Construction remains on tightrope

Real value added by Namibia’s construction sector in the second quarter this year plummeted to N$291 million, contracting by nearly 34% year-on-year.

The latest data released by the Namibia Statistics Agency (NSA) shows the sector’s real value addition fell from N$623 million in the first three months of the year and N$453 million in the second quarter of 2022. This is a massive drop from the N$1 billion-plus recorded from 2013 to 2016.

The -35.9% y/y growth in the quarter under review is the biggest contraction since the first quarter of 2017. In the 30 quarters since the beginning of 2016, construction has only recorded positive growth in six.

The negative growth figure of the second quarter 2023 was the fifth biggest contraction since the beginning of 2016.

The sector’s contribution to the gross domestic product (GDP) in the second quarter this year fell to 0.7% - the first time the figure dipped below 1% on the data base of the Namibia Statistics Agency (NSA) going back to 2013.



‘Mixed signals”



Activity in the construction sector displayed mixed signals, the Bank of Namibia (BoN) said on Friday when it released its bulletin for the second quarter.

Government expenditures allocated for public construction projects saw a y/y increase of 12.4% in real terms, juxtaposed with a quarterly decline of 26.3%, the BoN said. The central attributed the y/y improvement partly to the renewed emphasis on infrastructure and capital investment, as outlined in the 2023/24 fiscal budget.

“However, the effect could not trickle down wide and deep enough within the sector as more was directed to the ongoing projects, especially roads,” the BoN said.

The real value of buildings completed remained weak, declining by 17.9% and 1%, y/ý and quarter-on-quarter (q/q), respectively.

“This was, in part, reflected in the decline in the new residential and commercial buildings completed in all towns, except Ongwediva, which experienced an increase in the new residential buildings completed,” the BoN said.

The real value of building plans approved - a leading indicator for future construction activity – decreased by 33.6% y/y and 2% q/q during the second quarter of 2023.



Grim outlook



Being a leading indicator for future construction activity, the decline in the real value of approved building plans “does not bode well for the construction sector’s outlook”, the BoN said.

“This state of affairs may, however, be offset by the afore-mentioned positive outlook, particularly, in the sphere of government-led construction works,” the bank added.

Cirrus Capital on Friday released its analysis of the latest GDP figures, saying: “The near-term outlook remains discouraging, with limited material or sizable investment.”

However, the longer term outlook has improved somewhat, according to the analysts, “particularly with fixed investment in the mining industry and slower flow through to the rest of the economy from current inward investment and growth”.

“High interest rates remain a hurdle, both for households and businesses, particularly as the high economic growth rates are not reflected in employment or household incomes,” Cirrus added.



CIF, Manwu



The Construction Industries Federation (CIF) and the Metal and Allied Namibian Workers Union (Manwu) recently urged Pres. Hage Geingob to cancel and re-advertise all projects currently excluding local contractors.

Local contractors are mainly excluded due to steep financial prequalification or qualification requirements.

These projects are not in the interest of the Namibian construction sector, as they undermine the optimal performance of the industry, the CIF and Manwu maintain.

“All the developments are extremely disappointing and undermine Namibia’s own contractors,” Bärbel Kirchner, the chief executive officer of the CIF, said.



She was joined by Justina Jones, secretary-general of Manwu, who said: “Our government and all state organs are the biggest employers for the construction industry; and it must be the state’s priority to ensure that local contractors, especially those with equal capacity as foreigner contractors, are exempted from tender requirements and are awarded the mega projects.”