltd is a civil engineering group with offices around the world. In February 2014, the company was awarded the tender to renovate the Port of Nacala in Mozambique.

Overseas projects include: • Nount Elizabeth Novena Hospital (Singapore) • Thi Vai Cargo Terminal Construction Project (Vietnam) • HKEx Next Generation Data Centre (Hong Kong) • Two Integrated Buildings, CUHK (Hong Kong) • Kashima Tank Terminal • Yokohama Port Honmoku District Quay • Port Island Multi Distribution Centre • Tokyo Bay Distribution Centre

Nr. of Employees 2949

Auditors Ernst & Young ShinNihon LLC

Turnover [2015] $ 3,546.90m (AR2015)

Profit $51.45m (Net)

Company Year End March

Transfer Secretaries

Name Physical Address Postal Address Tel

Mizuho Trust & 2-8-4 Izumi Suginami-ku, Tokyo 168- 2-8-4 Izumi Suginami-ku, Tokyo 168-

Banking Co Ltd 8507, Japan 8507, Japan

Influencing Factors

The Japanese economy has undergone numerous changes in direction in the financial year. Despite some signs of a rebound, prompted by demand related to recovery from the Great East Japan Earthquake, uncertainty continued to linger as the global economy slowed. With the inauguration of a new government, however, new economic measures as well as fiscal policies received a favorable reception. As the Japanese Yen weakened and the country’s equities markets surged, hopes of an economic recovery increased.

Conditions in the construction industry offered space for cautious optimism. Results in public-sector operations in Japan remained solid, as recovery-related operations reached full speed and an auxiliary budget was disbursed. Residential investment found a recovery footing but activity was sluggish overall, while private-sector capital investment faltered amid caution over future prospects. Overseas demand for construction remained firm across Southeast Asia.

Brandnames

Penta-Ocean

Direct Subsidiaries, Associates & Investments Company Name Percentage Andromeda Five Pte Ltd 100.00 Angkulaut Ltd 100.00 Brichwood Co Ltd 100.00 Cherry Five Pte Ltd 100.00 Domi Environmental Solutions 100.00 Haneda Airport International Airline Apron PFI 100.00 Jaiwat Co Ltd 100.00 Jupiter Five Pte Ltd 100.00 KD Shipping Inc 100.00

Kegoya Dock Co Ltd 100.00 Mars Five Pte Ltd 100.00 Matsuyama Environmental Technology Co Ltd 100.00 Mercury Five Pte Ltd 100.00 Miyajima Aqua Partners Co Ltd 100.00 Neptune Five Pte Ltd 100.00 Obama Marine Co Ltd 100.00 Penta Builders Corporation 100.00 Penta Insurance Services Co Ltd 100.00 Penta Techno Service Co Ltd 100.00 Penta-Ocean (Malaysia) Sdn Bhd 100.00 Penta-Ocean Construction (Hong Kong) Ltd 100.00 Penta-Ocean Construction (India) Ltd 100.00 Penta-Ocean Dredging Co Ltd 100.00 Penta-Ocean Marine Holdings Pte Ltd 100.00 Penta-Ocean Technology Information Advisory (Shenzhen) Ltd 100.00 Sand Techno Co Ltd 100.00 Siam Goyo Co Ltd 100.00 Thai Penta-Ocean Co Ltd 100.00 Yoshin Construction Co Ltd 100.00

PROCONSTROI MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

Rua da Base de N'Tchinga, N° 395 R/C, Rua da Base de N'Tchinga, N° 395 R/C, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 418-304 / 82 305-2544 Fax.: +258 21 418-304

Email: [email protected] Website: www.proconstroi.co.mz

Shareholders Shareholder Percentage Directors 100.00

Directors

Appointment Name Designation Date

Mr Luis Bruno Executive Director

History of Business

Proconstroi Mozambique Lda was established on 12 September 2006.

Nature of Business

Proconstroi Mozambique Lda specialises in civil construction as well as real estate development. The company operates three subsidiaries namely Pro Real Estate Inc, PROARQ Inc as well as PRODECOR Inc.

Projects of Proconstroi include: • Construction of Kadaterra Spar in Maputo • Construction of Unico Bank Branch at St Thomas University • Refurbishment of Ernst & Young building in Maputo • Expansion and upgrading of FBLP central offices • Rehabilitation of Manica office (3rd Floor of headquarters building) • Expansion and rehabilitation of Mozfoods headquarters office in Maputo • Front façade rehabilitation and expansion of Home Center store in Angola Avenue • Rehabilitation of Kudumba central offices in Maputo • Construction of new facilities and upgrading of Imago Group in Maputo

Nr. of Employees 200 (Est.)

