What's supporting Côte d'Ivoire's construction sector

 

The construction of numerous large infrastructure projects has contributed considerably to economic expansion since 2012. The sector, still mostly driven by public investment, has witnessed significant growth in recent years; its dynamism has attracted international companies, particularly Chinese firms, which have completed several important projects in transport, logistics and energy. Activity has also benefitted from a real estate boom, with many new properties in the pipeline, especially around Abidjan.

Sector Performance

Construction is the third-largest source of employment in Côte d’ Ivoire, with 10% of the workforce involved in the sector, behind 31% in trade and 15% in manufacturing. Since 2012 the sector has gone from strength to strength, and construction GDP rose from CFA902bn ($1.6bn) in 2015 to CFA1.24trn ($2.1bn) in 2018, according to the National Institute of Statistics, hitting CFA1.51trn ($2.6bn) in 2019, as per provisional data. “The sector was deeply affected by the post-election crisis in 2010-11, but since 2012 it has been very dynamic due to considerable investment in public infrastructure, particularly in roads and urban areas,” Hamed Traoré, executive director of the Ivorian Group of Construction and Public Works (Groupement Ivoirien du Bâtiment et des Travaux Publics, GIBTP), told OBG. “Currently there are a number of large-scale projects both under construction and in the pipeline.”

Construction GDP was expected to grow again to CFA1.8trn ($3.1bn) in 2020, according to early forecasts from the Ministry of Economy and Finance (Ministère de l’Economie et des Finances, MEF); however, the Covid-19 pandemic will likely weigh on private investment and growth – due in part to volatility in global capital markets – and disruption to building projects can be expected in the short term as people are urged to stay at home and activity across sectors stalls. Figures from the IMF suggest the virus’s broader economic impact will be severe, and in April 2020 it downgraded its forecast for GDP growth in Côte d’Ivoire from 7.3% to 2.7% for the year.

Much of recent performance was driven by the CFA30trn ($51.6bn) National Development Plan (Plan National de Développement, PND) 2016-20, Côte d’ Ivoire’s medium-term economic development agenda. Infrastructure and public works projects were a key focal point of the strategy, being allocated CFA9trn ($15.5bn). State funding for the entire PND stood at CFA11.3trn ($19.4bn), and the remainder was expected to come from public-private partnerships (PPPs) and international financial institutions.

Growth Strategy

Dynamics within the sector have evolved since 2011. In the years following the political crisis, growth was mostly driven by public investment in the hope that restoring public infrastructure would attract private funds. This strategy has shown success, notably through PPPs. “Right after the crisis, most of the investment came from the state. The second phase was then driven by projects funded by donors and PPPs,” Traoré told OBG. “An increasing number of local companies are now getting involved, but there is still much to do to make the sector more inclusive and to increase the participation of small and medium-sized enterprises.”

Côte d’Ivoire has also opened itself up to new countries and investors – China, in particular. Loans from China increased by 1400% between 2010 and 2015 to $2.5bn, according to a study by the China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies in Washington, DC. Major projects carried out by Chinese firms in Côte d’Ivoire include construction of a motorway between Abidjan and the seaside city of Grand-Bassam, which was inaugurated in 2015, and the 275-MW hydroelectric dam in Soubré, inaugurated in 2017. Ongoing projects include expansion of the Abidjan Autonomous Port and the construction of a fourth and fifth bridge in the city, as well as the construction of three stadia – in Abidjan, San-Pédro and Korhogo – ahead of hosting the 2023 Africa Cup of Nations. Many of these projects are being funded through loans from the Export–Import Bank of China.

Business Environment

In recent years, the government has made efforts to improve the regulations governing the construction sector. Steps taken include the Ministry of Construction, Housing and Urban Planning publishing its building regulations online, the creation of a one-stop shop for construction permits and reinforced quality controls.

In the World Bank’s “Doing Business 2020” report, Côte d’Ivoire ranked 152nd out of 190 countries in the category of dealing with construction permits, up from 182nd in 2017 but down 10 places from its position in 2019 due to other countries’ reforms. Data from the report showed that building a warehouse in Abidjan required 22 procedures and 163 days, against 23 procedures and 357 days in 2017. While it is a clear improvement, the figures are still higher than the average of 15.1 procedures and 145.4 days in sub-Saharan Africa. In Côte d’Ivoire, procedures cost 5.9% of the total value of the warehouse, compared to an average of 8.9% in sub-Saharan Africa.

