Cushion construction sector to save economy
By Nashon Okowa
| April 18th 2020
There is evidence of a strong relationship between construction activity and economic growth. Put better; the state of a country’s economy and its construction industry are interdependent. Globally, the construction industry contributes approximately 15 per cent share of the world’s GDP and employ about seven per cent of the workforce. According to Kenya National Bureau of Statistics Economic Survey 2018, our construction and real estate industry contributed about 12.4 per cent of the GDP, that is 5.4 per cent and seven per cent respectively. Further, it employs approximately 550,000 workforce of which 60 per cent are informal.
The novel coronavirus has hit the construction industry at a worse time. We must develop deliberate valiant intervention for survival. We cannot hem and haw. Since 2015, the industry growth has been largely on a plummeting path with ignorable glimpses of growth. The challenges have been vast, some like building collapses, its own creation. In light of the government restrictions to curb the virus, it’s undoubted that the domino effect of these restrictions will hit hard, on the informally employed in this sector.
These are, inter alia, the hard working women who toil daily to serve food for construction workers on sites or the manual laborers who must wake up early to be on construction sites by 7am if they are to stand a chance of getting a day’s work. Of course the formally employed are on the line in the coming months. Not to mention the sundry manufacturers of construction products who have to cut down on production and inadvertently lay off some workers as a result of slowed construction works. What scares me is not whether we can control the virus, I think we can and will, but whether we nearly one month after confirming our first case have intervention plans for crucial sectors like construction and real estate.
Should construction be classified as an essential service in this Covid-19 reign? This is a question many nations continue to grapple with. And one we must make our mind about. Australia for instance has classified construction as an essential service and work continues on building sites. Australian Prime Minister Scott Morrison said in an interview that construction site work was needed to keep the economic activity up as it is an important part of economy. “The social distancing can be practiced on construction sites,” he said. "This keeps the economy going; keeps people in work; it keeps supporting people through this.” New Zealand on the other hand has shut down all non-essential construction work while the UK is encouraging construction companies to practice social distancing amidst calls for wider shut down. Can we pronounce ourselves on this as country? We seem to have left construction sites to continue running but cut off supply of sand into Nairobi in recent containment yet it is a critical construction material. We must decide what we want?
I wouldn’t expect the robust government interventions into the construction industry witnessed in the developed world. True, we don’t have the kind of resources to provide for instance allowances for employers with eligible employees affected by stay at home notices or even offset 75 per cent of wages in April and 25 per cent for next couple of months. But there are interventions within our reach.
Let us begin by extending at least for three months all construction levies that is construction licences, business permits and statutory approvals. It should be expressly stated that there will no liability for non-performance contracts, no liquidated damages shall be charged. Further government should intervene for deferment of loan payments for SME contractors. How about putting a plan for a fortnightly progress payment claims in public sector projects instead of monthly? This could be a fore plan to jump-start the industry and economy. Or even one-off mandatory advance payment plan for all contractors in public sector projects during the Covid-19 break. These are options we must put in place for short and long term benefits. Like our counterpart countries, we need a plan.
- The writer is chair of Association of Construction Managers of Kenya. [email protected]
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