Africa’s construction markets are beginning to be impacted negatively by Russia’s invasion of Ukraine and renewed lockdowns in China just after these markets had begun to recover from the impact of the Covid-19 pandemic.
This was according to Turner & Townsend’s International Construction Market Survey (ICMS) for 2022. The independent professional services company operates in the global real estate, infrastructure and natural resources sectors.
The ICMS, drawn from data and experience from 90 global markets, found that in Africa, some cities had showed significant recovery in construction, including Johannesburg, Cape Town, Gaborone, Harare, Nairobi, Kigali, Kampala and Lagos.
However, the market’s full potential required more growth to restore gross domestic product (GDP) to pre-pandemic levels.
Furthermore, inflation across the continent was likely to reduce consumer demand, further impacting growth in the sector throughout 2022.
The report, however, said activity in the construction sector had weakened over the last year.
A major contributing factor was the cost of construction, which has been driven higher by supply-chain bottlenecks caused by the pandemic and the war in Ukraine, as well as the rising costs of energy.
These factors had resulted in higher risk for contractors, and construction schedules for projects had regularly increased due to material supply shortages.
Project teams had been forced to take measures to mitigate this, including early procurement, early payment to contractors, or having contracts in which the client sources and issues material themselves.
The ICMS survey showed that residential and social housing remained a strong African construction sector, and the industrial, manufacturing and logistics sectors were seeing some of their strongest rates of growth.
Warehousing and goods movement had been boosted by the rapid growth of e-commerce sites, and remote working had seen a growing requirement for data centres in most regions.
Growth in renewable energy in Africa presented many opportunities for the construction industry.
The continent was rich in hydro, solar and wind, and the use of renewables was a more attractive scenario for many African nations; there were many regions where the local population still has no access to electricity, and decentralised renewables offered an opportunity to provide cheap local electricity, the firm said.
A switch to renewables would also do away with reliance on imported fossil fuels for many nations while offering energy security going forward.
A construction-led recovery in Africa faced many challenges this year, however.
The survey said the IMF had stated that sub-Saharan Africa would need to double its forecast growth rate to match the growth seen in the post-pandemic period in other advanced economies.
Foreign investment was repelled by high inflation and increased debt levels, and this had the knock-on effect of making financing conditions difficult.
BUSINESS REPORT