Demand for road construction in Ghana will benefit from a robust trade outlook, as goods’ imports is expected to grow by an annual average of 6.7 percent between 2021 and 2025, according to Fitch solutions.
This strong growth is likely to be supported by Ghana’s ambitions to become a gateway to the region’s hinterland coupled with a robust household spending. Fitch Solutions forecasts Ghana’s household spending to become the fifth largest in sub-Saharan Africa in 2021. Precisely, household spending will grow by 4.7 percent per year between 2021 and 2025.
Ghana has one of sub-Saharan Africa’s longest existing road networks, ranking among the region’s top five. This, coupled with a substantial number of unpaved roads, supports sustained need for maintenance and upgrading projects, Fitch Solutions noted.
Furthermore, current construction activity is highlighted by the large number of road infrastructure projects currently under construction in Ghana. A well-stocked pipeline of planned road construction projects indicates that construction activity in the sector will remain heightened.
“Demand for road construction in Ghana will benefit from a robust trade outlook, as we forecast goods imports (USD) to grow by an annual average of 6.7% between 2021 and 2025.
Our positive outlook for road infrastructure opportunities in Ghana is supported by a catalogue of robust fundamentals that will sustain demand for road infrastructure improvements. [This includes] a well-stocked project pipeline, a strong trade growth outlook, and an expanding vehicle fleet.”
Fitch Solutions
Meanwhile, Ghana has a comparatively small vehicle fleet, forecast to stand at 989 thousand vehicles in 2021. Fitch Solutions expects that strong medium-term growth of the country’s vehicle fleet will support demand for road infrastructure.
Moreover, this growth of vehicle fleet coupled with household spending growth will also benefit public private partnership opportunities in the road infrastructure sector.
Some of the projects underway include toll road projects like the US$570 million Accra-Tema Motorway Expansion Project. This project is to be built by Portuguese contractor Mota-Engil under a Build-Operate-Transfer agreement.
Ghana’s industry risk profile
According to Fitch Solutions, Ghana’s comparative attractive risk profile will also benefit road infrastructure opportunities. The country’s industry risk profile is attractive compared with many SSA markets.
That said, the features of this risk profile include an open competitive landscape, availability of cost-effective labour, and wide access to development funding.
Furthermore, access to infrastructure construction and financing opportunities in Ghana is widened by an open competitive landscape. Ghana’s construction industry is the most diverse in sub-Saharan Africa, hosting contractors of more distinct nationalities than any other market in the region.
With such a comparatively low number of Chinese and French-held shares of key construction roles, that translates into significant opportunities for a lot of international construction firms.
However, Chinese and French companies are often perceived to crowd out other international competitors in sub-Saharan African and West African markets respectively, Fitch Solutions indicates.
Ghana’s Country risk profile
Also, Ghana’s country risk profile is comparatively attractive, as contractors are exposed to less political risk than in many other markets in the region.
Additionally, Fitch Solutions notes that the generally lower complexity and shorter time frame of road construction projects will reduce their exposure to longer-term political and economic risks.
Considering the near term outlook, Fitch Solutions expect Ghana to see relatively elevated levels of social tension resulting from rising living costs and growing concerns about governance standards and alleged corruption.
Furthermore, this will lead to some small-scale protest activity in the coming months, although broad political stability will persist, Fitch Solutions notes.
In the long term, the expectation is that Ghana’s political risk profile will remain relatively favourable, especially in the context of West Africa. Despite highly competitive electoral politics, instances of serious insecurity and unrest will likely remain rare and the country will benefit from strong institutions relative to its SSA peers.
