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Kumasi International Airport serves the Ashanti region in Ghana. Credit: James Cridland.

Kumasi International Airport (IATA: KMS) located in Kumasi, the capital city of Ashanti, Ghana, is operated by the Government of Ghana.

The airport offers international and domestic aviation services to passengers in the Ashanti region and nearby areas. It is regarded as one of the busiest international airports in the country.

Known for its regional airline operations, the airport is undergoing an expansion to transform it into a full-fledged international airport.

The expansion project forms part of the multi-modal transportation system being developed by the government to enhance tourism in the Ashanti Region.

The airport has witnessed a steady rise in passenger traffic over the recent years. The expansion will also serve the growing demand by adding capacity to serve international passengers.

Kumasi International Airport expansion project details

The expansion project at Kumasi International Airport is being carried out in two phases. A $29m rehabilitation project was carried out under phase one by December 2014. Aeronautical ground lighting systems were installed and the existing runway was rehabilitated under the project.

Ground-breaking for the €66.35m ($75.23m) second phase of the expansion project was held in November 2018. Phase two involves construction of a new passenger terminal and multiple service facilities at the airport. The new terminal will have the capacity to handle more than one million passengers a year upon its completion.

The existing runway will be extended from the current length of 1,981m to 2,300m, enabling the airport to accommodate wide-body aircraft such as Boeing 737-800.

“The construction of Kumasi airport was approved in 1940 and operations were started in 1943.”

An additional apron area and associated taxiway will also be constructed as part of the project by the second half of 2020.

Existing facilities at the airport

Kumasi International Airport currently features a single terminal and a runway. Built in December 1993, the existing terminal is used for both international and domestic arrivals and departures. It features security checkpoints, retail and commercial spaces, and parking areas.

The single asphalt-paved runway, designated as Runway 02/20, has a length of 6,502ft (1,981m) and a width of 148ft (45m).

The landing and take-off distances of the runway are 6,502ft (1,981m) and 7,242ft (2,207m) respectively. The overrun length is 740ft (226m) and the load bearing capacity is 15t.

Kumasi International Airport history

The construction of Kumasi airport was approved in 1940 and operations were started in 1943. Airside operations at the airport were streamlined by the Ghanaian government with a series of development activities carried out on the runway between 1958 and 1959.

The airport underwent main renovations such as installation of lights on the taxiway and extension of the runway southwards during the 1970s.

Further lighting system installation, runway extension, and construction of a new terminal building were completed by 1993 under a modernisation project, which also involved installation of VHF omni-directional range (VOR) and distance measuring equipment (DME).

The airport served as a military base until it was converted into a domestic airport in 1999. It was declared as an international airport in 2003.

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Ghana Construction Awards rebranded, set to hold in May

 

West Africa Construction Awards 2019 will be held at Movenpick Ambassador Hotel
 

 

Ghana Construction Awards has been rebranded to West Africa Construction Awards 2019 (WACA). It is set to hold on May 3rd, 2019 at the plush Movenpick Ambassador Hotel at 6pm.

Now in its third year, West Africa Construction Awards is the industry’s most celebrated and distinguished awards event.

The Award recognizes the enormous achievements of the construction industry and its contribution to the sub-Saharan economy.

According to Mr. Akin Naphtal, the CEO of Instinct Wave, “The awards competition will raise the level of construction standards throughout the industry by recognizing the hard work and workmanship of the players in the construction industry as it showcases results of excellence, commitment and professionalism across West African countries”.

On why the awards scheme has been rebranded, Mr. Naphtal said that recent reports have shown that Sub-Saharan Africa will have the fastest growing construction industry among all major regions in the world.

According to Global Data, the region over the next five years will grow on average by a compound annual growth rate (CAGR) of 6.6 per cent a year, from 2018 to 2022. We have rebranded the awards scheme to expand our reach to the sub region and also show case excellence of the construction industry in the eco system.”

WACA 2019 is open to all Stakeholders, experts and organizations trading in the construction Industry across West Africa and are expected to submit entries on the events website: https://www.constructionawardswa.com

The West Africa Construction Awards (WACA) will also bring together top industry executives and decision makers in Ghana, Nigeria, Benin Republic, Togo to celebrate the stand-out projects and achievements of the year under review.

The Awards is powered by InstinctWave, Africa’s premium B2B event & media specialist.

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Make education and infrastructure building a priority in your next government - Okyehene tells Mahama

The Okyehene Osagyefo Amoatia Ofori Panin



The Okyehene Osagyefo Amoatia Ofori Panin is urging former president John Dramani Mahama to focus on building infrastructure and prioritize education should he win 2020 election.

The King welcoming president Mahama to his palace as part of his campaign to lead the NDC as flagbearer noted that if education and infrastructure building is prioritize, it will positively affect all sectors of the economy.

" I want to advice you to make education and infrastructure building your main focus because that is what drives every sector of the economy especially when it comes to job creation ".

Former president Mahama has been rigorously canvassing for votes in the eastern region ahead of the party's primaries on January, 26.

In a brief statement former president Mahama accepted the challenge of the Okyehene while promising a clean campaign.

He asked for the blessing of the Akyem King as he campaigns in the region.

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Make education and infrastructure building a priority in your next government - Okyehene tells Mahama

The Okyehene Osagyefo Amoatia Ofori Panin



The Okyehene Osagyefo Amoatia Ofori Panin is urging former president John Dramani Mahama to focus on building infrastructure and prioritize education should he win 2020 election.

The King welcoming president Mahama to his palace as part of his campaign to lead the NDC as flagbearer noted that if education and infrastructure building is prioritize, it will positively affect all sectors of the economy.

" I want to advice you to make education and infrastructure building your main focus because that is what drives every sector of the economy especially when it comes to job creation ".

Former president Mahama has been rigorously canvassing for votes in the eastern region ahead of the party's primaries on January, 26.

In a brief statement former president Mahama accepted the challenge of the Okyehene while promising a clean campaign.

He asked for the blessing of the Akyem King as he campaigns in the region.

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Ghana Building Code will be a game-changer in construction industry – Bawumia

The Ghana Standards Authority on Wednesday unveiled a 1700-page Ghana Building Code to provide guidance and standard requirements for the construction of private, public and industrial buildings.

Vice President Dr Mahamudu Bawumia, who launched the first-ever Building Code at a ceremony in Accra, said it would be a game-changer in the country’s building industry and ensure value for money.

He said it would provide a benchmark against which all construction related procurement could be measured and guarantee quality and durability of building materials used in constructing schools, roads, hospitals and all types of public infrastructure.

The Vice President noted that building codes worldwide were essential components in the construction industry because they ensured uniformed cost for all types of constructions in the private, public and industrial buildings.

He said the outdooring of the Code and subsequent passage of the necessary legislation would address the issue of collapsing buildings due to shoddy works and make the country safer.

He charged the Ministry of Works and Housing to facilitate the passage of the Legislative Instrument (L.I. 1630) to enable the Code to work effectively and efficiently, saying that the country’s building construction industry must be regulated appropriately to guarantee public safety.

The Code covers the essential areas for the smooth and safe operation in the building construction industry by ensuring conformity of standards in the built environment, public safety and structural and environmental integrity.

The Code, drafted by a 22-member Technical Committee from diverse professional backgrounds, and chaired by Mr Seth Bright Attipoe-Denyah of Apro-Plan Consult Limited, was under the auspices of the Ministry of Works and Housing.

Vice President Bawumia said: “We continue to look unconcerned when the structures in the industry are put up without paying attention to the required rules and regulations.”

As the years go by, the building industry becomes characterised by complex constructions, therefore, it is important the necessary regulations are put in place and enforced to ensure sanity and bring about progress”.

Dr Bawumia noted that the Code had come at an opportune time following the Government’s recent forum on “Value for Money,” which would provide standards for the construction of roads, hospitals and schools as well as ensure effective process for financial management of construction of projects.

