Sub-Saharan African construction sector returning to growth
Mace has released its latest tender cost update for Sub-Saharan Africa.
The report predicts strong growth in the Sub-Saharan African construction sector, particularly in Kenya. South Africa’s construction sector outlook also looks positive as confidence begins to return to the national market.
Sub-Saharan African construction is forecast to enjoy a rebound in growth over the next twelve months, driven by investment in infrastructure, expansion of oil production to new areas and improved weather conditions after some years of drought conditions.
Infrastructure, and in particular massive, often regional and externally funded transport and energy projects continue to be in the spotlight in 2018.
Examples include the Nigeria transport network, which is due for a 12 station, 28 mile boost with the launch of Abuja light rail. Ethiopia’s Ababa Bole International Airport is expected to complete in 2018, and Uganda will open its largest power plant, one of the continent’s largest hydropower facilities.
In South Africa, Cyril Ramaphosa – who has taken over as president, now Jacob Zuma has resigned – has made clear that his administration will focus on expanding infrastructure investment significantly. This would be a move towards stability and growth that will offer confidence to a sector that is already beginning to recover from a challenging 2017.
Large scale projects are being funded by increasingly diverse sources: as the US looks to pare down its foreign aid budget, Turkey and other countries could increasingly challenge China’s position in Africa, with some recent high value wins for Turkish contractors in East Africa.
Mace’s report provides an overview of the region, as well as detailed economic analysis of South Africa and Kenya’s construction sectors. Mace has recently invested in forming joint ventures with local cost consultancy companies in South Africa (MMQSMace) and Kenya (MaceYMR).
Simon Herd, the Managing Director of MaceYMR, said:
“Tender prices dropped towards the end of 2017 due to adverse weather conditions, political uncertainty and credit growth stagnation. However East African economies are expected to see an expansion in the communications, mining and oil exploration sectors in 2018, along with significant investment in public infrastructure. This, combined with increasing material prices, are expected to push tender prices back up.”
Mandla Mlangeni, Mace’s Director of Cost Consultancy for Sub-Saharan Africa, said:
“With the hopes of renewed vigour in the government’s approach to tackling corruption, and reforming the beleaguered economy, South Africa has seen some optimism return to the construction market.
“However, with future pipelines held back by slow growth, and inflation dropping off, tender costs could see deflationary pressures over the next six months as contractors look to secure what work they can after the recent slowdown.”