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Ghana Infrastructure Report Q1 2012
Business Monitor International, Nov 2011, Pages: 64
BMI View: Ghana has a nascent oil and gas sector and we believe that infrastructure sector growth will be driven by the demand for auxiliary infrastructure. This is fully in line with BMI’s view that mining (in this case oil and gas exploration and production) in frontier markets will drive investment in transport and energy infrastructure to support the demands of extracting and, crucially, exporting minerals. A second, though certainly not secondary, driver of infrastructure development – tied to the oil and gas prospects – will be Chinese credit, which has buttressed infrastructure spending in other resource-rich countries in Sub-Saharan Africa (SSA).
Key themes for Ghana’s infrastructure sector:
- The latest report from the Central Bank of Ghana suggests a strong performance for the entire economy over the first six months of 2011, with construction cited as one of the sectors outperforming. This lends credence to our estimate of nearly 30% real construction industry value growth for 2011. For 2012 we forecast a moderation in growth, reaching 11%.
- Buttressed by one of the strongest business environments and political environments in the SSA, Ghana has good prospects and will develop its infrastructure sector by attracting foreign expertise and capital. Indeed, with a greenfield airport public private partnership (PPP) in the planning stages – which is likely to act as a litmus test – the market can emerge as one of the most desirable infrastructure stories on the continent.
- BMI’s holds a bullish outlook on Ghana’s macroeconomic prospects. The country's objective of securing a middle income level by 2015 (predicated on successful oil windfall management) suggests that Ghana is likely to rapidly outperform other markets in SSA. The presence of UK banking group Barclay’s Capital in a multibillion dollar project financing arrangement (for the STX Housing scheme) highlights the attractiveness of the market and sets a precedent for largescale project finance schemes.
- BMI's Business Environment Ratings suggest Ghana has a favourable business environment, with scores in components such as the level of institutional quality and market orientation, suggesting the country is a clear outperformer in Africa and the Middle East.
- However, risks loom, most notably the ‘oil curse’ trap, which has been responsible for the decay in governance and stability in several oil-rich West African markets, most notably Nigeria and Angola. Efforts have been made to implement standards, checks and balances, to avoid problems arising from the Dutch Disease, rent-seeking behaviour and the entrenchment of patronage Our forecasts for Ghana’s construction and infrastructure sector suggest very high levels of growth over the coming years. Historically, volatility in real growth has been high and, consequently, downside and upside risks are present in our forecasts. Oil windfalls and new greenfield projects present upside risks, while delays in implementation are the primary downside risks.
Business Monitor International's Ghana Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ghana's infrastructure industry.
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