Construction Key Lever in Infrastructure Dev't, Crucial in Economy: ECA

Addis Ababa February 24/2021 (ENA) Construction is a key lever in infrastructure development and plays a crucial role in an economy, providing essential structures including public and private infrastructure, and housing, as was the case in Ethiopia, Angola, and Tanzania among the top countries where construction contributed significantly to GDP in 2019, Director of Macroeconomics and Governance at the Economic Commission for Africa (ECA) Bartholomew Armah said.

Speaking during a ministerial webinar organized yesterday in a series of quarterly briefings to ministers of finance by the ECA Price Watch Centre for Africa, the director stated that a vibrant construction sector is an indisputable driver of GDP growth in a country.

He, however, noted that the sector has been severely impacted by COVID-19, resulting in a 45 percent loss in economic activity in 2020.

In the same vein, ECA Director of the Africa Center for Statistics Oliver Chinganya deplored the fact that “construction prices have increased in many countries, threatening the affordability of decent housing, and becoming a heavy load for infrastructure development. This is triggered, largely, by the lockdown measures instituted by governments.”

According to the report, the average price increase in most African countries is higher than 3 percent annually. This could be attributed to a number of factors that vary from country to country such as exchange rate, high import taxes, and prices in other sectors.

Chinganya noted that with the halting of construction projects due to COVID-19, “construction workers become jobless” thereby adding to existing burden of unemployment and poverty in many countries, a press release of ECA stated.

The report noted that construction grew more (over 5percent yearly) in fastest growing economies such as Ethiopia, Mali, Djibouti, Rwanda, Côte d'Ivoire, Tanzania, Senegal, and Togo.

Countries with more moderate growth such as Niger, Benin, Kenya, Uganda, Gambia, Guinea-Bissau, Egypt, Cabo Verde, DRC, Cameroon, and Madagascar also recorded strong annual growth of 3-5 percent in the construction industry.

The study recommends that countries should prioritize investments in the construction sector, given its potential to significantly drive economic growth without necessarily equating to inflation.

Countries are also urged to develop infrastructure methods and materials that are environmentally friendly while prioritizing the use of local materials and green building practices.

Bartholomew Armah pointed out that analysis for the construction price levels were done mainly with use of the “deflator of gross value added as an indication of price level." This is because “very few countries in Africa conduct comprehensive economic surveys or surveys on cost of building materials or construction.

The ECA Price Watch Centre for Africa is a reference on latest price developments on the continent, offering decision-makers in Africa a unique view of most recent price developments in country, sub-regional and at continental level, in support of short to medium-term economic governance, and long term sustainable development planning.

The next Price Watch discussion will focus on energy pricing, it was learned.