Ghana: limited 0.3% volume growth in 1Q16

Higher levels of infrastructure investment in the coming months should help Ghana’s construction industry rally after a slow start to 2016, although rising costs risk squeezing profit margins.

The industry grew by only 0.1 per cent QoQ and by just 0.3 per cent YoY in the first quarter of the 2016, well below the annualised GDP increase of 4.9 per cent, according to data released by the Ghana Statistical Service in late June. By contrast, Ghana’s construction sector expanded by 6.2 per cent YoY in 2015, with growth easing in the fourth quarter.

According to the Ghana Economic Update report by the Oxford Business Group (OBG), with a number of public works projects currently in the pipeline – ranging from housing developments to port upgrades – Ghana is likely to see an uptick in spending on construction projects in the coming months.

The report said that in late December Ghana saw its first major price hike in electricity and water tariffs since 2013. Electricity prices increased 59.2 per cent while water tariffs increased by between 69-89 per cent depending on usage, according to Ghana’s Public Utilities Regulatory Commission.

“Meanwhile, Ghana’s cement producers increased the price of cement by 9.6 per cent last year, resulting in a 50kg bag costing GHS29.30 (US$7.30), citing the depreciating cedi as the primary factor for the price change, according to press reports,” it stated.

Imports currently amount to approximately 1Mta in spite of the fact that Ghana’s production
capacity of 9Mta surpasses local consumption of 6Mta, according to a statement from Ekwow Spio-Garbrah, the Minister for Trade and Industry. From August companies importing cement from outside the ECOWAS region would now need to apply for an operating licence.