Hassan Allam predicts project boom in Egypt

01 April 2015

Egyptian contractor says it is well positioned to take advantage of growing project market

The Egyptian general contractor Hassan Allam Construction is expecting rapid growth in Egypt’s project market in 2015.

“As I speak today, we have double the size of the backlog we had 12 months ago,” says Hassan Allam, the company’s general manager. “Currently our backlog is more than $925m. We’re expecting more contracts over coming months and we have the capacity to take on the extra work.”

Egypt has seen significant economic and political stabilisation over the last 12 months after enduring three years of turmoil in the wake of its 2011 revolution.

“As a local contractor, we have been suffering due to lack of work over the past couple of years. There hasn’t been much in the way of opportunities to grow or even sustain our size,” says Allam.

“During the difficult years, we maintained our size by increasing our activity overseas, including projects in Saudi Arabia and Algeria. This puts us in a good position to capitalise on the market’s recovery in Egypt.”

Since winning the general election held in May 2014, President Abdul Fattah al-Sisi has implemented several measures to increase security, lower fiscal deficits and reign in government debt.

Al-Sisi’s reform campaign has been backed by Saudi Arabia, the UAE and Kuwait, all of which have supplied billions of dollars-worth of financial support.

Allam says the drive to get the economy back on track has already created real benefits for construction companies.

Although Allam is optimistic about the reforms, he says the rapid transition also comes with risk.

“Inflation is the single largest risk that hangs over us – whether it comes from fuel subsidies being removed, increases in material prices, labour costs, or changes in taxation rules,” he says.

“As a contractor if we are in the middle of a project that takes two or three years and there is inflation we can’t pass it through to the client. We have to absorb it and it hits our bottom line.”

Allam says construction firms are currently struggling to deal with a rapid escalation in materials prices, with cement prices rising from £E500 a tonne to £E780 a tonne over the past 12 months.

Ongoing labour law reforms are also a cause for concern for the construction sector, according to Allam, who says legislators must be careful not to repeat mistakes made in the past.

He says that, under the old laws, there were vagaries and loopholes that created grey areas for both employees and employers.

“The legislation created situations where companies feel like they are being held hostage by labour, and workers feel like they are not being given their rights,” he says. “There needs to be a clearly defined law so that when international companies come to participate in the Egyptian economy, there is no disruption or delays due to disagreements and misunderstandings.”

Hassan Allam Construction employs more than 11,000 workers in Egypt, Algeria and Saudi Arabia.

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