Construction sector is gaining ground in Mozambique – Economist

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Construction sector is gaining ground in Mozambique – Economist

12:00 CAT | 21 Jul 2017

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The Economist Intelligence Unit (EIU) believes that the construction sector in Mozambique is gaining ground despite the economic and financial crisis, and will recover further in 2018, although it remains below 2014 levels.

“Despite not yet recovering to pre-2014 levels, construction activity seems ready to recover. Even with the freezing of foreign aid and the accumulation of arrears in payments and debt increase, the Government has managed to secure financing through concessionary loans for various infrastructure projects,” the Economist analysts write.

In an industry analysis note sent to investors and available to Lusa, experts from the British magazine’s economic analysis unit call attention to the expansion of the Matola electricity grid and the road to Tanzania in the province of Cabo Delgado, two infrastructure projects funded by US$71 million from Germany and US$75 million from the African Development Bank respectively.

“Not all planned construction projects will come to an end, and the Government’s ability to secure concessionary financing for some infrastructure projects, and private sector involvement in projects that support the ore industry, will foster a modest recovery in the construction sector in 2018,” the Economist analysts conclude.

Mozambique’s construction sector relies heavily on government contracts and was affected by severe austerity measures following the fall in commodity prices and the freeze on foreign aid , following the disclosure of hidden loans valued at US$1.4 billion.

“The industry has been in recession since mid-2016 and, after heavy indebtedness between 2010 and 2014, the Government has greatly reduced contracts in 2015 and 2016,” the EIU says, noting that “construction companies account for most of the most bad debt held by Mozambican banks”.

Among the projects named by the Economist are 190 kilometres of road in Gaza province, three new bridges in the port city of Pemba, and other private projects such as the US$780 million highway to South Africa financed by South Africa’s Capital Projects, the US$2.3 billion railway line between Moatize and Macuse, and a Mota Engil contract for a port project.

Source: Lusa