“We will, therefore, ensure the availability of the Code throughout the country and at all metropolitan, municipal and district assemblies, training institutions and technical universities for training and education,” the Vice President said.

He commended members of the Technical Committee for their dedication to duty and selflessness in coming out with the Code.

Mr Seth Bright Attiope-Denyah presented an overview of the Code, noting that the Committee took six months to compile it, starting from November 10, 2017 to April, this year.

He said the Committee made reference to a number of local and international codes to come up with the Code so as to reflect international best practices.

A building code is a body of standardized technical knowledge and best practices of rules and regulations for construction and ancillary structures, he noted.

Samuel Atta Akyea, the Minister of Works and Housing, who chaired the function, noted that the Code is a world-class document, which is fit-for-purpose and underscored the need to strengthen the enforcement regime to derive the required benefit.

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Urban planners around the world strive to create efficient cities

In 2008, for the first time in history, more than half of humanity was living in urban areas. Perhaps the most remarkable observation about this trend is the speed at which it has happened: as recently as 1900 urban areas accounted for 13% of the global population. Towns and cities are seen as the crucibles of opportunity for many rural dwellers. The UN estimates that by 2030 urban areas will host 60% of the world’s population – up from 54.5% in 2016 – with the pace of urban growth especially rapid across Africa and parts of Asia. Urban areas are home to more than 470m people in Africa, accounting for 40% of the continent’s population, up from 14% in the middle of the 20th century.

Growing Pains

In 2016 there were 512 cities around the world with at least 1m inhabitants, more than 100 of which were in China. By 2030 this number is set to increase to 660, with about 40 categorised as mega-cities home to more than 10m inhabitants, including Bogotá, Bangkok, Dar es Salaam and Ho Chi Minh City.

All cities, even those in prosperous and stable countries, face challenges, from providing adequate housing, sanitation, transport and energy, to combating pollution and inequality. Not surprisingly, however, these issues are magnified in developing and emerging countries, where limited resources and weak institutions can struggle to cope with eventualities such as waves of migrants or the effects of climate change. Nonetheless, opportunities abound for municipal authorities and the construction industry to create urban areas that are sustainable, dynamic, healthy and safe.

Building Innovations

The construction sector is not generally considered a frontrunner in embracing innovation. The basic techniques of constructing brick and timber buildings date back centuries and – often for sound economic or aesthetic reasons – they have tended not to evolve dramatically. However, this tendency is changing, spearheaded by the advent of lighter, stronger and more flexible materials, along with innovative techniques such as modular construction and 3D printing. While large projects are increasingly complex, industry players can use tools like building information modelling (BIM), robotics and the internet of things to ease their undertaking. These can improve efficiency and bring down costs, while also enhancing quality and sustainability, which will be important considerations as many urban areas need to be resilient against earthquakes and extreme weather, such as tropical storms, flash floods and heatwaves.

Technology & Project Management

The process by which buildings are constructed and woven into wider infrastructure is of the utmost importance, with projects becoming increasingly complex and challenging to deliver. The IHS Herold Global Projects Database estimates that some productivity has declined since the early 2000s; large infrastructure projects, for example, cost on average 80% more than the original budget and run more than 20 months late. Many also have defects, which suggests project management teams have failed to cope with rising complexity and external risks.

Technology can play a role in developing more streamlined construction and infrastructure schemes, and in recent years BIM has been at the forefront. It combines 3D-modelling software with layers of data on every detail along a project’s timeline, providing architects and engineers with a relatively simple way of rigorously testing and analysing designs. BIM has been widely adopted across Europe, the US, South Korea, Singapore and the Gulf. In the UK the government requires all centrally procured contracts to achieve BIM Level 2.

Take-up has unsurprisingly been slower in emerging markets, but in 2017 Dubai became the first public authority to mandate the use of BIM for most of its large-scale building projects. The neighbouring emirate of Abu Dhabi also uses BIM, which has notably been employed on the $3bn Midfield Terminal Building by Abu Dhabi Airports Company.

Smart Cities

The miniaturisation of sensors and the evolution of the internet means that information on almost all aspects of urban life – from air and water quality, to the movement of people and objects, weather, road and rail traffic, and energy generation and consumption – can be measured in real time. By linking houses, public buildings, factories, vehicles, power stations, traffic signals and street lighting, cities can be smart and responsive to the needs of residents. Developments in smart metering, solar photovoltaic technology and battery storage are leading to more local energy generation, which should facilitate the shift to cleaner, more efficient and quieter electric vehicles.

Qatar has embraced the smart city concept as it prepares to host the 2022 FIFA World Cup in Lusail. On the outskirts of Doha, the city is being developed with smart technology, incorporating sustainability measures to enhance residents’ quality of life. “Lusail City was the first in Qatar to endorse the Global Sustainability Assessment System principles, and to rate all buildings according to their sustainability and performance,” Nabeel Mohammed Al Buenain, group CEO of real estate developer Qatari Diar, told OBG. The city will offer residents and visitors integrated smart transport and communications services, overseen by a central management facility. Meanwhile, in the renovated Msheireb area of Doha, several services offer a smart experience. “These include navigation, people counting, help desks, online payments, CCTV, fire alarms and infrastructure network applications,” Ahmad Mohamed Al Kuwari, CEO of IT firm MEEZA, told OBG.

In the face of a rapidly urbanising population, the concept of smart cities is also being developed in numerous African nations, including Kenya’s Konza Technological City, 60 km outside of Nairobi and extending over 2020 ha of land. Dubbed “Silicon Savannah”, the project is part of Vision 2030, the country’s national development strategy, and is slated to see $15.5bn in investment. Due for completion after 2030, the project is expected to create 100,000 jobs and generate $1bn annually, according to the Konza Development Authority.

Another example is the Eko Atlantic project in Nigeria, bordering Lagos’s Bar Beach coastline and spanning 10 sq km. Though the pace of work has been slowed by the domestic economic climate, the project is expected to attract 150,000 daily commuters and host a range of amenities upon completion, including high-end housing that will accommodate up to 250,000 residents.

The New Administrative Capital, Egypt’s new capital unveiled in 2016, is also working to integrate smart networks. Expected to be delivered by 2022, the city is located 50 km from Cairo and will extend over 700 sq km. It aims to help alleviate congestion, provide homes to 5m people and host some of the country’s main public institutions. In late 2017 another smart city was announced in Aswan, near Egypt’s Western Desert, to help accommodate the city’s growing population. The development will extend over 1620 ha and will include housing, recreational facilities and green areas.

Challenged Urbanisation

Smart cities are now firmly on the radar around the world, but older metropolises are also embracing digital technology to improve service delivery and quality of life. Buenos Aires, for example, has recently surveyed its infrastructure and developed an application – the SAP HANA platform – to speed up administrative processes. The city of 16m inhabitants has 372,625 trees, 91,000 street lights, 50,700 pavements, 30,000 storm drains and 27,000 roads. Previously, certifying maintenance and repair work was very time-consuming and tedious, requiring thousands of sheets of paper to be printed and filed.

For other cities in emerging markets, however, talk of big data for urban planning and smart infrastructure may seem far removed from the reality of urban sprawl, traffic congestion, air pollution, flooding and sanitation problems. Myanmar’s largest city is a prime example. Following six decades of military rule and international isolation, Yangon lacks an effective public transport system and suffers from chronic congestion. “During the last decades the expansion of the city was not followed by the modernisation of its infrastructure, and this is now putting pressure on both city management and public services,” U Phyo Min Thein, chief minister of the Regional Government of Yangon, told OBG.

Misaligned Driver

Housing construction has been a key growth driver in Yangon since reforms began in 2011, but developers have focused on the upper-tier segments, due to the paucity of accommodation and Myanmar’s position as a frontier market in a dynamic region. In 2013 rents in central areas soared above those in Bangkok and even parts of Manhattan. However, this resulted in an oversupply of high-end units and not enough affordable housing for average families.