Influencing Factors

The market in the construction industry of Mozambique recorded potential growth which attracts many local as well as domestic entities to invest in the country.

Brandnames

Pro Real Estate, Proarq, Proconstroi, Prodecor

Direct Subsidiaries, Associates & Investments Company Name Percentage Pro Real Estate Inc 100.00 Proarq Inc 100.00 Prodecor Inc 100.00

SOARES DA COSTA MOZAMBIQUE SARL

Updated: 2015-09-20

Postal Address: Physical Address:

Av Ho Chi Min, 1178, 2° Andar, Av Ho Chi Min, 1178, 2° Andar, Maputo, Mozambique Maputo, Mozambique

Tel: +258 21 431-059 Fax.: +258 21 321-653

Email: [email protected] Website: www.soaresdacosta.pt

Shareholders Shareholder Percentage GAM Holding AG 66.70 SDC Investimentos SGPS SA 33.30

Directors

Appointment Name Designation Date

Mr Antonio Castro Henriques Non-Executive Chairman - Group

Mr Anastacio Santos 1993-09-01 Executive Administration Director

History of Business

Soares da Costa Mozambique SARL t/a SDC Mozambique was established in 1995.

Nature of Business

Soares da Costa Mozambique Sarl t/a SDC Mozambique is a Portuguese construction company specialising in civil engineering and construction, real estate development, public works, concessions as well as the manufacture of construction materials and other related activities.

Projects include: • Construction and rehabilitation of two elementary schools in the provinces of Manica and Inhambane • Construction of a hospital in Montepuez • Construction of a hotel in Maputo • Roadways and a bridge over the Zambezi River

Nr. of Employees 700 (3,785 - SDC Investimentos SGPS)

Turnover [2013] $ 35.20m (As per company)

Profit $0.70m (Net)

Company Year End December

Brandnames

SDC

STEFANUTTI STOCKS MOZAMBIQUE LDA

Updated: 2015-09-20

Postal Address: Physical Address:

PO Box 2633, Maputo, Mozambique Av De Mozambique, Parcela 7160/A, En1, Zimpeto, Maputo, Mozambique

Tel: +258 21 471-604/5/6 Fax.:

Email: [email protected] Website: www.stefanuttistocks.com

Shareholders Shareholder Percentage Stefanutti Stocks International Holdings (Pty) Ltd 75.00

Directors

Appointment Name Designation Date

Mr Paul dos Santos Executive Business Development Director

Mr Lucas Labuschagne Executive Managing Director - Building

History of Business

Stefanutti Stocks Holdings Ltd began operating in Mozambique in 1993.

Nature of Business

Stefanutti Stocks Mozambique Lda undertakes various civil as well as building projects across the country including contracts for clients in the building, industrial, marine, mining as well as the oil and gas sectors. Its early civil contracts include the repair and rehabilitation of cylindrical storage silos and the MIPS container terminal, as well as the construction of the Maputo fishing port and a sugar terminal for the Sugar Association. Later work for the sugar industry included the expansion of the Xinavane sugar mill for Tongaat-Hullets, the Maragra sugar mill for Ilovo Sugar as well as the sugar silo at the Maputo port for STAM.

Stefanutti Stocks has started undertaking projects in the Tete as well as the Cabo Delgado provinces, where housing and civil engineering projects were successfully completed. The company's focus is on establishing a presence in Pemba and Nacala for the marine divisions.

Nr. of Employees (13,768 - Stefanutti Stocks Holdings' Total)

Banks Banco Internacional de Mozambique; Standard Bank Mozambique

Turnover [2014] ($189.7m - Africa & Middle East Segmental Revenue)

Company Year End February

Influencing Factors

Despite the recent contractual problems in the country, still good opportunities remain for the building business unit in Mozambique.

Sub-Saharan Africa offers considerable opportunities with an estimated annual investment of US$93bn (approximately 15% of the region`s GDP) required to meet conservative development targets to 2015. Of this, approximately US$60bn comprises capital expenditure on new infrastructure while the remainder is required for maintenance and operation.

