Download industry report - The Big 5 Construct North Africa

www.bncnetwork.net
NORTH AFRICA
CONSTRUCTION
MARKET
REPORT 2017
Report Published by BNC for The Big 5 Construct North Africa
Publication Date: January 2017
© 2004-2017 Industry Networks (FZC). All rights reserved.
Table of Contents
Executive Summary
3
Construction Market Overview
3
Economic Growth
3
Population Growth and Urbanization
3
Regulatory Reforms
4
Construction Analysis
4
Major Construction Projects
5
Conclusion
6
Executive Summary
The construction market in North Africa has been growing
steadily, following a period of heightened socio-economic
instability in 2011. New investment opportunities are opening
up as geopolitical tensions gradually ease and governments
rebuild their economies. According to the BNC Project
Intelligence Database, there is approximately USD 473 billion
worth of active projects in North Africa, majority of which
come from Egypt. This report gives an overview of the
construction activities in North Africa, focusing on Algeria,
Egypt, Morocco, Sudan and Tunisia. The report excludes Libya
due to the continual political unrest, which is affecting project
investments in the country.
Construction Market Overview
improving, and policymakers have been taking steps to unify
their governments in supporting reform policies and longterm economic objectives.
Chart 1: GDP Per Country 2011 to 2016 in USD Billions
400
350
300
250
200
150
100
50
0
2011
Economic Growth
Some regional economies are dependent on commodities,
leaving them vulnerable to external price shocks.⁹ As a result,
governments are investing in other sectors such as tourism
and hospitality to diversify economic activities. The North
African tourism sector has been affected in recent years due
to the geopolitical unrest. Morocco and Tunisia aim to build a
thriving tourism market; Morocco aspires to become a top-20
tourism destination by 2020,¹⁰ while Tunisia is in investing in
areas of medical and cultural tourism, and ecotourism¹¹
offering a diversity of experiences for different travelers. North
African countries have dealt with several challenges over the
past few years including the Eurozone Crisis and the Arab
Spring.¹² The international perception of the region is
1-15
Media, IMF, KPMG, African Development Bank & News
Egypt
2013
Morroco
Sudan
2014
2015
Tunisia
2016e
Algeria
Source: World Bank; 2016 are based on projected figures
Population Growth and Urbanization
Population growth and high urbanization rates are resulting
in greater economic and social inequalities in the region.¹³
North African countries have been investing in infrastructure
and upgrading urban settlements which have resulted in
better living standards than in other parts of the continent.¹⁴
The demand for infrastructure and housing is growing in
highly urbanized countries such as Algeria and in densely
populated cities such as Cairo, which has nearly 19 million
people making it the largest city in North Africa.¹⁵
Chart 2: Population and Urbanization Rate 2016
Population in Millions
The GDP of North Africa has been growing since 2011 with a
six-year estimated growth rate of approximately 20%;
although economic growth is not consistent among all
countries. Egypt is the leading contributor to GDP growth in
the region, having a strong industrial sector, which is the
largest recipient of non-government bank loans.⁶ Moreover,
in November 2016, Egypt devalued its currency against the
dollar, which is expected benefit its export sector and had
caused stock markets to rally.⁷ On the other hand, Algeria’s
oil-dependent economy has resulted in a negative GDP
performance between 2014 and 2015 due to low energy
prices.⁸
2012
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
80%
70%
60%
50%
40%
30%
20%
Urbanization %
The construction market in North Africa has experienced
several challenges as a result of the decline in commodity
prices, lack of regulatory reforms and geopolitical unrest.¹
Significant fiscal adjustments are necessary to limit deficit
spending.² At the same time, increasing engagement with the
private sector is needed to overcome growth impediments.³
Basic infrastructure investments are ongoing as governmentsponsored projects are aimed at promoting economic and
social development.⁴ Foreign investors and private
contractors are also taking part in lucrative contracts,⁵ which
is supporting some construction activities in the region.
Several of the main drivers of the construction market are
economic growth, population and urbanization and
regulatory reforms.
10%
0%
Egypt
Sudan
Population
Algeria
Morroco
Tunisia
Urbanization
Source World Population Review; Worldometers
3
An increasing population will continue to drive the demand
for construction activities in many areas including
infrastructure, residential and commercial properties,
hospitality and healthcare.
