The switch to renewable energy looks promising in terms of boosting Africa’s construction sector in an era where the Russia-Ukraine war has thrown the sector off track, according to Turner & Townsend 2022 report on the construction sector.
The newest survey found that while most markets have recovered somewhat from the impact of the Covid-19 pandemic and the subsequent lockdowns, Russia’s invasion of Ukraine and renewed lockdowns in China are starting to influence construction markets.
In Africa, some cities have shown significant recovery, including Johannesburg, Cape Town, Gaborone, Harare, Nairobi, Kigali, Kampala and Lagos. However, the market’s full potential requires more growth in order to restore gross domestic product (GDP) to pre-pandemic levels.
Furthermore, rising inflation across the continent will likely reduce consumer demand, further impacting growth throughout the year. The report noted that activity in the construction sector has weakened over the last year.
A major factor contributing to this is the cost of construction, which has been driven higher by the supply-chain bottlenecks caused by the pandemic and the war in Ukraine, as well as the rising costs of energy. These factors have resulted in higher risk for contractors, while construction schedules for projects have also regularly been extended owing to material supply shortages.
The report found that “project teams have been forced to take measures to mitigate this, including early procurement, early payment to contractors, or securing contracts in which the client sources and issues material themselves”.
Potential for Growth in Africa’s Construction Sector
On the positive side, the International Construction Market Survey (ICMS) showed that residential and social housing remains a strong African construction sector, with the industrial, manufacturing and logistics sectors seeing some of their strongest rates of growth.
Warehousing and goods movement have been boosted by the rapid growth of e-commerce sites in Africa, and the rise of remote working has seen a growing requirement for data centres in most regions.
The potential for growth in renewable energy in Africa also presents many opportunities for the construction industry, found the Turner & Townsend report. The continent is rich in hydro, solar and wind, and the use of renewables is an attractive scenario for many African nations.
This is the case as there are many regions where the local population still has no access to electricity, and decentralised renewables offer the opportunity to provide cheap local electricity. Not only that, but 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 faces many challenges this year. The research report noted that according to the International Monetary Fund “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 is being repelled by high inflation and increased debt levels, and this has the knock-on effect of making financing conditions difficult, the report noted.
Turner & Townsend predicted that 2022 is turning out as another difficult year, but some drivers of inflation easing including costs for fuel, transport, imports, steel and raw materials costs and costs of imported goods– could greatly assist the African economic recovery.
The ICMS is the company’s largest and most in-depth report, drawing from data and experience from 90 global markets. It explores the challenges and opportunities presented by the economic market conditions that affect the construction industry.
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