Challenges remain in the local construction permit system, especially with regards to improving its transparency and the slow pace of the property registration process, where Côte d’Ivoire ranked 112th out of 190 countries. According to the report, the process involves five procedures and takes 39 days, compared to 6.1 procedures and 51.6 days on average in sub-Saharan Africa. While Côte d’Ivoire has a regional competitive advantage in this area, it still has some way to go to catch up with OECD high-income countries, where the process requires 4.7 procedures and takes 23.6 days on average.

In terms of labour, Traoré told OBG that the construction and public works sector is experiencing a shortage of supervisors and specialised workers, particularly site managers, machine operators and field managers. To reduce this deficit, the GIBTP is working closely with the Millennium Challenge Corporation to provide technical and financial assistance to build education and training centres in public works.

Roads

Once among the best in West Africa, the local road network was severely affected by the 2011 crisis, during which time most roads fell into disrepair. Amédé Koffi Kouakou, the minister of economic infrastructure, told Bloomberg in a May 2018 interview that about 70% of the country’s asphalt roads needed repairs and 4500 km of roads are older than 18 years. The economic impact of a poor road network is significant, as it deters companies from establishing operations in certain parts of the country, and hinders the growth of sectors such as tourism. “Investing in engineering projects for universities, hospitals and roads are necessary to develop the country,” Omar Benjelloun, general manager for West Africa of engineering firm JESA, told OBG. Business-friendly policies and incentives have proven successful in attracting investors to various engineering projects.

It is estimated that €1.5bn of potential earnings are lost each year due to the poor condition of Côte d’Ivoire’s roads. For example, farmers in the cocoa industry – a major economic engine – often find themselves unable to access their plantations during the rainy season. The government has therefore taken action to address the situation. Under the PND, the state allocated CFA7.12trn ($12.2bn) to transport projects, with CFA2.61trn ($4.5bn) earmarked for road construction, paving and asphalting. Two new motorways were built in the previous decade: one between Abidjan and the capital of Yamoussoukro in 2013, and the other between Abidjan and Grand-Bassam in 2015. In late 2019 the Road Management Agency stated that a total of CFA1.6trn ($2.8bn) had been spent over the 2017-19 period to build and rehabilitate roads, which included 14 co-financed projects with a total length of 1249 km. Major road projects in the pipeline include Abidjan’s fourth bridge and repaving the road between Abidjan and San Pedro, which is expected to significantly reduce travel time between the two cities from eight hours to less than four.

Housing

The housing deficit, meanwhile, is estimated to be between 400,000 and 600,000 units. Demand is projected to increase by 40,000-50,000 units each year, driven by population growth – 2.5% annually on average – and rapid urbanisation. In May 2013 the government launched the Presidential Housing Plan, with the objective to build as many as 150,000 units by 2020. The plan focuses on social housing, which must account for 60% of all units built.

However, progress has been slow, with less than 12,000 units built as of early 2019. The pace of works is mostly due to land acquisition and fund mobilisation issues. Moreover, some finished units have been left unoccupied due to delays in connecting water and electricity to the national grids. In March 2019 Bruno Koné, minister of construction, housing and urban planning, recognised that the pace of construction was “very weak” and that the initial target would be difficult to meet in the next 10 years.

As more and more citizens enter the middle class, and with an influx of companies searching for offices in the economic capital, the market also faces a shortage of mid-range and high-end housing units around Abidjan. “The real estate sector is booming, with a lot of investment and many units under construction. However, demand continues to largely exceed supply in almost every neighbourhood of Abidjan and for almost every type of unit, both in the residential and office segments,” Mariam Mahama, strategic development director at Abidjan-based developer and real estate agency Kalimba, told OBG.

Building Materials

The rapid pace of building in the years after 2011 resulted in cement shortages, leading to rising prices and higher imports of building materials. Prices for cement rose from CFA80,000 ($138) per tonne in 2017 to a peak of CFA120,000 ($206) per tonne in 2018. Numerous housing and infrastructure programmes caused demand to double from 2m tonnes per year in 2012 to 4m tonnes in 2018, and encouraged local and foreign companies to boost their domestic production capacity. Between 2015 and 2017 more than CFA73bn ($125.5m) was invested by cement companies to increase production. As a result, output has increased sharply, from 3.5m tonnes in 2017 to an estimated 12m tonnes in 2019, and prices per tonne have returned to 2017 levels.

Key players in the cement industry include Ciments de l’Afrique (CIMAF), owned by Moroccan firm Addoha, Switzerland’s LafargeHolcim and Turkey’s Limak. CIMAF, which has production facilities in Abidjan’s industrial zone of Yopougon and San Pedro, announced the building of a third factory in the country’s second-largest city of Bouaké in 2017. At a cost of CFA25bn ($43m) and with a production capacity of 300,000 tonnes of cement per year, the facility was set to become operational in 2019.

