Growth of the construction industry dropped by 6.3% from an initial growth projection of 14% to 7.7% in the last quarter of 2018. This was revealed in the 2018 Fourth Quarter Treasury Bulletin produced by the Ministry of Finance and Economic Development.
Cement shortages
Reporting on the construction industry, the Treasury Bulletin said, “The construction industry boom that was being experienced in the economy during the first half of 2018 suffered a huge setback following acute cement shortages and unsustainable prices of construction material during the remainder of the year… These shortages started in earnest beginning of August 2018, as shortages of foreign currency to procure spare parts, raw materials, packaging materials and equipment also negatively impacted on the growth of the construction industry.”
The report further states that cement prices rose from between $7 and $14 to between $35 and $45 (initial Bond and now RTGS dollars) for a 50kg bag. Prices of basic commodities rose drastically after October 2018. This pushed many people to turn to imports but access to foreign currency has been a major stumbling block. As a result, most companies have decided to downscale their operations and this is not a good indicator.
Outlook for 2019
The report goes on to note that road rehabilitation, power generation expansion projects and other construction work are likely to spur the growth of the construction industry this year. “In 2019, growth of the industry will continue to be bolstered by activities of road rehabilitation, power generation expansion projects, dam construction, border posts redevelopment, expansion and rehabilitation of various water and sanitation projects and expansion as well as modernisation of state universities. Investment in development of low cost housing by Government, in collaboration with public sector entities, commercial and merchant banks, as well as self-financing schemes by individuals, are also expected to sustain growth of the construction industry,” read the report.
Unfortunately, the first 3 months of the year have been uninspiring. The Monetary Policy Statement has not yet produced any tangible results. The exchange rate between the RTGS Dollar and the US Dollar keeps rising on the interbank market. The parallel market where most individuals get their forex is also following suit. Forex supply is still constrained. However, despite all this, the government continues to assure the nation that things will get better.
Growing the construction industry will solve a lot of our challenges as a nation. With proper infrastructure, our calls for investors to come on board will be answered. This is why the construction industry is one of the most important indicators of economic performance.
