KENYA: Slower growth cements the construction sector

Production of cement, a key material that indicates performance of the construction sector, increased by 9.02 per cent in eight months through August compared to the same period last year.

The Kenya National Bureau of Statistics data shows 4.11 metric tonnes of the building material was manufactured in the period.

This is 340,000 tonnes more than 3.77 tonnes produced in the first eight months of 2014. Thus underlies the slowing performance in the sector that has experienced a double-digit growth in recent years.

Consumption of cement rose by a slower pace of 7.78 per cent [compared to production] over the same period to 3.60 million tonnes from 3.34 tonnes.

The slowdown in the sector is further underscored by the lower value of building plans approved by the Nairobi county government – where development of offices, residences, retail space and warehouses are concentrated.

The county’s data shows it cleared building plans valued at Sh101.75 billion for construction over the eight-month period. This is a quarter or Sh35.06 billion less than the Sh136.81 billion worth of residential and non-residential buildings the county approved in the same period last year.

The data shows that cement manufacturers in August cut their production by 8,877 tonnes to 531,618 tonnes compared to July. Use of the commodity rose by 34,647 tonnes to 455,700 tonnes.

Reduced activities in the sector was one of the major reasons the overall expansion in the economy reduced to 5.5 per cent in the second of this year [April to June] from six per cent last year.

The sector’s growth decelerated to 9.9 per cent over the review period from 16.6 per cent, the KNBS said.

Its performance is mainly being driven by increased expenditure by the government on key infrastructure projects including roads and the 480-kilometre Mombasa-Nairobi standard gauge railway line.

The private sector has also been increasing investment in the real estate sector, targeting largely the mixed-use developments comprising apartments for middle-income earners and shopping malls.