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ECA Price Watch points to construction sector as a key driver of growth

Eca

Mr Bartholomew Armah, Director of Macroeconomics and Governance at the Economic Commission for Africa (ECA), has said a vibrant construction ecosystem is an indispensable driver of growth in a country.

“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.”

He was speaking during a Ministerial webinar organised to present African member States with the latest in a series of quarterly briefings to Ministers of Finance by the ‘ECA Price Watch Centre for Africa,’ which focused on ‘Price Evolution in the Construction Sector.’

Mr Armah cited Ethiopia, Angola, and Tanzania as amongst the top countries where construction contributed significantly to GDP in 2019.

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

The Director of the Africa Centre for Statistics at the ECA, Oliver Chinganya said, “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.”

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According to the report, the average price increase in most African countries is higher than three per cent annually. This could be attributed to several factors, including exchange rate, high import taxes, and prices in other sectors.

Mr Chinganya noted that with the halting of construction projects due to COVID-19, construction workers became jobless, adding to the existing burden of unemployment and poverty in many countries.

The report noted that construction grew more (over 5% yearly) in the 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 recommended that countries should prioritise 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 prioritising the use of local materials and green building practices.

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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 the country, sub-regional and at the 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. ECA has embarked on activities to fortify its collaboration with national statistics offices and research institutions to enhance data collection and analyses.

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