At least eight new cement plants were opened between 2010 and 2019. In November 2018 Ciments de Côte d’Ivoire, a unit of Ouagadougou-based CIM Metal Group, opened a plant with a capacity of 3m tonnes per year, and in 2019 Nigeria’s Dangote Cement completed a CFA150bn ($257.8m) factory in Yongbon, just outside Abidjan, with a production capacity of 3m tonnes per year. Also in 2019, a factory was inaugurated on the outskirts of Abidjan in March by Sino-Ivorian joint venture Prestige Ciment Côte d’ Ivoire. The facility comprises two production lines and has a capacity of 1.2m tonnes per year.

While domestic output has risen, the industry still lacks some of the basic raw and semi-processed materials necessary for cement production, such as clinker, a mix of limestone and clay. Cement producers are thus grappling with balancing import prices and rising competition. However, this increased capacity could see Côte d’Ivoire become a significant exporter of cement in the coming years, with demand set to grow in other West African countries.

Côte d’Ivoire is also home to the only bitumen manufacturer in West and Central Africa: the Société Multinationale de Bitumes, which sold 210,000 tonnes of bitumen in 2018, up from 192,000 tonnes in 2017. The company expects to more than double 2018 sales volume to 427,000 tonnes in 2021, aided by rising demand in the region’s largest economies – namely Côte d’Ivoire, Ghana and Nigeria.

Major Projects

Abidjan inaugurated its third bridge in 2015, and the Soubré dam became operational in late 2017. Other large projects of recent years include the €1.4bn Abidjan Metro, work on which has been under way since 2017 and is scheduled for completion in 2023. The first line, entirely financed by the French Treasury and the French Development Agency, will run 37.5 km and is being built by French firms Bouygues, Alstom and Keolis. Abidjan’s road system is slated to see two more bridges. China State Construction Engineering will erect the fourth bridge, which will link Yopougon, Adjamé and the Plateau, and is expected to be completed in August 2020. It will carry 70,000 vehicles per year, and is being partly financed by a loan from the African Development Bank. Work on the city’s fifth bridge began in March 2019, and the CFA77.5bn ($133.2m) project is being funded by a loan from the Islamic Development Bank. The link will connect Plateau to the district of Cocody and is being built by the China Road and Bridge Corporation, with completion due in 2021. The 1.5-km-long bridge will carry up to 35,000 cars per day and is part of the $450m Cocody Bay Rehabilitation project overseen by Moroccan firm Marchica Med.

Three stadia are also being built ahead of the 2023 Africa Cup of Nations. One of these is located in Anyama-Ebimpé, north of Abidjan, and will have 60,000 seats. The CFA71bn ($122m) facility is being built by the Beijing Construction Engineering Group, and was set to be delivered in early 2020. Two additional stadia will be built for the event by Chinese firms in San Pedro and Korhogo, while existing facilities in Yamoussoukro and Bouaké will be renovated.

Logistics

A number of logistics-related projects are also in the pipeline, such as new container terminals at the Abidjan Autonomous Port and San Pedro Autonomous Port. San Pedro’s new container terminal is being built by Swiss firm Mediterranean Shipping Company at a cost of €460m, while French group Bolloré is building Abidjan’s second container terminal for approximately €400m. The latter is part of broader efforts to expand and modernise the country’s biggest harbour – a project which is valued at CFA1.1trn ($1.9bn), according to the Agence France Presse, with 85% of funds coming from the Export-Import Bank of China and the China Harbour Engineering Company (CHEC) appointed as contractor. The most recently completed phase was the widening and deepening of the Vridi Canal, which was inaugurated in February 2019.

Furthermore, the authorities are rehabilitating and developing new industrial zones. In December 2018 rehabilitation works at the industrial zone of Yopougon were completed at a cost of CFA24bn ($41.3m), which involved the overhaul of energy and water infrastructure, the installation of a fibre-optic telecoms network and road improvements. Two other industrial zones in Abidjan – in Koumassi and Vridi – will also be renovated, while another is currently under development just outside the city. The PK24 industrial zone will cover 940 ha, 218 ha of which will be built by the CHEC. In Yamoussoukro, 250 ha of land were undergoing development studies as of late 2019, and a 300-ha industrial zone has also been announced in Bouaké.

Outlook

With major infrastructure projects nearing completion and others under way, the construction and public works sector is likely to remain a key contributor to the economy in the medium term. Covid-19 is set to weigh on the economy in 2020, but the extent to which construction projects will be affected is yet to be seen. However, building may well continue as infrastructure facilitates the growth of other sectors.

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The Report: Cote d'Ivoire 2020

Construction & Real Estate chapter from The Report: Cote d'Ivoire 2020

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