Construction Boom In Egypt Drives Chemicals Demand

The country’s growing population and rising middle class is fueling residential and commercial construction, says Frost and Sullivan.

Egypt’s chemicals market was estimated to be the second largest in Africa, after South Africa last year. Egypt is the largest producer of polymers and fertilisers in the continent, and is expected to continue growing in these sectors, according to new analysis by Frost and Sullivan.

One of the primary reasons for the market’s success is the growing population, currently at two per cent, as well as the rising middle class, accounting for over 60 per cent of the Egyptian population.

The report found that the market earned revenues of $11.89 billion in 2011 and estimates this to reach $16.43 billion in 2016.

The residential and commercial construction boom in 2011 was a result of an increased need for housing and non-residential infrastructure to accommodate the swelling population. As a large percentage of the country’s residents are under the age of 39, there is a considerable need for housing and other non residential buildings, such as schools and hospitals.

Government initiatives to build the residential sector include enhanced housing finance, and private housing upgrades due to higher disposable income.

Approximately 10 billion Egyptian pounds was allocated by the government in the 2011-2012 budget for the National Social Housing Project.

Although Egypt has a wide variety of construction and manufacturing activities, due to a lack of skills and technology, it imports most of its raw materials for local production of paints and coatings, construction chemicals, consumer goods, pesticides, adhesives and sealants, and food additives.

“In the pharmaceuticals sector, more than 85 per cent of raw materials are imported, and a similar trend is observed in the consumer products market, which imports more than 80 per cent of its raw materials,” said Frost & Sullivan’s Chemicals, Materials and Food analyst.

“These raw material imports are susceptible to price fluctuations in the international market due to unstable currency, or a fluctuation in the currency exchange rates.”

Importing larger amounts of these products, or directly importing raw materials, will help domestic manufacturers reduce their import volumes. They could also establish a short-to-medium term contract with suppliers for a specific price, in order to reduce the impact of price fluctuations, said the report.

“Local manufacturing companies unable to procure larger quantities of raw materials need to seek assistance from investors, or establish a payment contract with their suppliers,” noted the Frost & Sullivan analyst.

“The government also needs to establish incentives for local raw material manufacturing to decrease the amount of imports, thereby assisting the local raw materials market to thrive.”