BMI View: Weakening government stimulus amid lower commodity prices will weigh on infrastructure growth over coming years, with our forecasts seeing a notable slowdown in the construction sector's real growth. However, Namibia's positioning as a regional logistics hub and key export route for landlocked neighbours, as well as ambitions to lower dependence on South Africa for electricity will help maintain growth. Furthermore, we have revised upwards our 2015 sector outlook from 11% growth to 14% this quarter after stronger than expected H115 growth was reported, driven by residential construction, a key element of the current development plan.
The key drivers of Namibia's construction industry growth over the short-term will be the projects awarded during the 2011-2014 Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), as well as the port of Walvis Bay expansion project, the Trans-Kalahari railway (TKR) line and the construction of the Neckartal Dam. Infrastructure surrounding the mining sector will remain a source of opportunity, although slowing demand for key commodities like diamonds and iron ore factor into our lower real growth forecasts for the construction sector.
Key Trends And Developments
The Namibia Ports Authority revealed construction on Namibia's port, called Southern Africa Development Community Gateway Port, 5km north of Walvis Bay, will start in 2015. The first phase will include construction of a NAD4bn (USD365.28mn) oil tanker jetty, a 75mn litre oil storage facility and petroleum pipelines. Phases two and three of the port, scheduled to begin in 2030, will include construction of a multi-purpose dry bulk terminal and coal terminal to supply coal shipments of up to 65mn tonnes from Botswana's Mmabula coalfields in five berths.
Namport has already reclaimed 1.25mn cu m of land for a NAD3bn (USD241.07mn) container terminal at the port of Walvis Bay. Work on the container terminal is about 25% complete, with more than NAD100mn (USD8.04mn) spent so far on the project. The terminal, part of Namport's plans to expand the port, will add 650,000 twenty-foot equivalent unit (TEU) per annum capacity to the existing 350,000TEUs. China Harbour Engineering Company is the main contractor. The terminal is scheduled to be delivered in March 2017.The Namibian government may invite private investors for the Walvis Bay port-rail link project, following completion of a detailed feasibility study, according to Namibian Ministry of Works and Transport's Permanent Secretary Peter Mwatile.
Lower oil and gas prices are a threat to the ongoing offshore exploration in the country. Namibia has attracted major players such as Tullow Oil, Murphy Oil and Royal Dutch Shell and expected between three and five exploration wells to be spud by 2016. However, in the context of tightening capex and increased fiscal discipline across the industry, there is a risk investments in Namibia will be pulled back in favour of other more prospective or more proven plays among company portfolios.
Increased Chinese demand for uranium will provide some support to government coffers and prevent a significant fall in revenue and continue to see investment in supportive infrastructure.
The Namibian government has chosen Chinese conglomerate Shanghai Electric Group Company as the preferred bidder to build a USD1.2bn combined-cycle gas-fired power plant in south-western Namibia. The plant is expected to have total capacity of up to 1,050MW. The plant will be supplied with gas from the Kudu field, while German industrial conglomerate Siemens will supply generators and turbines for the project. In case negotiations fail with Shanghai Electric, the project will be carried out by a consortium comprising Mitsubishi Hitachi Power Systems, Sumitomo Corporation and POSCO Energy. The project will be connected to the Namibian and South African power grids.
The NAD14.6bn Targeted Intervention Programme for Employment and Economic Growth (TIPEEG) economic growth and job creation package has now come to an end. The programme had a heavy social and economic infrastructure focus. However, the programme, which ran between FY2011/12 (April-March) and FY13/14, did not hit its targets and is not understood to be a long-term solution to the country's issues. Following its termination in 2014, sector growth is expected to slow in 2015.
Construction is under way on a new 5MW solar power plant near Otjiwarongo in Namibia, signalling an area for investment we highlight as having strong long-term potential, despite its small scale. The NAD120mn (USD10mn) power plant will be installed with 35,000 solar panels. The municipality of Otjiwarongo has leased a 120,000sq m site for the project. The municipality signed a public-private partnership agreement for the project with Central North Regional Electricity Distributor (CENORED) and HopSol Africa. The project is being built and funded by HopSol. The power produced by the facility will be sold to CENORED. The plant is expected to supply 13.5mn kWh of electricity annually to 2,500 homes. The plant is scheduled to start operating in December 2015. Similar power projects have been planned for the towns of Okahandja, Tsumeb, Outjo, Grootfontein, Khorixas and Okakarara.
The Namibia Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Namibia Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Namibian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Namibia to test other views - a key input for successful budgetary and planning in the Namibian infrastructure market.
- Target business opportunities and risks in the Namibian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Namibia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.