2013 Multinational Design Firm Fee Survey

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1 S e p t e m b e r / O c t o b e r w w w.di.net V o l u m e 1 9 N u mber Multinational Design Firm Fee Survey

2 102 September/October 2013 Africa The Next Frontier In thinking about growth strategies for architectural businesses entering into new territories there are three essential components that need to be aligned for any firm to be successful; Richard Marshall & Phil Harrison Is there a market for what the firm does?; Does the firm have a strong understanding of risk and reward in that market?; and, Can the firm access that market and deliver work competitively? Firms attempting to work in Africa should consider these questions, then take a deep breath, and ask a few more. Africa is an emerging geography with great potential but also presents a set of significant hurdles and unique risks for architectural firms looking to step foot on the continent. Africa Emerging Africa is experiencing significant economic and population growth, while also urbanizing. This combination means that its emergent middle class has higher expectations about how they live their lives, where they live, where they get educated, where they get medical treatment and where they want to spend their money. Just as we have seen in China there is beginning to be a shift in real estate expectations and, with that, a demand for foreign architectural firms to provide design services. Since the 1990s many international architectural firms have successfully completed projects and many have established offices within China. But it would be a mistake to think that success in China equips any of us for success in Africa. The rules of engagement are very different and our clients indeed are very different. Developing a successful strategy for Africa will require a nuanced understanding of geographic differences and the associated business cultures that this brings. In many respects Africa is a far more complicated place to operate in than we might at first realize. Most of us have a particular view of Africa, and unfortunately this is not always a positive one. Indeed, Africa still struggles with an image problem. For too long it was always seen as a desperately poor, economically backward and politically unsettled continent. Whilst pockets of this unfortunately remain, the continent is transforming. The World Bank is forecasting global economic growth at between 2.2 percent and 3.3 percent between now and 2015; Africa meanwhile is forecast to grow notably more quickly, between 4.9 percent and 5.4 percent over that same period. The Economist Intelligence Unit central forecast assumes that a steady flow of investment, strong Asian demand, favorable demographics, good resources, gradual reforms and ongoing development will support long-term annual average growth of 6-7 percent. However, factors such as an acceleration of reforms, political stabil-

3 103 ity, democratic deepening and better governance could generate a stronger growth rate of 8-10 percent a year. These kinds of economic growth figures rival those of China. In short, there is a growing global realization that Africa s potential is truly remarkable. Africa s Growing Cities Concurrent with this economic growth is an accelerating urbanization of Africa s cities. At 3.9 percent per year (World Bank), Africa s urban population growth rate is the highest in the world. In 2010, 47 cities in Africa had populations of over one million and this is continuing to grow. The cities with the highest population, such as Lagos (10.6 million) and Cairo (11 million) are in fact not the fastest growing cities, instead cities that are lesser known such as Abuja, Ouagadougo and Lomé will have population increases of more than 50 percent by These are the centers for growth that will have a demand for a host of new building needs. To understand Africa s growth it is important to appreciate that it is different geographically. Africa s growth trajectory can be mapped by a breakdown into regions: the North, South, East and West. This article is mainly focused on sub- Saharan Africa, as North Africa tends to operate more in sync with Middle East markets. In West Africa, for example, Nigeria, Angola and the oil-based economies will dominate the region. Ghana also joined the oil club in 2011, with its first commercial output. There is significant money being made from this oil wealth, but whilst some are clearly benefiting enormously the wealth is not spread evenly. East Africa is forecast to be the fastest-growing region. Although Kenya has limited natural resources, it is the key financial and business hub, and the Kenyan economy is expected to grow by 5-6 percent on the back of ongoing development and reforms. Kenya s ability to produce an educated management and finance workforce bodes well for its future within the African continent. Across the border, Uganda s discovery of oil will boost development and growth, and the country will join the oil club in a few years time. Key mineral producers will also perform well (Tanzania), as will strong agricultural economies (Ethiopia). Africa will become an increasingly important food supplier to global markets. Countries without major resources but with a strong reform record, such as Rwanda, will also join the ranks of high growth achievers. In the South, South Africa is the African country most connected to the global economy. South Africa has some of the strongest managerial and financial connections to the rest of the world and a great deal of foreign investment comes into Africa through South Africa. In addition, South Africa has talented architects and engineers and therefore a strong pool of potential African partners. Some countries in the South will be poor performers, such as Zimbabwe and Swaziland. Given an ineffective political situation and poor policy, growth of even only 1 percent would be an achievement in these countries.

