Construction Boom in Egypt Drives Chemicals Demand, Finds Frost & Sullivan Growing population and rising middle class fuels residential and commercial construction
CAPE TOWN, South Africa, Nov. 14, 2012 /PRNewswire/ -- In 2011, Egypt's chemicals market was estimated to be the second largest in Africa, after South Africa. Egypt is the largest producer of polymers and fertilisers on the continent, and is expected to continue growing in these sectors. One of the primary reasons for the market's success is the growing population, currently at 2%, as well as the rising middle class, accounting for more than 60% of the Egyptian population.
New analysis from Frost & Sullivan (http://www.chemicals.frost.com), Strategic Analysis of the Egyptian Chemicals Market, finds that the market earned revenue 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% of raw materials are imported, and a similar trend is observed in the consumer products market, which imports more than 80% of its raw materials," said Frost & Sullivan's Chemicals Materials & Food Research Analyst, Dilshaad Booley. "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.
"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 Booley. "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."
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