Côte d’Ivoire emphasises infrastructure development to support expansion in transport and housing

Since the country’s return to political stability in 2011, Côte d’Ivoire’s construction sector has experienced significant growth as a result of heavy public and private investment. Foreign investors have helped to usher in new infrastructure projects, especially in the transport and housing segments. Such investments have gone hand-in-hand with the rise of local cement production driven by companies ranging from Morocco’s Ciment de l’Afrique (CIMAF) to Switzerland’s LaFarge Holcim. The supply of construction materials is expected to increase after a period of shortages, which partly stemmed from the political crises that the country faced in the early 2000s. These projects – which are part of a government effort to restore the pre-civil-war road network and provide affordable housing in Abidjan and beyond – should serve as the basis for continued economic growth in the medium term.

Sector Growth

According to the Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest, BCEAO), the construction and public works sector grew by 87.3% in 2012, for a total sector GDP of CFA1.3trn (€1.95bn). The construction sector’s value added was equal to 5.9% of GDP in 2016, according to the BCEAO, up from 1.7% in 2010. These figures show significant progress, in part due to inflation, but also to the evolution of the real estate sector, which grew at 28.3% in 2015, according to the Ministry of Economy and Finance.

Future prospects for the construction and public works sector are positive as continuous growth is expected, supported by the National Development Plan (Plan National de Développement, PND), Côte d’Ivoire’s economic development agenda, which was approved by the government in December 2015 and runs from 2016 through to 2020.

The plan emphasises infrastructure and public works projects, particularly those related to the improvement of the country’s road network, with a planned budget of CFA9trn (€13.5bn), out of CFA29trn (€43.5bn). A special fund for road maintenance was created in 2001 to help finance road rehabilitation projects, and is currently being used to ensure the processing of payments in time and the rehabilitation of approximately 4500 km of roads (63% of the country’s total of 6590 km), including tarring and pavements in cities.

Business Environment

Côte d’Ivoire ranked 142nd out of 190 countries in the dealing with construction permits category of the World Bank’s “Doing Business 2019” report – a significant improvement from 182nd in 2017.

The country was able to improve its ranking by publishing building regulations online on the Ministry of Construction’s public website; creating a one-stop shop for construction permits, called the Guichet Unique du Permis de Construire within which applications can be completed in 21 days, rather than in 87 days; and strengthening quality control by appointing an independent architect in the commission, who is tasked with reviewing construction permit applications. It further details that building a warehouse in Côte d’Ivoire would require 21 permits, compared to sub-Saharan Africa’s average of 14.8 and the average 12.5 days in OECD high-income countries. The process would also take an average of 162 days, which is down substantially on the 347 days recorded in the 2017 report, and more in line with 147.5 days and 154.6 days in the two comparative groups, respectively.

Furthermore, the process costs around 5.4% of a warehouse’s value in 2018, lower than the 9.9% sub-Saharan African average and higher than the 1.6% average in OECD high-income countries.

Challenges

In practice, real estate and construction professionals in Côte d’Ivoire welcome the changes, but are worried about the opacity and slow pace of the system. “Zoning laws are not respected, in Abidjan for instance, and procedures are heavy and lengthy,” Mariam Mahama, Strategic Development Director at developer and real estate agency Kalimba Immobilière, told OBG. “That said, a number of changes have been introduced to simplify the administrative process related to land ownership claims. This will allow for real estate transactions to occur more efficiently,” she added.

Registering property also presents some major challenges, according to the World Bank’s “Doing Business 2019” report, where Côte d’Ivoire is ranked 112th out of 190 countries, having gained one place since 2018. The process takes 30 days and requires six procedures. The average in Sub-Saharan Africa is 6.2 procedures in 53.9 days, giving Côte d’Ivoire a clear competitive advantage in the region, though it is still lagging behind the OECD high-income country average of 4.7 procedures in 20.1 days.

Public Works & Road Infrastructure

Studies conducted by the Road Management Agency, Côte d’Ivoire’s national agency in charge of road networks, show that the country’s roads have not been maintained and were extensively damaged during times of political crisis.

A 2013 study, undertaken in cooperation with the National Bureau for Technical Studies and Development, an Ivorian engineering group, revealed that more than 50% of the country’s road network was in poor condition. However, the authorities have made some headway in recent years, with a national programme to rehabilitate roads put into effect in 2016. “Côte d’Ivoire’s 2016-2020 infrastructure rehabilitation plan is a much needed initiative that should help bolster economic development,” Marcel Allou, general manager of local construction firm Colas Côte d’Ivoire, said to OBG.

In terms of project management and implementation, Côte d’Ivoire still faces constraints, primarily related to a lack of financial resources, and in some cases infrastructure development has been seriously delayed due to insecurity and political instability. More state financing is still needed to support future infrastructure work, Eugene N’Gouan, the chief engineer at Bouygues-backed COLAS, told OBG. “For now, these projects are primarily financed by International Finance Institutional such as the World Bank and the African Development Bank,” he said. He added that Chinese competitors are bringing prices down, affecting both overall quality as well as the competitiveness of local Ivorian companies.