Similarly, rapid urbanisation and the adoption of smart networks has been challenging across Africa. At 4.5%, the continent has the world’s highest urban growth rate, and by 2050 more than half of the population is expected to be living in cities, representing an important demographic shift.

While there has been progress in developing some of the main urban centres, infrastructure works often lag behind on the back of slow structural transformation, a historical dependence on natural resources and weak levels of industrialisation. Inadequate urban planning and underinvestment in infrastructure has seen informal settlements proliferate, as is the case in Lagos, Africa’s most populous city. With over 21m people and growing at 3.2% per year, Lagos has experienced unprecedented urbanisation, leading to the development of slums. However, as the government aims to turn the city into the “Dubai of Africa”, settlements are gradually being cleared, as was the case for Ilubirin and Otodo-Gbame, bordering the waterfront, in 2016. Despite challenges brought by population growth and the lack of accommodating infrastructure, the city acts as an economic engine, accounting for over 35% of GDP and 62.3% of non-oil GDP in 2010, per the UN Economic Commission for Africa.

Growth Potential

This is a testament to the potential cities have as drivers of transformation and economic growth. In addition to developing infrastructure, promoting economic efficiency, improving urban density and ensuring social inclusion, the success of Africa’s urban centres will depend on their ability to create employment for the continent’s ever-growing youth population. With more than half of Africans under the age of 18.5, and 19% between 15 and 24 years old, this represents both a significant challenge and a potential opportunity should it be tapped effectively.

A report produced by the African Development Bank, the OECD and the UN Development Programme in 2016 calls for policy reforms to make the most of the “urbanisation dividend”, and for African countries to spend the equivalent of 5-7% of GDP per year on infrastructure. According to the report, two-thirds of the investment needed in urban infrastructure through to 2050 has yet to be made, suggesting substantial opportunities ahead.

Master Plans

Experiences show that creating a sustainable city requires more than a dynamic construction sector. In Myanmar’s case, the municipal authorities are developing a master plan drawing on lessons from other regional cities, but progress could be constrained by a lack of skills, weak institutions, legal uncertainty and limited financing. Plans are also afoot for the Yangon New City Project, a 12,140-ha development to alleviate congestion and reduce informal settlements. The project is supported by multilateral organisations and is expected to make use of public-private partnerships. However, sustained work is required to strengthen the tax system and replicate international best practices in harnessing private finance to improve public services.

Sprawl

In devising plans for the sustainable development of Yangon, Abidjan, São Paulo, or smart cities on the outskirts of Cairo and Jeddah, a significant challenge is sprawl. Architects and urban planners have come to recognise a key distinction between expansion and sprawl: cities have expanded throughout history and will continue to do so, but sprawl is a fairly recent and undesirable phenomenon. It refers not only to low-density suburbs, but also to the development of apartment blocks, which have sprouted up in large numbers.

In her seminal text, The Death and Life of Great that the dramatic growth of car traffic separates city dwellers from each other and the natural environment. This, she claims, creates cities that lack the cross-fertilisation and interactions that allow humanity to thrive. In addition to facilitating sprawl, private cars have brought traffic congestion and a resultant loss in productivity and increase in stress, mental illness and non-communicable diseases stemming from inactivity, and other health conditions linked to air pollution.

Jan Gehl, an urban architect, wrote about the importance of providing safe places to walk or cycle and enjoy outdoor spaces. Others refer to the “Goldilocks density”, at which buildings are densely populated enough to provide retail and services to vibrant main streets, but are not built so tall that people are removed from the streetscape. Buildings of six or seven storeys allow the sun to penetrate to street level, making it easier for ground-floor cafes to spill out onto the street, creating a sense of community and vibrant street life. Such buildings can also accommodate a large number of people: traditional Parisian districts house up to 26,000 people per sq km, while Barcelona’s Eixample district reaches 36,000 inhabitants in the same surface area.

Urban Principles

Some of the principles for solving sprawl and building sustainable cities that are likely to be taken up as authorities work to manage their expanding populations include the preservation of natural ecologies, historical sites and architecture as a way to imbue urban communities with a sense of identity. The benefits of creating opportunities for mixed-use infrastructure as well as mixed-income communities to prevent neighbourhoods divided by wealth is also likely to shape urban planning in cities across the globe.

In terms of urban transport, investment in high-quality and affordable mass transit systems, and a focus on matching city density with transport capacity, is key to keeping cities moving. The increasing take-up of smart infrastructure is likely to make this job easier. The convergence of streets to allow for multiple modes of transport on a single path may likewise become popular if it enhances the potential for mass transit systems to gain traction in previously car-dominated areas. At the same time, an emphasis on walkability and bicycle access to reduce road congestion is being seen as important for both the health of the environment and urban dwellers, as well as a sense of community.

The model of urban planning that extended from modernism and its vision of the city as a machine has proved extremely popular throughout the past half century – and it still persists today. However, there is now a growing realisation that if urban areas are to be lively, safe, healthy and truly sustainable, they will need to develop a different structure and complexion.

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Growth in Ghana's construction sector to continue into 2019

Ghana’s real estate sector has gone through peaks and troughs over the past decade, mirroring the economy’s turn from the oil boom in 2010 to the mid-decade slowdown. The market started to tick upwards in 2018 thanks to a robust economy and the government’s reform programme, and various segments, from highend residential real estate to industrial and logistics property, are performing strongly. Economic and demographic factors should continue to drive growth through 2019, though investors are keeping an eye out for downside risks and segments in which there is oversupply. The market is becoming more geographically diversified, with outer areas of Accra and regional centres attracting increasing attention.

“The market is cautiously optimistic,” Joseph Amo-Mensah, CEO of real estate company Broll Ghana, told OBG. “However, for those who serve large-scale businesses or build industrial parks, this is the time to invest. Real estate supply vis-à-vis demand has a lag time of 18 months to two years in Ghana, and our aim is to match demand by 2021 as the market peaks.”

Residential Property

Since 2008, with the Ghanaian cedi depreciating sharply, inflation climbing and capital markets developing at a slow pace, residential real estate has become an increasingly popular investment asset class for well-off Ghanaians. Demographic growth has helped support demand while a previously short supply of higher and upper middle-end property has kept rents and yields high.

In 2017, the latest year for which data is available, the average rental yield on high-end apartments in Accra was 8.4% while capital appreciation averaged 6.7% annually, giving an overall return of 15.1%, according to Cytonn Real Estate, a real estate developer owned by a Kenyan private equity fund.

For detached houses of three to six bedrooms, yields averaged 5.6% while capital appreciation averaged 8.6%, giving a total return of 14.2%. Total returns were as high as 16.7% for five-bedroom detached homes.

Supply & Demand

While yields remained high, 2017 was a slower year for the property sector, which persisted into early 2018. A number of macroeconomic factors dampened demand while on the supply side rising costs meant that new units became more expensive, putting a squeeze on the market as a whole.

“Costs rose thanks to the depreciation of the cedi against the dollar,” Kelvin Nyame, CEO of local real estate company MeQasa, told OBG. “This pushed up the costs of building materials, which was passed onto the endbuyer. Bad debts increased, leading to foreclosures.”

Nonetheless, a turnaround was apparent by mid-2018. The strength of the economy and lower inflation led to growing demand, and lower interest rates made borrowing more affordable and investment less expensive. In July 2018 global real estate company JLL said that Ghana could be one of the most interesting markets in Africa for investors, citing the country’s high economic growth, resource wealth and strong services sector. It pointed out that even during the market slowdown, high-quality assets mostly remained fully leased, and that, though real estate demand usually lagged behind economic growth, an upturn was in the offing. Moreover, JLL cited Ghana’s housing shortfall of 1.7m units in 2018 as a major demand factor. Accra’s location and potential as a West African business centre also support the medium-term outlook while Ghana’s political and economic stability give it an edge over other West African markets.

