The Construction Industry in Ethiopia 2022

Introduction

This report focuses on the construction industry and infrastructure development in Ethiopia, which includes transport infrastructure, road construction, railway, sewage and energy projects, real estate and industrial parks.

Small and medium construction companies operate in the informal market and local and foreign companies operate in the formal market. The involvement of foreign companies is dominated by Chinese companies, which are undertaking large projects. The construction market is projected to grow at an annual average growth rate of more than 8% from 2023 to 2026. The country’s 10-year development plan touches all aspects of development, including infrastructure development and the objective of public-private partnerships.

Opportunities

High demand for modern retail and commercial facilities.

Opportunities for cement and steel manufacturing to meet local demand. Public-private partnership policies giving opportunities for private investors to invest in public infrastructure development. Rapid urbanisation. Rising demand for low-cost social housing. Trade zones and industrial parks that offer investment incentives.

Outlook

Much of Ethiopia’s growth in 2023 is expected to come from infrastructure development, a tourism rebound and liberalisation of the telecoms sector. A focus of the 10-year growth plan is rapid urban development that will involve housing development and inclusion of the private sector in infrastructure development and service provision.

The government is also focusing on public-private partnerships for infrastructure development which will offer opportunities, as the country plans to address the infrastructural deficit and public services delivery gaps. The outlook for Ethiopia’s construction industry looks positive in the short to medium term. However, key downside risks include the ongoing security conflict in Tigray and company debt vulnerabilities.

Report Coverage

This report focuses on Ethiopia’s construction industry and infrastructure development and includes transport infrastructure, road construction, energy projects, real estate and industrial parks.

It includes country information, major projects and developments. There are profiles of 23 companies including international players such as China Civil Engineering Construction Corporation and China Railway and local companies such as Midroc, Afro-Tsion, Sunshine and Sur Construction.

Strengths

10-year development plan from 2020-2030 which priorities infrastructure development.

A young workforce of more than 45 million people. Competitive incentives packages for investors (tax exemptions). Government’s continuous high budget allocation to infrastructure development. High economic growth rates. High foreign direct investment compared to regional peers. Large and growing population predicted to reach 145 million in 2030.

Threats

Climate change and increasing risk of drought.

Delays in Implementation of infrastructure projects. Potential security conflicts among regional states, and or government and regional states. Risk and potential for high debts on industry players.

Weaknesses

Delays in construction industry development policy implementation. Difficulties sourcing the right materials locally. Foreign currency shortages. Frequent power outages and water supply interruptions. High levels of corruption. Limited access to credit. Poor safety precautions on construction sites, safety regulations are commonly flouted and poor enforcement by authorities. Poor transport infrastructure leading to delays in delivering times and high costs. Research and development activity is low and little innovation. Shortage of skilled labour.