Construction industry seen to grow by 4.5pc
By James Wanzala | July 15th 2021
The construction sector is expected to grow at 4.5 per cent despite the impact of Covid-19 pandemic.
This is according to a report by the Architectural Association of Kenya (AAK) released on Tuesday that covered the first half of this year.
“We forecast Kenya’s construction industry growth to accelerate to 4.5 per cent year-on-year in 2021 as the sector recovers from the negative impact of the Covid-19 pandemic,” said Status of the Built Environment report.
“While this puts Kenya in line with the 2021 Sub-Saharan African average of 4.4 per cent for construction industry growth, the country will not be able to recover its pre-Covid-19 growth rate.”
AAK President Wilson Mugambi said the sector’s short-term recovery will be supported by a quick return of private investment in the residential and non-residential segments. The Kenya National Bureau of Statistics (KNBS) reported that the country’s economy contracted by 1.1 per cent in the third quarter of 2020 compared to 5.8 per cent growth over the same period in 2019.
The industry contributed 5.6 per cent to GDP in 2019 and provided employment to almost 222,000 people.
‘‘In the medium term, we project a gradual acceleration of growth, supported by a number of large-scale road and related infrastructure projects, for which construction is likely to begin in 2022 and which will inject renewed momentum in the Kenyan transport infrastructure sector following the end of works on the Standard Gauge Railway (SGR) project in 2020,” said Mr Mugambi.
“Nonetheless, a gradual shift towards more financially sustainable infrastructure projects, contrasting with expensive bilateral debt-funded projects, such as the SGR, will put downward pressure on long-term growth rates.’’
The report projects growth despite the disruptions from the pandemic and related interventions that have resulted to the rising cost of steel prices subsequently affecting the country’s construction industry.
The increase has also been attributed to the high demand for steel amid low global supply, thereby resulting to prices of construction metals shooting up by up to 25 per cent in Kenya, with a kilogramme currently selling at Sh125 up from Sh85 in December 2020.
The AAK report, however, gave a neutral outlook for both real estate with a bias to positive, based on the fact that the containment of the Covid-19 pandemic through the expected mass vaccination is expected to spur economic activities.
Speaking during the launch of the report, Nairobi Metropolitan Services (NMS) Deputy Director General Kangethe Thuku said they are working on updating the buildings approval system, which was hacked in June and 18 illegal approvals done.
“We wanted to update and reform it so that it’s modern and also look at reviewers to work on accessibility and make the system faster and safer,” he said.
“That has not stopped approvals, we are doing it for small-impact projects such as five-storey buildings, on which you can get a permit within one week.” He also said NMS has formulated policies that will guide and control development for the next 10 to 15 years.
“These policies will provide insights to both the professionals in the built environment as well as local and global investors on what, how and where to invest in Nairobi,” Mr Thuku told Real Estate.
But during a panel discussion, industry experts challenged NMS to first work on the recommendations of an earlier report, which urged national and county governments to prioritise provision of infrastructure such as sewer system expansion and solid waste management for all urban areas.
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