The outlook on the construction sector remains bleak in the short-term – SSS
The construction sector is still a weak contributor to the gross domestic product due to a poor pipeline and weak results in August 2023, according to investment research firm Simonis Storm Securities (SSS).
According to an analysis from the firm, the number of approvals decreased by 8% m/m, translating to a 15.7% y/y decrease in August 2023.
“As mentioned in our previous report, we maintain our view that growth in the construction sector for 3Q2023 will be minimal,” the firm noted, adding that 2023, on average, records the lowest plans approved since 2020.
This signals that the construction sector is contracting in Windhoek and Swakopmund. Year to date, 20.6% fewer projects were approved compared to the same period last year and 3.6% less than 2020.
“Total plans approved have been trending well above the 6-month average since May 2023, which could be a signal that a slight expansion is about to take place albeit at a slow pace. Another contributing factor could be due to relatively low approvals over the past six months,” the firm said, adding that the value of plans approved has seen a significant decline, driven by both the value of plans approved in Swakopmund and Windhoek in August 2023.
On a positive note, the value of projects completed saw an uptick in August 2023, driven by a higher value of projects completed in Windhoek (↑ 191.4% y/y), while Swakopmund weighed down on the growth (↓ 25.6% y/y) in August 2023. These two municipalities together recorded a combined value of N$147.9 million of projects completed, a combined increase of 89.1% y/y in August
2023.
However, the number of projects completed in August decreased by 18.8% y/y, compared to an increase of 39.4% in the prior month. Windhoek – accounting for 72% of projects completed – decreased by 11.8% y/y, while Swakopmund – accounting for 28% of projects completed – decreased by 32.6% y/y in August 2023.
According to SSS, the government had set a target of delivering 20,000 housing units by the end of 2025, however, it appears unlikely that this target will be met, given the current pace of construction by the National Housing Enterprise (NHE). 29% of this goal has been achieved, and the deadline is just two years away, as indicated on the Harambee Prosperity Plan website.
“Given this, the outlook on the construction sector remains bleak in the short term. However, green hydrogen and the oil and gas boom should boost the construction sector in the medium- to long-term, especially in areas such as Lüderitz and Oranjemund,” the firm concluded.
