Construction simply means forming objects. The industry which is based on formation, is also one of the building units of the Egyptian economy, especially with the myriad of projects that the country is implementing recently. Thereby, the number one question that comes across one’s mind since the pandemic hit is: “How does this sector affect the economic resilience while maintaining its progress?” This, despite a series of obstacles the sector faces, such as schedule delays, workforce and supply chain disruptions, reduced productivity due to on-site health and safety protocols restrictions, and financial shortfalls or cash flow stagnations.
Invest-Gate digs into this industry and asks game players about the impact of the construction sector on the economy during this hard time.
Uncertainty & Resilience
First off, studying the effect of the virus on different aspects of the industry, Invest-Gate’s R&A report on the impact of the construction sector affirms that the virus is already causing slight turmoil in the Egyptian economy, where the Gross Domestic Product (GDP) growth rate hit 5% in Q3 2019/20, down from the targeted average of almost 6%. Construction, among other sectors, contributed to about 50% of the gains of the GDP, Minister of Planning and Economic Development Hala El Saeed officially confirmed in a recent meeting.
Equally noteworthy to mention that the demand for real estate, which is heavily associated with the building industry, was hit hard due to the outbreak, which created a case of economic uncertainty, taking into consideration that the sector’s annual contribution to GDP ranges between 10-15%.
Medhat Nafei, Writer and Economist, analyses to Invest-Gate the situation on a large scale. “National projects across Egypt are fueling the construction sector with a resilient and sustainable demand,” he says.
“The pandemic had a slightly negative effect on that sector and its supply chain starting from the basic materials such as steel and cement. Of course, the governmental restrictions on private sector construction activities in the greater Cairo temporally delayed the steady growth of the sector from keeping momentum but the presidential persistence on sticking to the plan for most of the ongoing mega projects neutralized this effect to a big extent,” he confirms.
In terms of the labor force, this industry according to the Invest-Gate’s report employs more than 10 mn workers and produces almost 6% of the country’s total economic output. This is because the North African nation depends heavily on foreign funding for construction and infrastructure projects, which is inevitably afflicted amid the current circumstances.
Nafei also agrees. “The construction and building materials sector absorbed labor force and participated in the slight downturn of the unemployment rate on the national level,” he stresses.
A Strong Sector in the Time of Crisis
Speaking of the government decisions to combat the crisis in the construction sector, officials have issued new policies and measures to cope with the situation. For instance, the Ministry of Housing, Utilities, and Urban Communities has promised to disburse EGP 3.8 bn in arrears to contractors to help pay salaries and expedite construction, specifically in national projects. The jurisdiction also has granted a six-month extension for contractors to finish the ongoing construction of national and government projects across the country. Other shelter-in-place measures include the extension of an EGP 500 monthly grant to irregular workers, with 1.6 mn people benefiting from the first batch. Besides, pensioners will get five overdue bonuses at a rate of 80% of the basic salary, in addition to a 14% annual bonus starting from FY 2020/21.
Likewise, Abdel Moneim El-Gamal, president of the General Syndicate of Contracting Workers, sees that the government’s efforts have helped the sector. Besides, the mega projects that the country accomplishes “push the industry all the time,” he stresses. He further adds that the ongoing progress of the sector creates more investments and job opportunities which in return keeps the economy stable and strong at tough times.
According to the Mordor Intelligence foundation for research, the construction industry in Egypt is expected to continue to expand strongly over the forecast period (2020–2025), with many investments in infrastructure, residential, and energy projects.
Omar Oteifa, chief commercial officer at Amer Group, also agrees with the important role of the construction sector in the Egyptian economy. “The construction sector plays a big role in the Egyptian economy. As demonstrated a couple of years back by President Abdel-Fattah El Sisi, the real estate and construction sector is a primary focus of investment by the government for the foreseeable future,” he says.
Regarding the industry role in pushing the economy, he further affirms, “The creation of millions of job opportunities and an influx of international investment has boosted the Egyptian economy at a time where most of the economies of the world were hit by COVID-19.”
Oteifa further emphasizes that the government deserves great credit for keeping the country functional while maintaining safety with developments now taking place all around the country not just in New Cairo and the 6th of October, places like Ain Sokhna, Port Said, El Mansoura, El Minya, and many more. “We are finally starting to see the huge unfulfilled potential of this sector in Egypt,” he notes.
Continually, he confirms that the construction sector could be the key in propelling the Egyptian economy in a model of stability and prosperity we have not seen in the past 60 years.
To wrap up, the construction sector in Egypt has confronted the crisis in a very solid way with the help of the government and the new urban development plan, despite all of the obstacles that the industry faces.