“Increased funding opportunities for developers would boost the real estate market,” Siriki Sangaré, CEO of local real estate company OPES Holding, told OBG. “We need to implement alternative funding schemes to increase accessibility to funding for both developers and potential buyers.”

A number of Ivorian and international companies have responded to calls for tender, which has notably helped a number of North African competitors – such as Tunisia’s Société de Routes et de Batimat and Morocco’s Société Internationale de Travaux au Maroc – enter the market. Ivorian companies submit their proposals either on their own or through partnerships with internationally established companies. “Given the existing quality of training, especially at the Institut National Polytechnique Félix Houphouët-Boigny, we have the national capacity to create strong public works companies in Côte d’Ivoire and build on the success of a few firms,” Augustin Kacou, an engineer and head of mission at the Road Management Agency, told OBG.

“That said, preferential treatments or quotas favouring local companies is needed in the call for tender process to ensure the rise of a local industry, to promote the creation of engineering and construction jobs, and to help decrease overall public works prices. This has been the case in North African countries like Tunisia and Morocco.”

Local Pressures

There is a pressing need to address the root causes of the housing shortage in the country, especially in the economic capital of Abidjan. Many companies operating in the construction and public works sector face frequent delays in payment. Although the establishment of the roads maintenance fund constitutes an important step towards solving these issues in the road networks, small and medium-sized enterprises in other sub-sectors are still at risk of facing low liquidity and are compelled to take out loans to pay for suppliers. Raw materials prices also present challenges for local firms. Although the domestic production of cement is rising with the emergence of a local cement industry, materials prices remain high, with most raw materials still being imported.

Cement & Other Materials

The growth in the construction sector that started after the political crisis of 2011 has led to shortages of cement in Côte d’Ivoire, which in turn has exacerbated price increases and the country’s commercial balance due to high imports. Prices rose from CFA80,000 (€120) per 50-kg bag in 2017 to a peak of CFA120,000 (€180) per bag in 2018. Though Côte d’Ivoire is a regional leader for the production of construction materials, with annual cement production capacity expected to reach 9.4m tonnes in 2019, such shortages due to pressure from the construction market have encouraged both local and international investors to boost the production capacity domestically and thereby increase supply. “The future of real estate companies lies in integration,” Alesia Adou, director-general of local real estate assistance and financing firm Cerisier Holding, told OBG.

“Promoters must be able to offer products across the value chain to their customers, from the initial phase of planning to the delivery,” Adou added. Key players in the industry include CIMAF – owned by one of Morocco’s largest real estate developers, Addoha, and accounting for nearly half of the low-cost housing that is currently being constructed in the North African kingdom. The company has been present in Côte d’Ivoire since 2013 and is particularly well known for its cement production facility in the Industrial Zone of Yopougon.

In addition to another facility in San Pedro, CIMAF is currently building its third production factory in Bouake. For a total cost of CFA25bn (€38m), the facility will start operation in 2019 and will have a capacity of 300,000 tonnes per year. Similarly, Swiss LafargeHolcim and Turkish Limak have been present in Côte d’Ivoire since 2015 and 2016, respectively, while the Nigerian conglomerate Dangote Cement is also looking to invest in cement production in the country at some point in the near future.

Côte d’Ivoire currently has five cement production units, which collectively have a total capacity of 4m tonnes in 2017 – falling short of the 5m tonnes needed to meet local consumption needs that year. Cement companies hope to produce 6m tonnes in 2018 and 9.4m tonnes in 2019. Similar trends have been observed in the steel industry, and Côte d’Ivoire has seen rising investments in steel production. As of 2017 the country had a total of eight steel producers, including Société des Tubes d’Acier et d’Aluminium de Côte d’Ivoire (SOTACI), which is the largest producer of steel products in West Africa, with an annual capacity of over 170,000 tonnes and turnover of CFA50bn (€75m). The company exports its products to West and Central Africa and has plans for further expansion, but has encountered some difficulties. “We’ve noticed a significant slowdown since 2015, primarily due to difficulties collecting payments for most of our clients and the rise of informal products entering the market from bordering countries,” Ali Achkar, the commercial director of SOTACI, told OBG.

Such interruptions in the financing chain present the danger of turning the market into one driven by credit payments rather than cash payments. “It is for this reason that most players in the market work on diminishing risks internally,” Achkar said. Further challenges, he said, include heavy administrative procedures and high taxes, primarily for raw materials, as well as difficulties in finding qualified staff.

Another major producer of construction inputs is in the country is Société Multinationale du Bitumes, the only local bitumen manufacturer. The firm supplies both the local market as well as buyers in the region, with a total production capacity of 340,000 tonnes and a storage capacity of 40,000 cu metres.