A further boost is expected to come from the impending introduction of publicly traded real estate investment trusts (REITs), which will both provide the sector with a new source of capital, and broaden its accessibility to all kinds of investors without the need for them to acquire bricks and mortar. Currently, the only Ghanaian REIT is operated by the Home Finance Company, which was renamed Republic Bank in April 2018. The capital markets regulator, the Securities and Exchange Commission (SEC), published draft guidelines on amendments to regulations in July 2018 that would allow the creation of listed REITs on the Ghana Stock Exchange. The SEC is confident that this will help increase investment in the real estate sector and provide generous returns for investors.

Nonetheless, downsides to the market come from Ghana’s sensitivity to global commodity prices, as well as domestic structural issues. Land ownership is complicated by traditional systems of communal ownership and disputes over title deeds, which can take a long time to resolve. “Although there appears to be governmental action in this direction, the issue of contested land rights remains a problem,” Dragica Todorovic-Letica, managing director of Energoprojekt Ghana, a Serbian construction company, told OBG. “Plots are always contested, and this adds a serious legal and bureaucratic hurdle in the way of construction projects.”

Infrastructure

Online real estate consultant MeQasa and other industry players noted rising interest in small compounds and higher-end condominiums in late 2018, as well as a renewed interest in investment in areas around Accra. However, development in outer areas of Greater Accra face challenges in terms of infrastructure and utilities. In some cases, developers are left to build their own basic infrastructure, including roads and water piping for their new projects, further pushing up costs in a price-sensitive market. Over the longer term development of Accra’s proposed light rail transit system would prove a significant boost to outer areas. “Land prices remain very high in Accra, and hence there is a trend for building upwards, as well as pressure on the outskirts on the city,” Kwasi Offei Owusu, managing director of local ADK Consortium, told OBG. “Indeed, this pressure on the suburbs is to accommodate the urban sprawl, but there is no developed infrastructure to facilitate effective commuting patterns, further compounding price issues in the centre. A railway system would make transport easier and cheaper, increasing the size of the commuter belt.”

Mortgage Market

One of the biggest factors holding back the growth of the residential real estate market is the underdeveloped mortgage market. With commercial interest rates in double figures, incomes relatively low, and collateral complicated by uncertain ownership and informal housing, mortgages have been slow to develop as a mass market in Ghana.

“Due to the macroeconomic reality of high interest rates and inflation, mortgages are an underdeveloped financial service,” Amo-Mensah told OBG. “In addition, liquid savings and asset collateral have not been historically consistent enough to support a widespread mortgage market. Interestingly, these conditions are changing, and there is a pent-up demand that has the potential to come on-line in the mid-term.”

However, as part of the government’s wide-ranging reform programme, concrete progress is being made on broadening access to mortgages, and thus to modern housing. In November 2018 the government completed preparatory work on a pilot phase of the Mortgage and Housing Finance Market Scheme announced in the 2018 budget. The scheme was allocated GHS40m ($8.6m) from government funds and an additional GHS40m ($8.6m) from private sector sources, including pensions and insurance funds.

In the 2019 budget statement, the government committed another GHS1bn ($216.1m) to the mortgage scheme, seeded with a minimum of GHS100m ($21.6m) every fiscal year over the following five years. The funds are designed to support the private sector in expanding access to housing and growing the mortgage market, with an end goal of broadening home ownership to a larger part of the population. Initiatives include lower mortgage interest rates, rent-to-own programmes and reduced construction costs. “The mortgage market needs to be boosted,” Bright Owusu-Amofah, CEO of local mixed-used developer Appolonia, told OBG. “People need flexibility, as they have unpredictable incomes.” According to Owusu-Amofah, up to 80% of those who have taken mortgages are able to repay them within five years. This suggests that they are largely the preserve of the affluent, including those who can afford to invest in property and rent it for high yields.

Retail

As of November 2018 Accra had 230,000 sq metres of modern shopping mall space, with anchor tenants typically paying $400-600 per sq metre per year, and line shops less than $950 per sq metre, according to JLL. Major malls in the capital include Accra Mall, which was the first to open in Ghana, in 2008, and has 20,000 sq metres of retail space; and West Hills Mall, which opened in 2014 with 27,000 sq metres, making it the largest in West Africa. Vacancy rates vary widely, from 5% to 50%, depending on the location and popularity of the mall. The significant supply has led to a shift towards a tenants’ market, with landlords willing to accept shorter advanced payment terms.

The retail real estate sector endured a tough period in 2017 and in the first half of 2018, despite resurgent economic growth. This was partly due to a high supply of modern retail property, following a series of investment over the past decade. Reasons for the slowdown include the government’s fiscal consolidation efforts, which trimmed public sector incomes and had a drag effect on the economy as a whole. The weakness of the cedi against the US dollar also affected modern retailers, who earn largely in cedis but pay rent in dollars. Despite the cedi stabilising, the impact of its depreciation in past years continued to feed through. Meanwhile, inflation remained above double digits until the second quarter of 2018, with rising prices further squeezing Ghanaians’ disposable income. A slowdown in oil sector growth may have also led to lower spending by expatriates and business visitors, a significant source of income for some modern retail outlets.

Market Uptick

However, by mid-2018 the market started to pick up again, as growth continued while inflation continued to drop, and the government’s fiscal policy strengthened confidence in the outlook. In the third quarter of 2018 Broll Ghana reported that interest in mall space in the secondary retail market was increasing, effectively meaning that retailers not previously present in certain malls were looking to lease space in them. As the company noted, the retail sector’s performance is closely tied to that of the economy as a whole, and with growth expected to be robust in 2019, inflation trending downwards, and the cedi stable, this bodes well for the industry.

Investment in modern retail space is thus accelerating. In December 2018 Takoradi Mall opened its doors, bringing nearly 20,000 sq metres of gross leasable area to the port city, which is the centre of Ghana’s oil industry and one of the country’s fastest-growing urban areas. The mall has a catchment area population of around 600,000 and was built by Ghanaian oil and gas services company Amaja Oil Fields with an investment of $40m. South African retailer Shoprite is the anchor tenant, as it is in a number of malls in Ghana and elsewhere in Africa. JLL estimated that there is 30,000 to 40,000 sq metres of additional retail centre development in the pipeline for Accra.

Commercial

Activity in the commercial real estate sector was relatively steady in 2017 and the first half of 2018, following a slow year in 2016 thanks to the economic environment. Nonetheless, the market has started to pick up towards the end of 2018 and early 2019. As Broll Ghana noted in late 2018, areas of Accra such as Ridge and Airport City continue to perform strongly, thanks to their competitive advantages in location and facilities. More than 41,000 sq metres of additional space came onto the market in 2018 in locations such as Atlantic Towers, SCB Towers and 335 Place, with rents remaining stable despite the growing supply.

The central business district and Airport Residential Area were achieving rents of $30 to $45 per sq metre as of late 2018, according to JLL, though vacancies ranged between 10% and 20%.

Outlook

By the second half of 2018 the Ghanaian real estate market was showing clear signs of an upturn, following the country’s robust economic performance. Structural competitive advantages in stability, location and demographics are encouraging demand. Meanwhile, government support for the development of the mortgage market and the introduction of REITs are in the offing, which is expected to help improve the sector’s maturity and boost its investment profile.

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Ghana's cement producers look to expand operations

With the construction industry growing at a lively pace, Ghana’s cement market has continued to expand, encouraging both local producers and importers to make investments for the future.

Key Players

Ghana’s primary market player Ghacem was founded by the government in 1967 in partnership with Norway’s Norcem AS. The participation of foreign investors in the company has continued since, and the current majority owner is Heidelberg Cement, one of the largest building materials companies in the world, with a 93.1% stake. The government holds a 5% stake, leaving J A Addison, founder of Ghacem, with 1.9%.

Ghacem runs two grinding facilities, one in Tema and one in Takoradi, which are both major ports. As of 2017, the latest year for which full figures were available, the company had capacity to produce 4.3m tonnes of cement per year.

