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Egypt Infrastructure Report Q1 2012
Business Monitor International, Jan 2012, Pages: 70
Egypt Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Poland's infrastructure industry.
- Independent 5-year Infrastructure industry forecasts for Egypt.
- Original Infrastructure market research and Infrastructure sector trend analysis for Egypt.
- Competitive intelligence, Egypt Infrastructure company rankings and SWOT analyses on international and domestic Infrastructure companies in Egypt.
Forecasting Restrained
Following the Egyptian Revolution in February 2011, construction activity resumed relatively quickly, with Egypt's biggest construction company OCI reporting just 10 days of lost activity on the majority of its projects. Due to the prominence of domestic players, activity on existing projects resumed relatively quickly; however, those contracted to international companies are experiencing prolonged disruption, owing to fears over further unrest. In general, construction activity has actually picked up in the months following the revolution, with the Daily News Egypt reporting that construction activity in the country was picking up in July 2011 after a lull in the previous months.
As a result, and factoring in a strong performance in the first half of the year, we remain relatively bullish on the country's construction industry value for FY2010/11 and anticipate 3.3% year-on-year (y-o-y) growth to reach a value of EGP56bn.
Double-digit growth in the first half of the year, was followed by a sharp slowdown in Q3 (January- March 2011) and with a similar picture expected in Q4 we are anticipating a sharp slowdown in annual construction industry growth compared to previous years; although we still expect a relatively strong performance considering recent events.
For FY2011/12 we turn pessimistic, with a full-year contraction of 6% anticipated, with nominal value remaining around the same at EGP56bn. This is predicated on a number of considerations; however there are upside risks which could cushion the sector:
Negatives for growth:
- An interim government focusing on day-to-day operations has effectively frozen the public sector project pipeline, meaning no significant contract awards are anticipated until after the elections and the new government finds its feet. This will result in a lull in construction activity.
- Lack of financing for infrastructure projects: the government is struggling to meet immediate demands and the banks are unwilling to lend to infrastructure projects while political uncertainty persists. The outbreak of large-scale anti-government protests across the country in late November 2011 supports our core view that political risk will continue to pervade the market.
- The PPP programme pushed forward by the previous government is in a state of flux, as no new projects can be procured until the new government comes to power and outlines its stance on private investment in infrastructure.
- Domestic construction backlog at the country's pre-eminent construction company OCI shows a severe drop off in contract awards in the first quarter of the year, with just US$330mn in new orders booked – the lowest number in at least three years.
Positives providing some upside:
- The primary upside pressure is from loan agreements offered by regional neighbours – the UAE, Saudi Arabia and Qatar. The funding is a mixture of immediate budget assistance and longerterm financing for investments. Qatar has offered US$10bn including funds for construction of two new ports. The UAE is considering investing in projects worth US$670mn.
- Tied to this are loans from multi-laterals, with the World Bank offering US$200mn for sanitation and sewerage projects, while the European Investment Bank (EIB) has committed to lending US$900mn a year and supporting the use of public private partnerships (PPPs) in the country.
Projects supported by international funding, which are most likely to be job intensive or socially beneficial, will offer some solace and could take the edge off the anticipated 6% contraction initially pencilled in for FY2011/12. Over the longer term we do believe that there is potential for Egypt to return to a higher growth trajectory, although this will remain below the previous double-digit rates for some time. Much depends on the orientation of the new government, to be elected in September 2011, and its stance on investment into infrastructure. However, from a demand perspective, there is significant need for new infrastructure investment and this should ensure the construction sector continues to thrive once political stability returns.
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