Why JB, Cappa & D’Alberto dominate Nigerian construction industry

For years, the construction industry in Africa’s biggest economy has been dominated by Julius Berger (JB), Cappa & D’Alberto, Elalan and ITB Nigeria Limited, a subsidiary of the Chagoury Group.

The local construction companies in Nigeria are predominantly small and medium-sized, with their participation in major construction works marginal.

Experts at the School of Environmental Studies, Federal Polytechnic Idah, in their publication titled ‘The Characteristics of Nigerian Construction Industry in Infrastructure Development’ maintained that local construction firms undertake about 5 percent of civil engineering construction and 25 percent of building works, while the bigwigs handle about 90 percent of civil and building construction projects in Nigeria.

“Local companies are neglected from the ‘real business’ in the industry basically for their technical incompetence, weak financial capacity, low exposure and dubious attitude of local contractors to enrich themselves with funds meant for contracts, hence government’s preference for the bigwigs”, the experts submitted.

The heavyweights control a large chunk of public sector construction. They have won many projects and poised to win more, leaving nothing for the smaller ones.

The increasing number of contracts won by these bigwigs in the public and private space begs the question why they keep dominating the industry. A few factors have been identified:

Not ‘JJC’ in industry

According to Babatunde Nathaniel, Rigger Supervisor at Planet Projects, the bigwigs have been in the industry for decades, thereby making it difficult for small/medium ones to overthrow them.

Cappa & D’Alberto’s presence in Nigeria dates back to 1932. Julius Berger completed its first project in the country in 1965. Chagoury Group, parent company to ITB Nigeria Limited came to the fore in 1971. Elalan commenced operations in 1982. CCECC signed its first contract agreement in Nigeria 24 years back.  “Julius Berger has been in Nigeria before my birth. I grew up knowing Cappa & D’Alberto”, Nathaniel said.

Ties with government

A major advantage the construction giants have over smaller ones is that they are closer to the government.  For long, they have been enjoying goodwill from Nigerian government for execution of heavy projects in many parts of the country.

“They virtually get all their contracts from the government. They have their big boys in the Senate and House of Representatives”, he noted.

Strong financial capacity

This is yet another edge the bellwether companies have over local ones. Local construction companies oftentimes encounter difficulty to acquire funds to execute projects. The high cost of funds in Nigeria is another disadvantage local firms have. Where the big foreign firms raise capital from their home countries at 3-4 percent interest rate, the local firms get their funds at 20-25 percent rate.

These make them a turn-off compared to the bigwigs who are financially capable, and allies of construction heavyweights in Asia, Europe & North America.

For instance, Eko Atlantic project costs billions of dollars, and is wholly funded by South Energyx Nigeria Limited, a subsidiary of the Chagoury Group. Smaller and medium companies definitely lack the resources to fund huge projects and also to procure the needed equipment.

Technical competence

It is widely believed that bigger construction companies are more technically competent than smaller ones. Often times, small and medium-sized contractors are booed for lack of experience and technical know-how in handling projects.

But the industry heavyweights possess the requisite resources, men and machines, to undertake heavy projects, hence government preference for them, thereby putting the smaller ones in tight corner.

Adaptation to dynamism

Construction practice across the globe is becoming more complex, technical and administrative-wise. The increasing demand for specialized construction projects gives the heavyweights an edge over the upcoming ones. Many people believed that the smaller ones lack the needed level of skills and exposure to execute world-class projects, making the bigwigs ‘hot cake’.

Standards

The big players embrace professionalism in their construction projects. They uphold the tenets of ethical practice. The fact that these big players successfully executed projects in the past encourages government and large corporates to award contracts to them.

“Julius Berger remains dominant in the industry because their designs are usually innovative and are known for timely project execution”, the experts posited in their publication.

Also, Cappa & D’Alberto positioned themselves as Engineering Procurement and Construction (EPC) contractors, implying that they are directly responsible for every step in their projects from start to finish.

“A good number of local contractors have low patronage as they are known to compromise standards for personal gains”, Damilola Ijalade, building agent at PWAN Homes once told BusinessDay.

Asked if there was chance for the upcoming ones to dethrone the industry leaders, Nathaniel tagged it impossible. “I don’t think that can happen because the smaller ones cannot access the benefits the big ones are enjoying”, he reasoned.

ISRAEL ODUBOLA