Other market players include Diamond Cement Ghana, which was founded in 2002 and owns a plant at Aflao in the Volta Region. Diamond Cement Ghana is part of the Diamond Cement Group, which also operates factories in Takoradi and Buipe. The Savanna Diamond Cement factory in Buipe is a 440,000-tonnesper-annum (tpa) plant in operation since 2015.

Segment Development

Overall, Ghana has cement production capacity of more than 7.4m tpa, according to official figures. This exceeds domestic demand, which stood at around 5m tonnes in 2017; however, the growth of the construction sector has led to increases in consumption, which is benefitting local suppliers.

“There was significant growth in cement demand in 2017,” Morten Gade, managing director of Ghacem, told OBG. “It expanded by 14.5%, which is huge. While this has been tapering down, we expect a growth rate of 6.5% for 2018 and 6% for 2019.”

According to Gade, the growth is not as strong as had been hoped, partly due to government projects being slow to get off the ground and muted confidence in the private sector. Nonetheless, with a wave of infrastructure projects pushing forward in 2019 and broad economic growth sustained, the outlook for the cement industry may be brightening. The prioritising of road construction in the 2019 budget should help boost domestic cement production.

Expansion

Therefore, producers and importers have been looking to ramp up their presence on the Ghanaian market. In August 2017 President Nana Akufo-Addo laid the foundation for a new cement plant in the free zones enclave in Tema. Known as Supacem, the $55m plant produces 1m tonnes of cement per year and is operated by CBI Ghana, the local partner of LafargeHolcim, the world’s largest cement manufacturer.

In April 2018 Johann Claassen, CEO of PPC, South Africa’s biggest cement manufacturer, cited Ghana as one of the promising markets in Africa for cement, given a wave of infrastructure projects being approved by the government. Some players in Ghana have taken this as an indication that the company is eyeing Ghana as part of its drive for expansion across the continent.

Nigeria’s Dangote Cement, one of West Africa’s biggest companies, has also been expanding on the market. It has been present in Ghana since 2011 and operates a terminal and plant bagging and importing cement at Tema, with capacity of 1.5m tpa. The company is also investing $100m in a new grinding plant at Takoradi, which will process imported clinker. The facility will also have capacity of 1.5m tpa, and is expected to commence operations by the end of 2019.

Representatives from Dangote Cement have expressed that they do not perceive great risk from growing competition on the Ghanaian market. More broadly, however, the industry has raised concerns about low-cost imports, which have become a challenge for some manufacturers. In October 2018 the Cement Manufacturers Association of Ghana appealed to the Ghana Standards Authority to tighten quality checks on imported cement to ensure that local producers are not undercut by substandard products.

 

 
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Ghana establishes new construction regulator and prioritises infrastructure investment

A budget prioritising infrastructure investment, one of the world’s fastest-growing economies and strong demand from demographic growth are the main factors driving the Ghanaian construction industry. Public projects to build and improve roads, railways and social infrastructure are in the pipeline, in addition to the $5bn in UN-backed investment in affordable housing to address the country’s shortage. The sector’s growth has led to renewed calls for the establishment of an official body to regulate and promote construction business, particularly to support domestic companies and tackle malpractice.

Growth 

Though the spell of double-digit growth seen between 2011 and 2012 at the height of Ghana’s oil boom is firmly in the past, sector momentum is nevertheless on the up. According to the Ghana Statistical Service, the construction sector contributed GHS19.4bn ($4.2bn) to rebased GDP in 2017, up from GHS15.2bn ($3.3bn) in 2016.

The sector’s importance to the economy has grown accordingly, accounting for 8.1% of total GDP in 2017, up from 7.7% in 2016. In the first three quarters of 2018 the construction sector was valued at GHS14.2bn ($3.1bn). Given the strong push for investment by the government, and the need for modern housing and commercial, retail and industrial property, industry players are upbeat about the outlook for the sector. “In terms of the economic cycle, things are due to pick up,” Hussein Fakhry, co-owner and managing director of Key Architectural Group, told OBG. “In terms of stability and resources, the economy is getting stronger and the infrastructure is improving.”

Ghana is enjoying a strong recovery after a slowdown in the middle of the decade. Rebased GDP growth stood at 5.4% in both the first two quarters of 2018, according to pan-African bank Ecobank, and the IMF expects that full-year growth for 2018 will reach a pace of 6.3%. The government is targeting a growth rate of 7.6% in 2019, which would make Ghana one of the world’s fastest-growing economies two years in a row. Meanwhile, Ecobank expects a robust growth profile and potential for long-term stability after a decade during which a boom was followed by significant cooling, attributable in part to the slump in global oil prices starting in mid-2014. Lower government debt and a reduced fiscal deficit, combined with inflation being brought under 10%, all bode well for the country’s outlook.

There have been some concerns about the end of a support deal with the IMF in April 2019, but the fact that the agreement is coming to an end can be seen as an indication of its success in encouraging fiscal consolidation and structural reform.

“The economy should be quite supportive to the construction industry,” Kwame Nyantekyi-Owusu, executive chairman of Inter-Afrique Holdings, a Ghana-based company involved in sectors such as real estate, construction and financial services, told OBG. “The government has the capability and discipline to deliver, and hopefully the end of the IMF deal will not lead to greater volatility.”

Nonetheless, there are risks. Ghana is expected to be affected by the escalated trade war between the US and China, partly because China is a major investor and trade partner, and partly due to the impact that it would likely have on global growth and appetite for investment in emerging markets.

Sector Oversight

Several government institutions are involved in the construction sector, including the Ministry of Transport, the Ministry of Roads and Highways, the Ministry for Sanitation and Water Resources, and the Ministry of Works and Housing. This allows each ministry to focus strongly on its own remit, although it occasionally leads to fragmentation in overall sector oversight.

The Ministry of Special Development Initiatives (MSDI) was established in February 2017 and is responsible for the development of infrastructure at the constituency level. The MSDI operates through the Infrastructure for Poverty Eradication Programme, a government initiative that aims to allocate $1m to each of Ghana’s 275 constituencies to meet infrastructure development needs. The ministry coordinates the work of its three development authorities, which are divided into the coastal region, the central region and the northern region.

Generally, the legislative and regulatory framework is regarded as well devised and clear. However, the implementation and enforcement of policies is not always as strong as it could be. Moreover, improvement is needed in the coordination between sector stakeholders in the public and private sectors.

New Regulator

In September 2018 Mavis Hawa Koomson, the minister of MSDI, signalled the government’s strong support for the creation of the Construction Industry Development Authority (CIDA) at the 10th annual conference of the Association of Building and Civil Engineering Contractors of Ghana (ABCECG). The CIDA would act as an overarching regulator and supporter of the construction industry.

The government would work with the ABCECG to enhance the competitiveness and profitability of the sector as a whole, and the CIDA would ensure better compliance to building regulations and standards. The authority is also expected to advise the government on the construction sector, as well as register contractors, consultants and other enterprises involved in the sector, such as materials providers.

The ABCECG sees the creation of an authority as essential to the transformation of the sector and to boosting the sector’s contribution to Ghana’s economic development. Prosper Yao Ledi, president of the ABCECG, told local media in October 2018 that a draft bill to establish the regulator was being carried out in cooperation with other sector stakeholders, including the Business Sector Advocacy Challenge Fund, a programme supported by international donors to boost business advocacy.

Additionally, Ledi stated that the authority would be able to help clamp down on one of the biggest challenges that the sector faces, namely delayed payments to contractors. In conjunction to its licensing and regulatory role, the CIDA would be tougher on delayed payments to contractors and ensure that debtors pay interest on the payments that take longer than the stipulated time.

Furthermore, the regulator could help ensure that no projects are started until funding had been obtained, and that it would help local businesses compete more strongly with international players. The establishment of the new regulator would also create a more level playing field, and an environment in which construction companies could grow stronger and compete at an international level.

