The country’s construction sector is betting on green hydrogen projects to realise some growth as construction projects become scarcer as time goes.
The sector shrunk by 10% in five consecutive quarters, a building statistics report by Simonis Storm has shown.
The decline is attributed to low activities by local construction companies, the majority of whom had to diversify business models as pipeline work remains subdued. This consequently affected profit margin, which is under pressure as smaller-scale projects take precedence in the absence of the large-scale ones.
“In addition, competition remains fierce, where local construction companies compete against foreign companies more intensely in public tenders. This has led small and medium-sized enterprises (SMEs) in the construction sector to close down all together,” read part of the report.
Simonis Storm warned that growth in the construction sector is likely to remain weak until the much-touted government’s green hydrogen project commences.
The report added that the only way to avert and improve the situation is if municipalities increase the supply of serviced land.
“Things may as well improve if we reach a point where public finances improve and allow fiscal space for the government to restart certain construction projects,” the report further reads.
The research firm, however, cautioned that if the government does not respond to private sector requests for a regulatory body in the construction sector, the future will remain bleak for as long as these challenges remain unresolved.
The report also established that “higher interest rates and a double-digit increase in building material prices are expected to delay the commencement of construction of buildings for which plans are currently being approved”.
In terms of building plans, the City of Windhoek approved 121 building plans during December 2022, compared to 204 in the prior month, translating into a decline of 10%.
This includes 83 plans for new residential additions, 24 for new residential properties, 11 for walls, and three for new commercial buildings. Meanwhile, building completions remained somewhat flat in 2H 2022. During December 2022, 81 building completions took place, compared to 89 completions in the prior month and 67 in December 2021.
In contrast, the Swakopmund Municipality approved 70 building plans during December 2022 compared to 63 in November and 96 in December 2021. The value of these plans is estimated at N$53.8 million in comparison to N$77.6 million in the prior month. In terms of completed buildings, there was a marginal increase of 1% from November.
“Completions were focused on the residential segment of the market, with 27 completions being recorded for new residential properties, 11 for residential additions, 7 for industrial buildings and 1 each for new flats and commercial buildings,” reflects the report.