Brandnames

Stefanutti Stocks

VM CONSTRUCTION

Updated: 2015-09-20

Postal Address: Physical Address:

Caixa Postal 1749, Maputo, Mozambique Rua da Educacao, No 432 Matola, Maputo, Mozambique

Tel: +258 21 783-710 Fax.: +258 21 783-709

Email: [email protected] Website: www.vmmoz.com

Shareholders Shareholder Percentage Directors 100.00

Directors

Appointment Name Designation Date

Ms Louise Jones Executive Director

Mr Reinier Meyjes Executive Director

History of Business

VM Construction was established in 1998.

Nature of Business

VM Construction is a civil construction and project management entity which provides building solutions throughout Mozambique. The construction entity specialises in turnkey, high-end tourism developments, luxury villas, residential homes as well as industrial and commercial developments. The company has extensively worked in the Bazaruto Archipelago off the coast of Vilanculos in Inhambane Province to construct 14 new chalets and new facilities for Vilanculos Beach Lodge.

Nr. of Employees 700 (150 - Permanent)

Influencing Factors

Mozambique’s economy is witnessing solid growth. The Mozambican government is aware of the fact that a lot has to be done to improve the conditions for competition in the construction industry. Despite economic growth, exports have gone down and among other things; the country’s infrastructure needs much attention.

Brandnames

VM Construction

WILSON BAYLY HOLMES-OVCON LTD

Reg. Number: 1982/011014/06 JSE Code: WBO VAT Number: 4650107529 BEE Rating: Not Rated Updated: 2015-09-20

Postal Address: Physical Address:

PO Box 531, Bergvlei, Johannesburg, 2012 53 Andries Street, Wynberg,Sandton, Johannesburg, 2090

Tel: +27 11 321-7200 Fax.: +27 11 887-4364

Email: [email protected] Website: www.wbho.co.za

Branches

Branch Area Head Tel

WBHO Cape Town Western Cape +27 21 532-5100

WBHO Durban KwaZulu-Natal +27 31 700-9050

WBHO Pipelines Gauteng +27 11 321-7200

WBHO Plant/Services Cape Town Western Cape +27 21 692-2660

WBHO Plant/Services Chloorkop Gauteng +27 11 265-4000

WBHO Port Elizabeth Eastern Cape +27 41 398-4600

Divisions

Division Area Head Tel

Wilson Bayly Holmes-Ovcon Australia Australia

Wilson Bayly Holmes-Ovcon Building & Civil Engineering Gauteng +27 11 321-7200

Wilson Bayly Holmes-Ovcon Construction Materials Gauteng

Wilson Bayly Holmes-Ovcon Projects & Property Gauteng

Wilson Bayly Homes-Ovcon Roads & Earthworks Gauteng +27 11 321-7200

Shareholders Shareholder Percentage Akani Investment Holdings (Pty) Ltd 15.40 Government Employees Pension Fund 12.33 Allan Gray Asset Managers 10.41 Old Mutual Plc 9.92

Sanlam Investment Management (Pty) Ltd 5.05 WBHO Management Trust 3.71

Directors

Appointment Name Designation Date

Independent Non- Mr Ross William Gardiner 2014-01-23 Executive Director

Executive Financial Mr Charles Henwood 2011-11-09 Director

Independent Non- Ms Nomgando Nomalungelo Angelina (Gando) Matyumza 2010-09-03 Executive Director

Independent Non- Ms Nonhlanhla Savannah Maziya Executive Director

Independent Non- Ms Nonhlanhla Sylvia (Nhlanhla) Mjoli-Mncube Executive Director

Mr Elia Louw (Louwtjie) Nel 2008-08-01 Chief Executive Officer

Independent Non- Mr James Matingi Ngobeni Executive Director

Mr Michael Stanley Wylie 1988-00-00 Executive Chairman

Managers

Appointment Name Designation Date

Mr Duncan Barry Manager - MD: Projects Division

Manager - Group MD: Building & Civil Mr Paul Joseph Foley Engineering

Mr Simon Gray Manager - Divisional Director: Australia

Manager - Divisional Director: Civil Mr Khulu Mabaso Engineering

Manager - Executive Member & Director: Mr Edwin Abram (Eddie) Mashishi 2009-00-00 WBHO Construction (Pty) Ltd