Budget

The 2019 budget contains several projects that are set to boost the construction industry as the administration of President Nana Akufo-Addo looks to upgrade Ghana’s social and physical infrastructure. The budget statement and economic policy for 2019 was presented by Ken Ofori-Atta, the minister of finance, in November 2018 and outlines the government’s commitment to supporting the development of infrastructure.

The Ministry of Education has pledged to start work on the construction of 20 new technical and vocational education and training centres, and 10 new science, technology and maths centres, according to professional services company PwC in its “2019 Budget Highlights” report. The ministry also expects to upgrade 34 vocational training institutions and 50 schools classified as “collapsing”, and complete delayed building projects in the senior high school segment. In 2019 the education sector was allocated GHS12.9bn ($2.8bn). The 39% increase in spending on the previous budget is partly attributable to growing investment in infrastructure.

For the Ministry of Health, the budget allocates spending for the construction of one district hospital and five polyclinics in the Western Region, and 15 Community-based Health Planning and Services compounds countrywide, as well as for the upgrade of the Hohoe Municipal Hospital. Meanwhile, the Ministry of Food and Agriculture is set to build 30 new warehouses to increase storage capacity, and to establish cattle ranches in a number of locations across the country to reduce conflict between cattle herders and arable farmers. Five new rural technology facilities are also in the pipeline, under the aegis of the Ministry of Trade and Industry. As part of the government’s agriculture transformation programme, 100 new greenhouses are due to be constructed by the end of 2019 to bring the total number of greenhouses in Ghana to 175.

Transport

As expected, some of the biggest projects are in the transport sector, where a significant increase in budget allocation is set to lead to a wave of new contracts and the acceleration of existing developments. Some of the most significant initiatives for the Ministry of Roads and Highways in 2019 include the construction of new key roads totalling 1150 km. The ministry will also undertake routine maintenance of 42,600 km of trunk, urban, and feeder roads, while extending rehabilitation works to 515 km of roads, up 12% on 2018.

The government has engaged China’s hydropower engineering and construction company Sinohydro Corporation to construct many of the roads, bridges and interchanges under a $2bn agreement signed in July 2018. The deal will see the Chinese company build crucial infrastructure in exchange for revenue from a bauxite project under development in Ghana. The government will also continue to use public-private partnerships (PPPs) to bring the crucial Accra-Takoradi and Accra-Tema Motorways, and the Accra-Kumasi dualisation project to completion.

Overall, the government allocated GHS1.3bn ($280.9m) to the transport sector, up 142% from the GHS533m ($115.2m) allocated in 2018. According to PwC, the budgeted expenditure for the sector would ensure a more reliable and extensive road network, improved accessibility, job creation and the prospect of sustained economic growth.

Rail 

Established in February 2017, the Ministry of Railways Development (MRD) has a budget of GHS544m ($117.6m) for 2019, up 17% on GHS636m ($137.4m) in 2018. Its key initiatives for 2019 include the complete rehabilitation of the 56-km narrow-gauge line from Kojokrom to Tarkwa in the south-west of the country via the Nsuta corridor, a mining and cocoa-growing region.

The ministry also aims to complete the construction of the Western Line, which will run from Manso, north of the port and oil city of Sekondi-Takoradi, to Kumasi, with a branch line from Awaso to Dunkwa, and launch the first phase of the 596-km line from Kumasi to Paga on the Burkina Faso border. Thanks to its location in the heart of the south of the country, Ghana’s second most-populous city and capital of the Ashanti region, Kumasi is a strategically important site and economic powerhouse, as well as a hub for national and international transport and logistics. The MRD also seeks to select a concessionaire for the construction of the rail link between the Tema Port – Ghana’s largest port – and Ougadougou, the capital of Burkina Faso. This north-south corridor is at the heart of Ghana’s goal of becoming a regional transportation and logistics centre. Currently, the country lacks a railway network linking it to the landlocked countries to the north, while neighbouring Côte d’Ivoire and Togo both have railways from their coastal ports to their northern borders, giving them a competitive advantage in international transport.

Another aim of the MRD is to complete feasibility studies in 2019 for a range of other projects that are expected to provide substantial opportunities for contractors, suppliers and service providers in the construction sector. These include the development of metro and light rail transit systems in Accra and Kumasi, and the Trans-ECOWAS rail line from Aflao on the Togolese border through Cape Coast to Elubo on the border with Côte d’Ivoire. The latter is part of a broader regional system linking members of ECOWAS, and could play a central role in supporting greater regional economic development and integration. The MRD also expects to complete a study on the redevelopment of the long-neglected Central Line from Kotoku in the Greater Accra Region to Huni Valley in the Western Region.

PwC expects most of the projects to be funded through the Sinohydro deal and PPP contracts, providing considerable scope for foreign and private contractors to participate in railway development.

Housing Needs

Private sector demand, meanwhile, is also robust, driven by Ghana’s sustained economic and demographic growth. In 2010, the latest year for which official census statistics are available, the population was growing by 2.5% annually, more than double the global average of 1.2% as estimated by the World Bank in 2010. According to Demographic Dividend, an organisation backed by Johns Hopkins University and the Bill and Melinda Gates Foundation, 38.8% of the population was under 15 in mid-2016, signalling a youth bulge that will see millions of young Ghanaians looking for their own homes and forming new family units in the coming years. Income growth over the past decade has already seen the World Bank move Ghana to middle-income status, and the growing middle class is increasingly demanding better homes.

Furthermore, GDP per capita has grown from $1096 in 2009 to $1692 in 2017, according to the African Development Bank (AfDB).“The Ghanaian middle class’ capacity to invest is increasing,” Fakhry told OBG. “The future of Ghana and Africa is based on this middle class, and business should be oriented to it. For many, living in the city is an achievable aspiration. Urbanisation is on the rise, which will keep pressure on cities to expand.”

Ghana’s urban population has risen from 43.9% of the total in 2000 to 55.3% in 2017, according to the AfDB. Demand continues to rise more quickly than supply. A housing deficit of 1.5m units in 2015 is expected to rise to 1.9m in 2019, according to official figures. In 2018 the deficit was estimated at 1.7m. Ghana builds 35,000 to 40,000 housing units per year. While estimates suggest that this could rise to 90,000 by 2020, more than 100,000 units a year are needed to meet current demand. During the 2019 budget speech, the minister of finance stated that around 200,000 housing units of various types would commence over the medium term.

As in many other markets, emerging and developed, one of the biggest challenges has been that a large part of demand is from the lower- and lower-middle-income segment, which private sector developers have often shied away from due to low margins. This issue is particularly acute in Ghana, where the cost of construction is relatively high, thanks partly to the cost of imported construction materials. Furthermore, disposable incomes at the lower end of the market are still fairly meagre.

Affordable Housing

With these factors in mind, the development of more affordable housing has grown in importance on the government’s agenda in recent years. In 2005 the government of then-President John Agyekum Kufuor started work on devising affordable housing schemes for government employees. Since then, the scale of demand has increased momentum behind the drive for greater affordable housing.

In February 2018 President Akufo-Addo pledged to push forward the efforts of improving affordability and boost housing supply. In addition to abolishing a 5% value-added tax on housing sales, the government is also focusing on improving the environment for mortgage lending and private-sector investment in housing.

Sustaining Housing

A major boost to these efforts came in September 2018, when the government signed a deal with the UN Office for Project Services (UNOPS) to construct 100,000 housing units through investment of up to $5bn. The agreement is seen as a major step towards the UN’s sustainable development goals, and the agency announced that it would help the government make more sustainable, affordable and environmentally sound housing available to its citizens while also providing jobs and boosting the local economy.

