Kenya’s construction sector is expected to recover this year
Kenya’s construction sector is expected to recover this year on the back of the government’s continued implementation of investor-friendly reforms as well as large-scale infrastructure projects aimed at boosting regional integration and economic diversification.
This is according to a report by Deloitte which reveals that the sector’s growth is expected to revamp to a growth of 6.3% this year. The sector contributed about 6% to Kenya’s GDP and supported more than 221, 000 jobs annually in both the public and private sectors on average over the past five years.
During the period, the sector also experienced year-on-year growth of 7.8% on average but is estimated to have slowed down to 1.3% real growth in 2020 as the COVID-19 pandemic ravaged the sector’s activity. According to the report, the residential and commercial construction sub-sectors were worst affected while the public infrastructure construction sub-sector strived to maintain growth momentum, supported by public spending. Key impediments witnessed in 2020 included supply bottlenecks, reduction in labor and constraints on financing.
Decline in value
“Residential and commercial construction were the hardest hit sub-sectors in 2020 with the latter being worse. This is brought to perspective by the decline in the value of non-residential building plans approved by Nairobi City County by about 90 percent on average in 2020. On the other hand, the value of residential building plans approved by the Nairobi City County declined by 75.8% on average,” the report states.
“2021 brings with it new hope of recovery in the sector as the Kenyan government continues to remain committed to implementing investor-friendly reforms and driving large-scale infrastructure projects aimed at boosting regional integration and economic diversification,” the report states.
It however warns that efforts to rein in expenditure, as well as growing scrutiny of the financial sustainability of Chinese-funded infrastructure projects (largely by the Kenyan Government) and Chinese lenders to curb Chinese infrastructure, will weigh on the construction industry’s medium-term recovery. Additionally, the need for fiscal consolidation given high levels of debt is expected to constrain public infrastructure investment in the medium term and slow down the construction industry’s growth.