Manager - Executive Member & Divisional Mr Fernando Monteiro 1983-00-00 Director

Ms Adelaide Ranape 2008-00-00 Manager - Group Legal Advisor

Mr Wayne Reddie 2001-00-00 Human Resources Manager

Mr Michael Sprott 2005-00-00 Divisional Manager - Managing

Mr Peter Taylor 2004-00-00 Divisional Manager - Managing

History of Business

The company was established in November 1982, when Peter Bayly Construction (Pty) Ltd merged with Wilson Holmes (Pty) Ltd to form Wilson Bayly Holmes-Ovcon Ltd. In 1995, the company was listed on the JSE. There have been numerous name changes, the latest being from Ovcon Ltd to Wilson Bayly Holmes-Ovcon Ltd in March 1991.

Nature of Business

Wilson Bayly Holmes-Ovcon Ltd (WBHO) operates as a holding company of a number of subsidiary companies principally engaged in building construction, civil engineering and roads and earthworks activities.

Projects include: • Building & Civil Engineering: o Kusile Power Station o La Croisette Mixed-Used Development - Mauritius o Queenstown Shopping Centre - Eastern Cape o The Bay Hospital - KwaZulu-Natal o Menlyn Podium - Gauteng

• Roads and Earthworks: o Tailings Facility - Iduapriem Mine in Ghana o Sasol GNP Pipeline Project o Kusile Ash Dams o Nacala Dam Wall - Mozambique o Valencia Roadworks - South Africa

Completed projects include:

• Building Construction: o Hospitals: Kuilsriver Hospital - Netcare; Linmed Hospital - Netcare; St Anne’s Hospital – Netcare o Leisure & Development: Cape Town Stadium - Cape Town Municipality; Moses Mabhida Stadium - Ethekwini Municipality; Peter Mokaba Stadium - Polokwane Municipality o Concessions and Property Development: Bigen Office Block - WBHO Property Developments; St Francis Links - St Francis Golf Links (Pty) Ltd o Hotels and Resorts: Monte Casino Boulevard - Abland (Pty) Ltd; The One and Only - Kerzner International; Sun City Hotel - Sun International; Riverside Hotel - Sage Investments o Office and Commercial Buildings: Investec Head Office – Investec; Radisson Blu (Sandton) - Savana Property (Pty) Ltd; Fairlands Offices - Rand Merchant Bank Properties; Icon - Coessa Holdings o Residential: Emperor Apartments - Royal Anthem 125; Knightsbridge - Century City Property o Retail: Clearwater Mall – Parkdev; The Zone - Old Mutual Properties; Morningside Shopping - Grapnel Property Investments (Pty) Ltd & Changing Tides 91; Norwood Shopping - Cavaleros Construction Company (Pty) Ltd; Greenstone Shopping - Sasol Pension Fund; Woolworths Distribution - Woolworths (Pty) Ltd o Golf Estates: Simbithi Eco Estate - Simbithi Eco Estate (Pty) Ltd; St Francis Links - St Francis Golf Links (Pty) Ltd

• Civil Engineering: o Heavy Industrial Plants: PPRust ISA Mills - Anglo Platinum o Mining: Foskor Extensions - Foskor (Pty) Ltd; Douglas Middleburg – BHP Billiton; Klipspruit – BHP Billiton; Nkomati Concentrator – African Rainbow Minerals; Ogies Project – Ango Coal; Phola Coal – DRA; Tati Activox - Norilsk Mining (Botswana); Tenke Mine - Tenke Fungurume Mining SARL [FMI]; Lumwana - Equinox Minerals; Project Lion - Xstrata Alloys South Africa (Pty) Ltd o Industrial Buildings: ELIDZ - East London Industrial Development Zone; PPRust Workshops - Rustenburg Platinum; SCM Warehouse - Lexshell 280 (Pty) Ltd o Silos and Towers: Impala Cooling Tower – Impala Platinum; Penstock Towers – Impala Platinum; Phola Silos - Anglo Coal; Zondagsfontein – Anglo Coal

