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Bleak construction activity likely to continue putting pressure on unemployment rate

Bleak construction activity likely to continue putting pressure on unemployment rate

The construction sector’s poor outlook is set to continue to impact unemployment rates, as revealed by the July building statistics analysis from Simonis Storm Securities (SSS).

According to SSS fewer plans were approved and completed year-to-date compared to the same period during the pandemic year (2020), making it more likely to expect the 6th consecutive contraction in the real value of building plans approved and completed in the second quarter of 2023.

“Year-to-date, the two municipalities we analyse (i.e. Windhoek and Swakopmund) approved 2.5% fewer plans in 2023 (1,538 plans) compared to the same period in 2020 (1,577 plans). For the same period, projects completed decreased by 47.4% since 2020. This is the third consecutive year that the number of projects completed has declined during this period,” SSS noted.

A total of 275 plans were approved in July 2023 compared to 340 plans in July 2022, translating to a 19.1% y/y decrease. On the brighter side, the number of projects completed in July 2023 increased by 39.4% y/y from 137 in July 2022 to 191 in July 2023, the firm said.

The investment research firm is of the view that the bleak construction sector activity is detrimental to the unemployment rate because many unskilled labourers are employed in this sector.

“In 2018 (the latest Labour Force Survey available in Namibia), the construction sector employed 33,707 people through 4,031 employers,” SSS noted.

According to SSS, the Bank of Namibia recently revised its GDP growth forecast upwards from 3% to 3.3% on the back of expected positive mining, livestock marketing, wholesale and retail, tourism, and construction data.

With various plans in the pipeline like the plans to construct terminal buildings at Hosea Kutako International Airport, Katima Mulilo, Rundu, and Lüderitz airports, among others, SSS believes that this provides minimal light for the local construction sector, however, profitability is likely to remain under pressure as major construction projects across the country are lacking while foreign competition remains at all-time highs according to the Construction Industries Federation.


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