Windhoek’s approved construction project values plummeted by 73.7% year-on-year in July 2023. This is in stark contrast to Swakopmund, where approved project values soared by 113.6% year-on-year.
The divergence in the two cities’ construction sectors is likely due to a number of factors, including differing economic conditions and government policies. In Windhoek, the tightening of financial conditions has led to a decline in demand for mortgage loans. This, in turn, has reduced the number of building plans submitted for approval.
In Swakopmund, on the other hand, the government has been investing heavily in infrastructure projects, which has boosted demand for construction services.
According to Simonis Storm Securities’ building statistics, the divergence underscores the complex dynamics shaping Namibia’s construction sector, revealing a stark contrast in economic trajectories between the two municipalities.
“The two municipalities under scrutiny, Windhoek and Swakopmund, have reported a 2.5% decrease in approved plans for 2023 compared to the same period in 2020, with 1,538 plans approved this year as opposed to 1,577 plans in 2020,” said Simonis Storm’s economist Angelique Bock.
She added that the number of completed projects has seen a significant decline of 47.4% compared to 2020, marking the third consecutive year of downturn in this metric.
In July 2023, 275 plans were greenlit for implementation, showing a notable 19.1% year-on-year decrease compared to July 2022’s 340 approved plans.
On a positive note, the number of completed projects surged by 39.4% in July 2023, with 191 projects finalised, in contrast to 137 in the same month the previous year.
Meanwhile, reflecting on the financial aspect, the value of approvals has exhibited a steady increase, while the value of completed projects saw a remarkable spike in July 2023.
“The discrepancy between the two municipalities is noteworthy, as Windhoek experienced a steep decline of 73.7% year-on-year in approved project values, whereas Swakopmund witnessed an impressive 113.6% year-on-year increase. This dual trend in project values suggests variations in construction activity between the two municipalities, possibly due to differing economic influences,” read part of the report.
Bock noted that Windhoek saw a decrease in completed projects, with 48 finalised in July 2023 compared to 80 in July 2022.
Conversely, Swakopmund demonstrated a substantial improvement, boasting 149 completed projects in July 2023 compared to a mere 49 in July 2022.
Notably, this upswing in Swakopmund’s project completion marks a significant milestone.
Simonis Storm’s analysis highlights that 109 of these projects were overseen by the Ministry of Urban and Rural Development, each with an average value of N$198,322 and spanning an average size of 46 square meters.
“In the realm of property maintenance, homeowners and building owners have experienced a slowdown in cost increases. The annual cost increase for regular building maintenance posted a subdued inflation rate of 3.1% year-on-year in July 2023, in contrast to the 6.2% average for the entirety of 2022,” says Bock.
As for the broader construction sector’s health, the prevailing data points to poor demand for new buildings as a significant factor. This trend is evident in the declining number of building plans submitted for approval.
“The tightening financial conditions for households and businesses, attributed to higher interest rates, have contributed to reduced demand for mortgage loans. Businesses have been net repayers of their mortgage loans since September 2022, signalling a lack of new investments in construction projects,” explains Bock.
The downward trajectory in construction sector activity holds broader implications, particularly for unemployment rates. The construction sector in Namibia has historically employed a substantial number of unskilled labourers, making its contraction a cause for concern.
“Namibia’s economic outlook remains somewhat optimistic. The Bank of Namibia has upwardly revised its GDP growth forecast from 3.0% to 3.3%, with positive indicators expected in mining, livestock marketing, wholesale and retail, tourism, and construction sectors,” Bock added.