• Roads and Earthworks: o Toll Roads and Freeways: Gauteng Freeway – SANRAL

o Road Construction and Rehabilitation: Mount Frere - Department of Roads and Transport; Nelspruit Bypass - TRAC (Pty) Ltd; Barbeton Road R40 – SANRAL; Mapapa (Mozambique) - (ANE) National Roads Administration; Ugie - Department of Roads and Transport o Airports, Harbours and Railways: King Shaka Airport – ACSA; CTB – ACSA; Saldanha Sishen Railway – Transnet; Echo Apron Development – ACSA o Dams: Ingula Dams – Eskom; Orapa Services Dam - Debswana Mining Company; Bergriver Dam Project – TCTA o Bulk Earthworks: Ahafo Ghana – Lycopodium o Pipelines and Infrastructure: AC Secondary Water - Ethekwini Water & Sanitation; Ntimbale Water - Government of Botswana, Department of Water Affairs; SAPREF Project - SAPREF – South African Petroleum Refineries; Shashe Pipeline - Water Utilities Corporation, Government of Botswana; Tanota Shashe - Dept. of Water Affairs (Botswana) o Mining: Klipspruit - BHP Billiton; Nkomati – DRA; Ogies - Anglo Coal; Tati Activox - Norilsk Mining; Tenke Mine - Tenke Fungurume Mining SARL [FMI]; Lumwana - Equinox Minerals; Ahafo Ghana – Lycopodium o Golf Courses: Ebotse - Ebotse Golf and Country Estate; Nondela Drakensburg - Nondela Drakensberg Mountain Estate (Pty) Ltd; Gardener Ross Golf - Devco African & Gardener Ross; Pinnacle Point - Pinnacle Point Holdings; St Francis Golf Estate - St Francis Golf Links (Pty) Ltd o Bridges and Structures: Gauteng Freeway – SANRAL; N2 Interchange – SANRAL; Nelspruit Bypass - TRAC (Pty) Ltd; Mbabane Bypass Road - Ministry of Public Works and Transport

Mining projects in Mozambique include additional works for Vale and Riversdale at the coal mines in Tete as well as ongoing construction of the Nacala Dam.

Nr. of Employees 11192 (Group)

Company Secretary Ms S Vally-Kara

Banks Standard Bank of South Africa Ltd

Auditors BDO

Attorneys DLA Cliffe Dekker Hofmeyr Inc

Turnover [2014] R 25,776.91m ($ 2,379.21m) INET Financials

Profit R775.27m ($71.56m) (Net)

Company Year End June

Transfer Secretaries

Name Physical Address Postal Address Tel

Computershare Investor 70 Marshall Street, PO Box 61051, +27 11 370- Services (Pty) Ltd Johannesburg, 2001 Marshalltown, 2107 5000

Influencing Factors

• Capacity in the construction industry currently outweighs the number of contracts on offer resulting in pressure on profit margins. • Chinese demand for resources continues to fuel expansion in mining projects both in Africa and Australia. • The discovery of gas fields in Mozambique presents opportunities for a number of businesses within the group, including those involved in pipe manufacture, pipe-laying and gas sales.

Corporate Risk Management in the Industry

The global financial recovery has been slower than anticipated and while the South African economy is showing some signs of recovery, the construction industry lags the real economy by 12 to 18 months and remains influenced by the recession.

Activities

Activity Percentage

Australia 48.00

Building and Civil Engineering 27.00

Property 1.00

Roads & Earthworks 5.00

Roads and Earthworks 19.00

Direct Subsidiaries, Associates & Investments Company Name Percentage Akani Investment Holdings (Pty) Ltd 39.00 BPG Caulfield Village (Pty) Ltd 30.00 Bunengi Mining Services (Pty) Ltd 21.30 Capital Africa Steel (Pty) Ltd 55.60 Dipalopalo Concession (Pty) Ltd 27.70 Edwin/Schweizer Reneke JV 80.00 Gigajoule International (Pty) Ltd 26.60

Ilembe Airport Construction Services (Pty) Ltd 28.30 Kusile Civils JV 28.00 Kusile Silos JV 33.30 Murphy Street Developments (Pty) Ltd 50.00 Saddleback (Pty) Ltd 50.00 Sandton JV 50.00 WBHO Australia Pty Ltd 100.00 WBHO Building Energy (Pty) Ltd 70.00 WBHO Construction (Pty) Ltd 100.00 WBHO Ghana/Desimone JV 50.00 WBHO Industrial Holdings (Pty) Ltd 100.00 WBHO/CCC JV 50.00 WBHO/Edwin Splish Splash JV 70.00 WBHO/Fikile JV 90.00 WBHO/Group 5 Mall of Africa JV 50.00 WBHO/Inanda JV 59.00 WBHO/Phayandani JV 59.00 WBHO/Stats SA JV 63.00