The economies of the Maghreb did not suffer badly during the recent financial crisis. Less exposed to the global capital markets than their Gulf peers, the economies of Algeria, Morocco and Tunisia all grew last year.
Despite this, North Africa’s construction sector has been hit badly, mainly thanks to a reliance on multi-billion-dollar investments by overseas developers, which are now being withdrawn. In January, UAE developer Sama Dubai pulled out of the $2bn mixed-use Amwaj project in Morocco, for example.
As most major real estate projects tabled for development in North Africa are under the direction of Gulf-based developers, their retreat has left a gaping hole in the region’s real estate market.
But many of the projects announced during the boom years of 2003-08 looked far too ambitious from the start. Sama Dubai’s $25bn Mediterranean Gate – the largest of the proposed real estate schemes in the Maghreb – was designed to accommodate about 500,000 people, although work has yet to start. In Algeria, ground has not been broken on Gulf Finance House’s $3bn Bouinan Economic Development Zone. In both cases, observers are sceptical the plans will ever be realised.
But Algiers, Rabat and Tunis can learn lessons from all this. Local developers and investors should be sought out for the next wave of construction, and projects should be planned and built on a realistic scale.