Boston, MA -- (ReleaseWire) -- 03/14/2014 -- Owing to a buoyant economic outlook, we expect that the Ugandan construction sector should enjoy solid growth of 11.4% in 2014. Lending rates are becoming more conducive for the residential and non-residential sector and the government is set to have an expansionary fiscal spending plan over the coming years which will boost the infrastructure sector. Major projects in the infrastructure sector are moving forwards, including the 600MW Karuma power project and the Hoima refinery, which provide major upside for the sector during the next few years. We forecast real growth averaging 7% to the end of our ten-year forecast period in 2023.
Key Trends And Developments
- In light of the brighter look for the economy, we believe residential and non-residential construction will be a major factor driving growth in the industry. Private consumption is set to be a key driver behind growth, which, aided by a recovery in credit growth and a relatively stable inflation outlook, will push demand for housing, especially around Kampala. Recent developments augur well for a gradual acceleration in FDI into the oil sector, while we are also seeing private investment in hotels and commercial property to match.
- The government pledged to tackle power shortages in the country and presented a long list of renewable power stations that have been lined up for construction. That said, we note risks remain prominent, with corruption likely to delay efforts. Reliance on hydropower will increase the country's exposure to weather conditions.
- South African firm Sanlam plans to invest US$190mn in Uganda's real estate sector.
- Progress in Uganda's oil and gas sector is slow, but moving forward nonetheless. Uganda has shortlisted six firms and consortia to bid as lead operator for the planned 30,000 b/d oil refinery, according to the Energy and Mineral Development Ministry.
- BMI's Oil & Gas team believes the granting of licences to China National Offshore Oil Corporation will see Uganda's upstream sector take off. This presents upside to our construction industry forecasts as not only will the oil sector need peripheral infrastructure in the midstream and downstream sectors, but also oil revenues for the Ugandan government are likely to be plied into the infrastructure sector.
- The government announced a US$400mn project to expand and modernise Entebbe International Airport, along with a number of other transport upgrade projects.
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