Construction sector performance takes a tumble

20 May 2021 | Infrastructure

The construction sector contracted by 11.8% during 2020 as activity in this sector declined severely owing to the Covid-19 pandemic.

According to Ruusa Nandago, an Economist at FirstRand Namibia, the decline was mainly reflected in reduced expenditure by government on civil engineering works.

“This was a result of the redirection of funds from the development budget towards Covid-19 related expenditure. Several private sector projects were also delayed during this period owing to uncertainty regarding the pandemic and raw material shortages owing to supply chain disruptions.”

Nandago said that the severe contraction in the construction sector is unsurprising, as the sector entered the Covid-19 pandemic on a weak footing.

She said that prior to the pandemic, the sector’s 3-year growth average stood at 11.5% y/y as the weak economy resulted in a slowdown in demand and dampened investor confidence in the sector.

“This was exacerbated by the fiscal consolidation drive by government which led to a slowdown in the completion of infrastructure projects and delayed payments to contractors. Furthermore, bottlenecks in public procurement led to delays in several capital projects which would benefit the industry.”

Nandago added that the approval of building plans, a leading indicator of future construction activity, has also been under pressure, averaging -41% in the last quarter of 2020.

She said that looking ahead, the sector is expected to remain under pressure as government has once again reduced expenditure on the development budget as it faces pressures from a SACU revenue shock and the need to continue redirecting expenditure towards fighting the Covid 19 pandemic.

“Similarly, weak private sector investment will likely persist until the economy shows prospects of recovery through much needed business reforms.”

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