Ghana’s construction sector eyes stronger growth

Accra, Sept. 3, GNA
– Higher levels of infrastructure investment in the coming months should help
Ghana’s construction industry rally after a slow start to 2016, although rising
costs risk squeezing profit margins.

The industry grew by
just 0.3 per cent year-on-year (y-o-y) in the first quarter of the 2016, well
below the annualised GDP increase of 4.9 per cent, and by just 0.1 per cent on
the previous quarter, according to data released by the Ghana Statistical
Service in late June.

According to the
Ghana Economic Update report, which was produced by the Oxford Business Group
(OBG), and made available to the Ghana News Agency on Friday; by contrast,
Ghana’s construction sector expanded by 6.2 per cent y-o-y in 2015, with growth
easing in the fourth quarter.

It said with a number
of public works projects currently in the pipeline – ranging from housing
developments to port upgrades – Ghana is likely to see an uptick in spending on
construction projects in the coming months.

The report said
increased costs and limited supplies are proving to be increasing challenges
for contractors.

According to
Ebenezer Denzel-Amanor, business development lead at Around the Clock
Contractors, a Ghana-based engineering and construction firm, the price of raw
materials used in construction, such as cement and water are rising, along with
an increase in electricity tariffs and labour costs.

“Quality raw
materials for construction are becoming increasingly difficult to obtain. To
ensure a reliable supply, a proper value chain must be put in place,”
Denzel-Amanor told OBG.

The report said in
late December Ghana saw its first major price hike in electricity and water
tariffs since 2013.

It said electricity
prices increased 59.2 per cent while water increased by between 69 per cent and
89 per cent depending on usage, according to Ghana’s Public Utilities
Regulatory Commission; media reports indicate that prices have in some cases
risen even higher.

“Meanwhile, Ghana’s
cement producers increased the price of cement by 9.6 per cent last year,
resulting in a 50-kg bag costing GHS29.3 ($7.3), citing the depreciating cedi
as the primary factor for the price change, according to press reports,” it
stated.

The report said
those prices might come under further pressure, following the government’s move
to impose a ceiling on annual cement imports.

It said both local
cement producers and the Cement Manufacturers Association of Ghana have called
on the government to address what they consider unfair competition from
imports.

Imports currently
amount to approximately one million tonnes, in spite of the fact that Ghana’s
production capacity of nine million tonnes surpasses local consumption of 6m
tonnes, according to a statement from Ekwow Spio-Garbrah, the Minister for
Trade and Industry.

The report said
starting in August companies importing cement from outside the ECOWAS region
would now need to apply for an operating license.

It said the
government had sought to help mitigate some of the problems in the sector by
rolling out new incentives and waivers for contractors participating in select
large-scale infrastructure developments, which should help to reduce costs.

The report said the
$1.5bn expansion of the Port of Tema, which was being carried out by the Ghana
Ports and Harbours Authority, Netherlands-based APM Terminals and French firm
Bolloré Africa Logistics, is one such project.

It said an
announcement in mid-June on tax concessions for the venture, which were valued
at $832m, include waivers on materials and equipment taxes, as well as a
10-year corporate tax exemption, according to press reports.

It said the fiscal
incentives were part of a broader push by the public sector to stoke an uptick
in construction activity, and industry growth in the medium term is expected to
be supported by increased government investment in infrastructure, particularly
transport projects.

“Foreign direct
investment in construction will increase in the second half of 2016 through to
2017. There are road infrastructure and harbour expansion projects in Tema and
Accra, and ongoing expansion work at Takoradi Harbour,” Kojo Brompong-Mensah,
managing director of design and building firm BM Construction, told OBG.

OBG is a global
publishing, research and consultancy firm, which publishes economic
intelligence on the markets of Africa, the Middle East, Asia and Latin America
and the Caribbean.

Through its range of
print and online products, OBG offers comprehensive and accurate analysis of
macroeconomic and sectoral developments, including banking, capital markets,
insurance, energy, transport, industry and telecoms.

The critically acclaimed
economic and business reports have become the leading source of business
intelligence on developing countries in the regions they cover.

OBG’s online
economic briefings provide up-to-date in-depth analysis on the issues that
matter for tens of thousands of subscribers worldwide.

OBG’s consultancy
arm offers tailor-made market intelligence and advice to firms currently
operating in these markets and those looking to enter them.

GNA

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