4 104 September/October 2013 Consumerization of a Youthful Population One of the driving forces in Africa is the increasing pace of urbanization and consumerization in Africa. As Africans flock to the cities and disposable incomes rise, their demand for modern goods and services (such as telecommunications and banking services) will accelerate. Global businesses whether based in Asia, Europe or the Americas as well as home-grown African firms will strive to meet this demand. Perkins+Will has been actively working in sub-saharan Africa for the past ten years. We have completed built projects in Angola, Uganda and Kenya, and we continue to have active projects in these countries as well as new work in Ghana and South Africa. Our work in Africa is some of the most architecturally exciting and socially compelling work in our firm s portfolio. In Angola, our master plan for Universidad Agostinho Neto is one of the most innovative campus designs in the world that we know of. The recent completion of construction of the first phase on this campus was immensely gratifying for our design team as the work is truly exemplary, and the faculty and students are thriving in this new world class facility. In other countries we have similarly special projects: In Uganda, we completed construction for a central library at Uganda Christian University, as well as a master plan for a new town associated with the University; in Kenya we have completed the Kenya Women and Children s Wellness Center; in Ghana, we are in the midst of design for the country s largest hospital in the capital city, Accra. In sum, Africa is one of the most populated and youngest markets in the world, with more than one-half of its population under 24 years of age. By 2050, Africa s forecasted population of 2bn will have overtaken that of India (1.6bn) and of China (1.4bn). Perkins+Will Experience It is difficult to summarize a region as vast and complex as Africa, but the following are some of observations from our experience: 1. The Critical Importance of Local Partners It is essential to have strong local partners when entering any new market, and this is especially true in Africa where the business risks are so high. Although the key business indicators are improving, the region s operating environment remains one of the most difficult in the world. The key economic risks range from weak fiscal and monetary policies, high inflation, volatile currencies, high taxes, nationalization issues, skills shortages, inadequate infrastructure and red tape. In terms of the sociopolitical challenges facing Sub-Saharan Africa, the primary challenge is the prevalence of ineffective governments which breed ineffective business environments. Key to success in Africa is to know people who know how to get things done and have relationships to move through a slow and difficult bureaucratic process.

5 105 Compounding this, there is no such thing as pan-african one-sized-fits-all experience. Firms will need access to highly specific knowledge of the particular country you are working in, and even the specific area within the country. Project approvals, fee payments, managing client expectations, schedules, and many more factors have particular subtleties in each locality, and local partners are essential to navigate these challenges. 2. The factor of Time Our teams report their surprise by the pace of business in Africa as much as any other factor. It simply takes longer to get things done. For firms who have been feverishly churning out work in China for the past decade, it will be essential to shift gears and calmly adapt to the speed of decision making in Africa. While the continent is surely on the move, it does not feel like it is in any hurry to do so. 3. Sustainability Imperative Sustainable design is not an option in many African markets, but a necessity. This is because central utility systems are often unreliable, and therefore buildings need to operate independent of central systems, or need to operate with minimum energy and water. In other words, off-grid is not an advanced option as it is in the West, but often simply a reality. Most operators in Africa will agree that the poor state of physical infrastructure, especially electricity and transport, is one of the biggest impediments to business. For instance, Nigeria, with a population of 150m, has the same power capacity as Hungary, with a population of less than 10m. Very few locations have sufficient infrastructure, with the exception of South Africa, but even there power and transport provision is inadequate. Trying to design and build state of the art facilities is difficult in this context. This presents an opportunity for skilled designers who are willing to understand local climates and resources and design deeply sustainable facilities. For example, Perkins+Will designed Universidad Aghostinho Neto in Luanda, Angola to work with prevailing winds to naturally ventilate all buildings on the campus (except the central library), thereby eliminating the need for mechanical ventilation and cooling. Everything from the master plan to the building sections and roof lines were modeled using computational fluid dynamics to optimize air flow without relying upon electricity at all. 4. Indigenous Design Imperative Similarly, designing for local conditions is a requirement. Working with locally available materials and construction processes requires an entirely different design approach. Again, the contrast with China is stark. Firms designing projects in China have largely brought Western design styles and materials, and the Chinese product manufacturing and construction industry has rapidly become one of the more sophisticated markets in the world. Meanwhile, most parts of Africa simply lack access to high tech materials and systems as well as the labor forces to build and install these systems.

6 106 September/October 2013 Again, this necessity to work within cultural limits can be a good thing. Our teams report deep gratification in discovering the design possibilities in local construction markets and the surprising innovations that have emerged from these constraints. 5. Leap Forward Design Opportunity Much of sub-saharan Africa s built environment and infrastructure dates from the colonial era, or roughly 50 years ago. In many parts of Africa, buildings and systems are actually less robust than they were pre-independence. This points out that the need for modern facilities is intensely acute at this time. It also presents a unique opportunity for Africa to avoid many of the missteps that designers have made over the past 50 years and leap forward to build globally progressive environments that meet Africa s unique demands. For example, urban planning could avoid suburban sprawl and African s growing mega-cities could move directly towards sophisticated integrated urban environments; or, Africa s universities could integrate modern academic design pedagogies to connect with larger student populations more rapidly; or, Africa s hospitals could incorporate advanced safety into designs to establish leading tropical medicine institutes. An example of this is the Kenya Women s and Children Wellness Center where a socially progressive client had a vision to address deepseeded gender discrimination issues through advanced medical care and educational outreach. Africa s future is bright. On the surface of it there are opportunities for design businesses. However, the picture is a complex one. Africa is more diverse politically, economically and culturally than many other places. The barriers for entry into Africa s design consulting markets are greater and the experience of working with foreign consultants is less. Our experience has been positive but not without its challenges. With the right mindset and a flexible approach great things are possible. We believe in the development of Africa and we believe we can deliver value to African clients. This is a continent on the move and we see a role in helping to move things in the right direction. In his role as International Strategy Director, Richard Marshall continues to develop Perkins+Will s global business. With 19 years of experience, Richard is an internationally recognized leader in large-scale development and urban design. He received his Bachelor of Architectural Studies and Architecture from the University of Adelaide in Australia and his Master of Architecture in Urban Design from Harvard. As President and Chief Executive Officer, Phil Harrison is responsible for Perkins+Will s strategic focus and business performance. He is directly involved with quality initiatives including design excellence, sustainability and technical delivery; he oversees firm growth, diversification and development; and he defines the firm s business objectives for performance, collaborative operations and staff development. Harrison is a Senior Fellow of the Design Futures Council.