The 100,000 homes will have energy-efficient solar rooftops, and the construction will entail the use of local materials, equipment and expertise. As well as lowering costs, this should also help support the development of the Ghanaian construction sector and its domestic supply chains. The construction would also utilise modern technology and help the integration of technology into the local building industry. “Though conventional construction methods still dominate, new technologies are on the horizon,” Kwaku Asuama Yeboa Abebrese, chairman and managing director of local Taysec Construction, told OBG. “Precast and cellular concrete techniques, which are starting to come on-line, will be effective in addressing the housing shortfall. However, one has to be careful about the climate. Given the high temperatures and humidity, certain technologies might not work in Ghana as they do elsewhere.”

The government will identify and allocate land for the developments, and is also expected to help create an environment conducive to foreign direct investment in housing development, following the UNOPS Social Impact Investment Initiative. This aims to reduce risk and structure infrastructure investment to help attract private sector financing while ensuring commercial returns.

Outlook

The construction industry’s growth has picked up over the past couple of years, in line with Ghana’s economic recovery, demonstrating the strong link between sector performance and overall economic confidence, and the government’s willingness to invest in infrastructure. With another year of robust GDP growth forecast for 2019, the outlook for construction is promising. The strong pipeline of government infrastructure projects under the 2019 budget will provide a wide range of opportunities for contractors. Given the long-term nature of some of the projects, momentum should be sustained into 2020 and beyond, provided that the global economic environment does not suffer severe shocks. The UNOPS housing programme should also be a boon for domestic companies in particular, which are also expected to benefit from a long-awaited regulatory and development body that can provide a framework for the implementation of standards and legislation.

Read more... 0

Ghana establishes new construction regulator and prioritises infrastructure investment

A budget prioritising infrastructure investment, one of the world’s fastest-growing economies and strong demand from demographic growth are the main factors driving the Ghanaian construction industry. Public projects to build and improve roads, railways and social infrastructure are in the pipeline, in addition to the $5bn in UN-backed investment in affordable housing to address the country’s shortage. The sector’s growth has led to renewed calls for the establishment of an official body to regulate and promote construction business, particularly to support domestic companies and tackle malpractice.

Growth 

Though the spell of double-digit growth seen between 2011 and 2012 at the height of Ghana’s oil boom is firmly in the past, sector momentum is nevertheless on the up. According to the Ghana Statistical Service, the construction sector contributed GHS19.4bn ($4.2bn) to rebased GDP in 2017, up from GHS15.2bn ($3.3bn) in 2016.

The sector’s importance to the economy has grown accordingly, accounting for 8.1% of total GDP in 2017, up from 7.7% in 2016. In the first three quarters of 2018 the construction sector was valued at GHS14.2bn ($3.1bn). Given the strong push for investment by the government, and the need for modern housing and commercial, retail and industrial property, industry players are upbeat about the outlook for the sector. “In terms of the economic cycle, things are due to pick up,” Hussein Fakhry, co-owner and managing director of Key Architectural Group, told OBG. “In terms of stability and resources, the economy is getting stronger and the infrastructure is improving.”

Ghana is enjoying a strong recovery after a slowdown in the middle of the decade. Rebased GDP growth stood at 5.4% in both the first two quarters of 2018, according to pan-African bank Ecobank, and the IMF expects that full-year growth for 2018 will reach a pace of 6.3%. The government is targeting a growth rate of 7.6% in 2019, which would make Ghana one of the world’s fastest-growing economies two years in a row. Meanwhile, Ecobank expects a robust growth profile and potential for long-term stability after a decade during which a boom was followed by significant cooling, attributable in part to the slump in global oil prices starting in mid-2014. Lower government debt and a reduced fiscal deficit, combined with inflation being brought under 10%, all bode well for the country’s outlook.

There have been some concerns about the end of a support deal with the IMF in April 2019, but the fact that the agreement is coming to an end can be seen as an indication of its success in encouraging fiscal consolidation and structural reform.

“The economy should be quite supportive to the construction industry,” Kwame Nyantekyi-Owusu, executive chairman of Inter-Afrique Holdings, a Ghana-based company involved in sectors such as real estate, construction and financial services, told OBG. “The government has the capability and discipline to deliver, and hopefully the end of the IMF deal will not lead to greater volatility.”

Nonetheless, there are risks. Ghana is expected to be affected by the escalated trade war between the US and China, partly because China is a major investor and trade partner, and partly due to the impact that it would likely have on global growth and appetite for investment in emerging markets.

Sector Oversight

Several government institutions are involved in the construction sector, including the Ministry of Transport, the Ministry of Roads and Highways, the Ministry for Sanitation and Water Resources, and the Ministry of Works and Housing. This allows each ministry to focus strongly on its own remit, although it occasionally leads to fragmentation in overall sector oversight.

The Ministry of Special Development Initiatives (MSDI) was established in February 2017 and is responsible for the development of infrastructure at the constituency level. The MSDI operates through the Infrastructure for Poverty Eradication Programme, a government initiative that aims to allocate $1m to each of Ghana’s 275 constituencies to meet infrastructure development needs. The ministry coordinates the work of its three development authorities, which are divided into the coastal region, the central region and the northern region.

Generally, the legislative and regulatory framework is regarded as well devised and clear. However, the implementation and enforcement of policies is not always as strong as it could be. Moreover, improvement is needed in the coordination between sector stakeholders in the public and private sectors.

New Regulator

In September 2018 Mavis Hawa Koomson, the minister of MSDI, signalled the government’s strong support for the creation of the Construction Industry Development Authority (CIDA) at the 10th annual conference of the Association of Building and Civil Engineering Contractors of Ghana (ABCECG). The CIDA would act as an overarching regulator and supporter of the construction industry.

The government would work with the ABCECG to enhance the competitiveness and profitability of the sector as a whole, and the CIDA would ensure better compliance to building regulations and standards. The authority is also expected to advise the government on the construction sector, as well as register contractors, consultants and other enterprises involved in the sector, such as materials providers.

The ABCECG sees the creation of an authority as essential to the transformation of the sector and to boosting the sector’s contribution to Ghana’s economic development. Prosper Yao Ledi, president of the ABCECG, told local media in October 2018 that a draft bill to establish the regulator was being carried out in cooperation with other sector stakeholders, including the Business Sector Advocacy Challenge Fund, a programme supported by international donors to boost business advocacy.

Additionally, Ledi stated that the authority would be able to help clamp down on one of the biggest challenges that the sector faces, namely delayed payments to contractors. In conjunction to its licensing and regulatory role, the CIDA would be tougher on delayed payments to contractors and ensure that debtors pay interest on the payments that take longer than the stipulated time.

Furthermore, the regulator could help ensure that no projects are started until funding had been obtained, and that it would help local businesses compete more strongly with international players. The establishment of the new regulator would also create a more level playing field, and an environment in which construction companies could grow stronger and compete at an international level.

Budget

The 2019 budget contains several projects that are set to boost the construction industry as the administration of President Nana Akufo-Addo looks to upgrade Ghana’s social and physical infrastructure. The budget statement and economic policy for 2019 was presented by Ken Ofori-Atta, the minister of finance, in November 2018 and outlines the government’s commitment to supporting the development of infrastructure.

The Ministry of Education has pledged to start work on the construction of 20 new technical and vocational education and training centres, and 10 new science, technology and maths centres, according to professional services company PwC in its “2019 Budget Highlights” report. The ministry also expects to upgrade 34 vocational training institutions and 50 schools classified as “collapsing”, and complete delayed building projects in the senior high school segment. In 2019 the education sector was allocated GHS12.9bn ($2.8bn). The 39% increase in spending on the previous budget is partly attributable to growing investment in infrastructure.

For the Ministry of Health, the budget allocates spending for the construction of one district hospital and five polyclinics in the Western Region, and 15 Community-based Health Planning and Services compounds countrywide, as well as for the upgrade of the Hohoe Municipal Hospital. Meanwhile, the Ministry of Food and Agriculture is set to build 30 new warehouses to increase storage capacity, and to establish cattle ranches in a number of locations across the country to reduce conflict between cattle herders and arable farmers. Five new rural technology facilities are also in the pipeline, under the aegis of the Ministry of Trade and Industry. As part of the government’s agriculture transformation programme, 100 new greenhouses are due to be constructed by the end of 2019 to bring the total number of greenhouses in Ghana to 175.

