Businesses & Financial News

Investors scramble for Sh5.6Trillion worth of construction deals

Construction sector added more than Sh448 billion to Kenya's Gross Domestic Product from Q1 to Q3 2020. In 2019, the annual value added by the sector was measured at Sh 542 Sh billion, with a consistent overall growth since 2015.

By Steve Umidha

The first big wave of Kenya’s construction sector boom is projected in the coming months, leaving many investors scrambling for more than Sh5.6Trillion worth of building projects in the pipeline.

With the industry expected to grow at 4.5 per cent according to recent estimates by the Architectural Association of Kenya (AAK), developers will be eying prospects in the construction sector with more than Sh225Billion worth of projects across different sectors already out to bid in Kenya.

Research, data and analysis service, MEED, estimates that both foreign and local investors are now drooling for contracts to build roads and housing units across the country, even though most of those projects are yet to be awarded.

“With more than $50bn of known planned and un-awarded projects in Kenya it is more important than ever to offer a safe environment for the regional and international community to come together where they can boost business activities, rebuild partnerships, and discuss vital lessons learnt all in one place,” said Muhammed Kazi, the Vice President of DMG events – the organizer for The Big 5 Construct Kenya forum which kicks off in Nairobi today.

It has attracted over 100 local and international suppliers of construction products from Germany, Italy, Finland, Egypt, and the UAE and is touted to offer professionals a chance to source industry innovations from around the world following disruption caused by the Coronavirus pandemic.

Kenya’s real estate market appears to be on the recovery path from the pandemic–driven economic downturn, a clear indication that the sector is on the rebound – but real effect will be felt in 2022, and the year ironically coincides with electioneering period.

In the medium term, AAK in its July predictions, sees a gradual acceleration of growth, supported by a number of large-scale roads and related infrastructure projects, for which construction is likely to begin to fully take-off next year.

But that growth will however, not smash the levels seen before the pandemic hit.

“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,” noted the Status of the Built Environment report, which covered the period January-June 2021.

Available figures by the Kenya National Bureau of Statistics (KNBS) shows that Kenya’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.

And the construction industry contributed 5.6 per cent to GDP in 2019, providing employment to almost 222,000 Kenyans – but that was altered with the pandemic halting most projects before a noticeable rebound in the second quarter of the year following lifting of movement restrictions.

There are several construction companies undertaking key projects in Kenya, including major Chinese companies such as China Communications Construction Company Limited (CCCC) and its wholly-owned subsidiary, the China Road and Bridge Corporation (CRBC), which focus on the high value civil engineering and construction market.

Opportunities provided in the Big Four Agenda by the national government – particularly in the housing and construction sector is also expected to give chances to both foreign and Kenyan firms keen to participate in some of the mega construction projects.

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