Sector Opportunities

The construction sector grew by 87.3% in 2012, according to the BCEAO, and hit 26.7% in 2016, for a total GDP contribution of 5.9% in the same year. The construction sector’s boosted growth is primarily driven by transport infrastructure, which makes up the most important segment of infrastructure projects in Côte d’Ivoire, accounting for a third of planned investment under the initiative. The PND allocates CFA7.12trn (€10.7bn) to transportation projects, out of total of CFA29.3trn (€43.5bn), of which CFA11bn (€16.5m) is intended to be financed by the public sector, while the rest will stem from public-private partnerships, as well as through international finance institutions such as the World Bank and the African Development Bank, with CFA2.61trn (€3.92bn) allocated for road construction, pavement and tarring.

Transport Development

Beyond the extension of the Northern Highway, there are plans for the construction of the Yamoussoukro-Tiébissou-Burkina Highway, the Abidjan-San Pedro road, Abidjan’s new Yopougon-Adjamé-Plateau bridge as well as the development of a metro system for the city, work on which started in November 2017. The bridge, which will be built by the China State Construction Engineering Corporation for a cost of €216m, will be 1.4 km long and will be completed in 2020. It is expected to transport 70,000 vehicles annually. Abidjan’s metro system, meanwhile, will cost €1.4bn and be entirely financed by the French Treasury and the French Development Agency. Totalling 37.5 km, the metro will be built by French firms Bouygues, Alstom and Keolis. It is expected to transport 180m people per year and is planned to open to the public by 2023.

Similarly, logistics-related projects are in the pipeline that are set to smooth transit and shipping. These include new container terminals at the Autonomous Port of Abidjan and the Autonomous Port of San Pedro, both of which are scheduled to be built in collaboration with international transportation conglomerates. The first will be built by Bolloré for a cost of €435.4m and is due in June 2020, while the second will be built by MSC for a total cost of €460m. Discussion is also ongoing regarding the construction of a dry port in Ferkessédougou in Northern Côte d’Ivoire, as well as a major road that is set to connect the two ports of Abidjan and San Pedro.

Lastly, a 60,000-seat stadium is being built for the 2021 Cup of African Nations, which Côte d’Ivoire will host in Anyama-Ebimpé, north of Abidjan, and will be delivered in late 2019. For a total cost of CFA67bn (€100.5m), entirely financed by China, the stadium has been under construction by the Beijing and Construction Engineering Group since 2016.

Two additional stadiums for the tournament will be constructed in the cities of San Pedro and Korhogo, and existing stadiums in Yamassoukro and Bouaké will be renovated. The San Pedro Stadium is being constructed by the China Civil Engineering Construction Corporation, while the Korhogo Stadium was awarded to China National Building Material. Both stadiums will have a capacity of 20,000 seats and are expected to be completed by 2020.

Further available opportunities relate to a government initiative to develop industrial zones in the country. The government started rehabilitating the industrial zone of Youpougon back in January 2016 and is moving on to the second phase of the project, which will consist of sanitation and tarring works. Another industrial zone currently under development is PK24, outside of Abidjan. It will cover 940 ha, 218 ha of which are being built by the China Harbour Engineering Company. The African Export-Import Bank has also announced its intention to develop several industrial parks in Côte d’Ivoire, but has yet to release detailed plans for these sites.

Housing

In 2010 President Alassane Ouattara announced a landmark plan to build 60,000 housing units – 50,000 of which would be in Abidjan – during his first term in office, with a view to tackling the country’s housing deficit, which was estimated to be between 400,000 and 600,000 units. Demand for housing in the country is estimated to increase by 40,000-50,000 units each year due to population growth, which averages 2.5% annually, as well as in light of high rates of urbanisation.

The state launched the Presidential Housing Plan in May 2013, with a goal of building 150,000 units by 2020. The plan focuses largely on social housing, declaring that three-fifths of all units built must qualify as such. Results so far, however, have been somewhat sub-par, with only 13,000 units built up to 2018. This failure to deliver has been largely due to difficulties in land acquisition, fund mobilisation and fluctuating raw materials costs. Additionally, some finished units have been left uninhabited due to delays in connectivity to important infrastructure, such as water systems or the electricity grid. On top of this, there is a shortage of Abidjan-based mid-range and high-end housing units on the market, due to the fact the Ivorian middle class is growing and more businesses are searching for offices.

Around 80% of construction projects in the country are in violation of the requirements of building permits as well as security standards, according to March 2018 data from the Ministry of Construction, Housing, Sanitation and Urban Planning. In Marcory and Koumassi 90% of the 57 construction sites visited by the ministry in the first quarter of 2018 were estimated to be in violation of urban planning rules. Starting in 2018 a number of measures were taken to address this issue, namely the strengthening of control teams, the introduction of fines and the systematic demolition in the district of Abidjan.

Outlook

The Ivorian construction industry may witness some slowdown compared to the 2011-17 period, primarily due to factors external to the sector such as the government’s revenue decreasing due to lower cocoa sales and political risk associated with the upcoming 2020 elections. That said, Côte d’Ivoire’s long list of ongoing and planned projects, from highways to bridges, to ports and stadiums, provide cause for optimism.

Beyond the public works, the real estate segment is likely to also slow down due to the lack of available lands for development in the country. Nevertheless, an ongoing programme in social housing is likely to keep the sector at a sustained momentum, with a healthy growth rate for the short to medium term.