Spurred by a rise in oil prices and improved pipeline security in Nigeria, Sub-Saharan Africa’s construction industry is set to rebound from a disappointing 2016, according to BMI Research.
The region saw the highest construction growth rate of any globally from 2011 to 2015 but fell to third in 2016, slipping behind Middle East/North Africa and Asia-Pacific. The consultancy predicts construction growth in the region will tick up to 4.8 percent in 2017, an improvement on its nearly 16-year low of 3.7 percent last year.
“This comes alongside an improvement in the outlook for the region’s largest construction market, Nigeria, which is expected to recover from the recession entered over 2016 as macroeconomic and operational challenges peaked,” BMI stated in its report. “Nigeria’s domestic growth story has the ability to shift the outlook for the region.”
BMI expects the threat of terrorist attacks against Nigeria’s oil pipelines, which have deterred investment in the country’s infrastructure, to ease, and oil prices to climb from their 2016 rate. Both these factors will contribute to economic growth in a country which comprises around a quarter of the region’s total construction industry value.
The report also highlights China’s outsize role in the region, predicting the country will continue to outpace rivals by providing critical support in the financing, construction and operation of projects.
“The SSA construction industry will remain an attractive investment destination for China in 2017 owing to the plethora of opportunities stemming from the region’s wide infrastructure deficit,” stated BMI. “We believe SSA governments will continue to embrace China’s involvement in their construction markets, with the nation offering cheap credit lines – a lifeline for fiscally pressured governments – and construction sector expertise – critical in markets with an acute shortage of skilled labour.”
Both transport and power infrastructure will be boosted by the continued development of regional networks, particularly in the East Africa sub-region, BMI forecast.
“Transport infrastructure will receive substantial attention, particularly rail, as governments seek to facilitate regional trade flows and reduce reliance on underdeveloped road networks,” BMI stated. “We also expect to see traction on regional power projects as markets look to capitalise on neighbours’ power generation potential.”