Regulatory Reforms
The construction market in North African has been making big
advances following a period of socio-economic instability in
2011. Strict capital controls were put in place to prevent a
massive outflow of funds in some countries such as Egypt,
which introduced restrictions on the value of international
transfers to USD 100,000 per person.¹⁶ While this was
loosened in 2014 to USD 100,000 per person each year,¹⁷
African governments are creating investment platforms to
increase infrastructure financing by removing policy and
technical barriers altogether.¹⁸ Many of the region’s
infrastructure projects are backed by bilateral and multilateral
lenders notably in areas of energy, transport, water, and
information and communication technology.¹⁹
Construction Analysis
The construction market in North Africa is primed for growth,
despite the geopolitical and economic challenges. Given the
environment of low oil prices, governments are investing in
different sectors to promote economic diversity and growth.²²
The buildup and improvements of facilities and infrastructures
in different industries create a more efficient operating
environment for enhancing business activities.²³ The
economic transformation will also have long-term effects on
the sustainability and future growth of local economies,
especially among oil exporters.²⁴ Egypt is the main contributor
of project investments in the region. The Egyptian
government is on a path toward economic adjustment and
reform with the aim of creating long-term stability and
growth.²⁵
Chart 3: Percentage of Project Values Per Country
Sudan
13%
Table 1: World Bank Ease of Doing Business Report 2017
Country
World Ranking
MENA Ranking
Morocco
68
4
Tunisia
77
6
Egypt
122
12
Algeria
156
15
Sudan
168
17*
Source: World Bank
*Sudan assigned to MENA ranking
Regulatory reforms are still necessary to improve the flow of
capital and increase investor confidence. The World Bank Ease
of Doing Business Ranking offers some indication of a
country’s regulatory environment to facilitate business
activities.²⁰ A low ranking score indicates the regulatory
challenges of increasing private sector engagement in local
economies. Some North African countries such as Tunisia,
have been working toward a unified government, which will
help put in place the needed reforms to meet the country’s
social and economic objectives.²¹
16-27
Media, World Bank & African Development Bank
Tunisia
4%
Morocco
13%
Algeria
13%
Egypt
72%
Source: BNC Project Intelligence Database
The urban construction and utilities sectors constitute the two
largest sectors in the region. An increasing population and
urbanization are driving many of the projects in these sectors.
Governments are investing in the utilities sector to address the
pressing constraints of the existing powers systems such as
planned outages and load shedding arising from insufficient
infrastructure.²⁶ Technological innovation such renewable
power is also driving change, especially since the cost of
renewable power is reducing and thus becoming more
economical for widespread use.²⁷
4
Chart 4: Sector-Wise Investments in North Africa in
USD Billions
$250
$200
$150
▪
$100
$50
▪
$0
Industrial
Oil & Gas
Transport
Urban
Construction
Utilities
▪
Source: BNC Project Intelligence Database
The following analysis is based on data from the BNC Project
Intelligence Database:
▪
There is approximately USD 473 billion worth of
▪
projects in North Africa, of which 60% are in the
initial stages of construction (i.e. concept and design),
indicating
a
healthy
flow-through
of
new
investments. It is also noteworthy to mention that
only 14% of the project values are on hold, which
demonstrates a strong pipeline of ongoing activities.
Egypt constitutes approximately 71% of the total
project investments in North Africa, following the
announcements of several high-value projects in the
urban construction and utilities sectors.
Urbanization trends and population growth will
continue to support a pipeline of new projects.
The urban construction and utilities sectors have a
combined estimated value of nearly USD 300 billion
and constitute approximately 63% of all project
investments in North Africa.
Developing
new
utilities
infrastructure
and
upgrading aging infrastructure are necessary to
keep up with the growing number of urban
developments.
Major Construction Projects
The majority of project investments in North Africa seem to be
concentrated in a few sectors. The announcements of highvalue projects such as the Capital Cairo in Egypt (USD 45
billion) and the Industrial Park in Morocco (USD 10 billion)
indicate a healthy pipeline of project investments, especially
since these projects are in the initial stages of construction.
Table 2: Sample List of High-Value Projects in North Africa
Project Name
Estimated Value
in USD Billions
Sector
Country
Stage
Rabat Grand Theater - Wessal Bouregreg
0.46 Billion
Leisure & Recreation
Facilities
Morocco
Under Construction
Anantara Al Houara Resort - Al Houara
0.30 Billion
Hospitality
Morocco
Under Construction
Morocco Mall - Wessal Bouregreg
0.20 Billion
Buildings
Morocco
Tender
Grand Heights - 6th of October City
1.20 Billion
Buildings
Egypt
Under Construction
Batterjee Medical City
0.97 Billion
Healthcare
Egypt
Under Construction
New Administrative Capital - Cairo
0.90 Billion
Buildings
Egypt
Under Construction
Great Mosque of Algiers - Mohammadia
1.30 Billion
Religious Buildings
Algeria
Under Construction
Sidi Abdellah University Campus
0.23 Billion
Education
Algeria
Under Construction
Hyatt Regency Airport Hotel - Algiers
0.23 Billion
Hospitality
Algeria
Under Construction
Campus & Techno Park - Tunisian
Financial Harbour
0.50 Billion
Education
Tunisia
Tender
Source: BNC Project Intelligence Database
5
Conclusion
The construction market in North Africa is on the rise due to
several high-value projects in the initial stages of
development. Although the majority of high-value projects
are coming from Egypt, there is still a relatively healthy flowthrough of investments in other North African countries.
Favorable demand drivers and shifts in technology are factors
influencing growth in the region notably within the urban
construction and utilities sectors.
For more construction intelligence contact
Tel: (+971) 4 4055333
[email protected]
or visit www.bncnetwork.net