Zambia Infrastructure Report Q1 2012 - new market research report published

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2012-02-03 15:37:59 - Zambia Infrastructure Report Q1 2012 - a new market research report on companiesandmarkets.com

Zambia´s construction industry has grown at a rapid pace, with average real industry growth of 15.3% over the past ten years (2000-2010). Over the next five years growth will be lower than the historic trend, coming in just below the double-digit rate seen at the beginning of the decade, although still higher than the previous three years. Between 2011 and

 

 

2015 we are anticipating average annual growth of 9.3% -- equal to a stable 18%-19% of GDP.

On the whole we are confident that growth will remain consistently high over the coming years. In 2011, 9.2% real growth is expected, expanding marginally to 9.6% in 2012. However, this is contingent on a number of factors.

- Inflation has been a major source of real growth erosion over recent years and this presents a significant downside risk for our real growth forecasts going forward, as well as an upside risk to nominal value expectations. Either way, this is negative for the industry, with high costs making projects more expensive and leading to difficulties when provisioning for construction work.

- Growth will also be based on the performance of commodity prices. With government revenues generated via the mining industry, funding for projects is contingent on consistently high prices and demand. Mining activity also has a more direct impact on construction growth; with construction necessary to establish support infrastructure at the mines; transport infrastructure to facilitate the export of goods; and power and water infrastructure to support mining activity. Consequently, any expansion in mining activity will also indirectly boost construction activity.

- Demand for infrastructure is also tied to economic growth. With real GDP growth expected to average 6.5% between 2011 and 2015 -- and GDP per capita expected to increase from US$1,473 to US$2,737 -- we anticipate large growth in demand for infrastructure.

- The biggest threat to our forecast remains financing. Government revenues are insufficient to meet the infrastructure funding gap, highlighting the importance of external financing. Consequently, multilaterals like the World Bank and African Development Bank, as well as state credit agencies, remain the biggest and most important sources of funding for infrastructure in Zambia.

- Tied into financing is the government´s plans to attract infrastructure operators through for public private partnerships (PPPs). In theory this is a good idea, Zambia needs to ensure comprehensive and transparent regulations are in place, and while its high score for Country Risks in our infrastructure risk/reward ratings bodes well for stability and policy, the lack of financial instruments, illustrated in very weak scores for country rewards will be an obstacle as it attempts to attract partners.

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