Transport

As expected, some of the biggest projects are in the transport sector, where a significant increase in budget allocation is set to lead to a wave of new contracts and the acceleration of existing developments. Some of the most significant initiatives for the Ministry of Roads and Highways in 2019 include the construction of new key roads totalling 1150 km. The ministry will also undertake routine maintenance of 42,600 km of trunk, urban, and feeder roads, while extending rehabilitation works to 515 km of roads, up 12% on 2018.

The government has engaged China’s hydropower engineering and construction company Sinohydro Corporation to construct many of the roads, bridges and interchanges under a $2bn agreement signed in July 2018. The deal will see the Chinese company build crucial infrastructure in exchange for revenue from a bauxite project under development in Ghana. The government will also continue to use public-private partnerships (PPPs) to bring the crucial Accra-Takoradi and Accra-Tema Motorways, and the Accra-Kumasi dualisation project to completion.

Overall, the government allocated GHS1.3bn ($280.9m) to the transport sector, up 142% from the GHS533m ($115.2m) allocated in 2018. According to PwC, the budgeted expenditure for the sector would ensure a more reliable and extensive road network, improved accessibility, job creation and the prospect of sustained economic growth.

Rail 

Established in February 2017, the Ministry of Railways Development (MRD) has a budget of GHS544m ($117.6m) for 2019, up 17% on GHS636m ($137.4m) in 2018. Its key initiatives for 2019 include the complete rehabilitation of the 56-km narrow-gauge line from Kojokrom to Tarkwa in the south-west of the country via the Nsuta corridor, a mining and cocoa-growing region.

The ministry also aims to complete the construction of the Western Line, which will run from Manso, north of the port and oil city of Sekondi-Takoradi, to Kumasi, with a branch line from Awaso to Dunkwa, and launch the first phase of the 596-km line from Kumasi to Paga on the Burkina Faso border. Thanks to its location in the heart of the south of the country, Ghana’s second most-populous city and capital of the Ashanti region, Kumasi is a strategically important site and economic powerhouse, as well as a hub for national and international transport and logistics. The MRD also seeks to select a concessionaire for the construction of the rail link between the Tema Port – Ghana’s largest port – and Ougadougou, the capital of Burkina Faso. This north-south corridor is at the heart of Ghana’s goal of becoming a regional transportation and logistics centre. Currently, the country lacks a railway network linking it to the landlocked countries to the north, while neighbouring Côte d’Ivoire and Togo both have railways from their coastal ports to their northern borders, giving them a competitive advantage in international transport.

Another aim of the MRD is to complete feasibility studies in 2019 for a range of other projects that are expected to provide substantial opportunities for contractors, suppliers and service providers in the construction sector. These include the development of metro and light rail transit systems in Accra and Kumasi, and the Trans-ECOWAS rail line from Aflao on the Togolese border through Cape Coast to Elubo on the border with Côte d’Ivoire. The latter is part of a broader regional system linking members of ECOWAS, and could play a central role in supporting greater regional economic development and integration. The MRD also expects to complete a study on the redevelopment of the long-neglected Central Line from Kotoku in the Greater Accra Region to Huni Valley in the Western Region.

PwC expects most of the projects to be funded through the Sinohydro deal and PPP contracts, providing considerable scope for foreign and private contractors to participate in railway development.

Housing Needs

Private sector demand, meanwhile, is also robust, driven by Ghana’s sustained economic and demographic growth. In 2010, the latest year for which official census statistics are available, the population was growing by 2.5% annually, more than double the global average of 1.2% as estimated by the World Bank in 2010. According to Demographic Dividend, an organisation backed by Johns Hopkins University and the Bill and Melinda Gates Foundation, 38.8% of the population was under 15 in mid-2016, signalling a youth bulge that will see millions of young Ghanaians looking for their own homes and forming new family units in the coming years. Income growth over the past decade has already seen the World Bank move Ghana to middle-income status, and the growing middle class is increasingly demanding better homes.

Furthermore, GDP per capita has grown from $1096 in 2009 to $1692 in 2017, according to the African Development Bank (AfDB).“The Ghanaian middle class’ capacity to invest is increasing,” Fakhry told OBG. “The future of Ghana and Africa is based on this middle class, and business should be oriented to it. For many, living in the city is an achievable aspiration. Urbanisation is on the rise, which will keep pressure on cities to expand.”

Ghana’s urban population has risen from 43.9% of the total in 2000 to 55.3% in 2017, according to the AfDB. Demand continues to rise more quickly than supply. A housing deficit of 1.5m units in 2015 is expected to rise to 1.9m in 2019, according to official figures. In 2018 the deficit was estimated at 1.7m. Ghana builds 35,000 to 40,000 housing units per year. While estimates suggest that this could rise to 90,000 by 2020, more than 100,000 units a year are needed to meet current demand. During the 2019 budget speech, the minister of finance stated that around 200,000 housing units of various types would commence over the medium term.

As in many other markets, emerging and developed, one of the biggest challenges has been that a large part of demand is from the lower- and lower-middle-income segment, which private sector developers have often shied away from due to low margins. This issue is particularly acute in Ghana, where the cost of construction is relatively high, thanks partly to the cost of imported construction materials. Furthermore, disposable incomes at the lower end of the market are still fairly meagre.

Affordable Housing

With these factors in mind, the development of more affordable housing has grown in importance on the government’s agenda in recent years. In 2005 the government of then-President John Agyekum Kufuor started work on devising affordable housing schemes for government employees. Since then, the scale of demand has increased momentum behind the drive for greater affordable housing.

In February 2018 President Akufo-Addo pledged to push forward the efforts of improving affordability and boost housing supply. In addition to abolishing a 5% value-added tax on housing sales, the government is also focusing on improving the environment for mortgage lending and private-sector investment in housing.

Sustaining Housing

A major boost to these efforts came in September 2018, when the government signed a deal with the UN Office for Project Services (UNOPS) to construct 100,000 housing units through investment of up to $5bn. The agreement is seen as a major step towards the UN’s sustainable development goals, and the agency announced that it would help the government make more sustainable, affordable and environmentally sound housing available to its citizens while also providing jobs and boosting the local economy.

The 100,000 homes will have energy-efficient solar rooftops, and the construction will entail the use of local materials, equipment and expertise. As well as lowering costs, this should also help support the development of the Ghanaian construction sector and its domestic supply chains. The construction would also utilise modern technology and help the integration of technology into the local building industry. “Though conventional construction methods still dominate, new technologies are on the horizon,” Kwaku Asuama Yeboa Abebrese, chairman and managing director of local Taysec Construction, told OBG. “Precast and cellular concrete techniques, which are starting to come on-line, will be effective in addressing the housing shortfall. However, one has to be careful about the climate. Given the high temperatures and humidity, certain technologies might not work in Ghana as they do elsewhere.”

The government will identify and allocate land for the developments, and is also expected to help create an environment conducive to foreign direct investment in housing development, following the UNOPS Social Impact Investment Initiative. This aims to reduce risk and structure infrastructure investment to help attract private sector financing while ensuring commercial returns.

Outlook

The construction industry’s growth has picked up over the past couple of years, in line with Ghana’s economic recovery, demonstrating the strong link between sector performance and overall economic confidence, and the government’s willingness to invest in infrastructure. With another year of robust GDP growth forecast for 2019, the outlook for construction is promising. The strong pipeline of government infrastructure projects under the 2019 budget will provide a wide range of opportunities for contractors. Given the long-term nature of some of the projects, momentum should be sustained into 2020 and beyond, provided that the global economic environment does not suffer severe shocks. The UNOPS housing programme should also be a boon for domestic companies in particular, which are also expected to benefit from a long-awaited regulatory and development body that can provide a framework for the implementation of standards and legislation.

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