Construction Sector Grows 6.6% in a Difficult Year

The growth rate of Kenya’s construction industry slowed down to a single digit in 2021 largely weakened by a loss of momentum in infrastructure projects, official figures show.

The Economic Survey 2022 shows that the sector, which comprises buildings, roads, and railways, grew 6.6% in 2021 compared with 10.1% in 2020, mainly supported by civil works.

“The sector’s performance, albeit not as strong as in 2020 was evidenced by a 23.4% increase in cement consumption from 7,375.6 thousand tonnes in 2020 to 9,098.4 thousand tonnes in 2021,” the Kenya National Bureau of Statistics says in the Economic Survey 2022.

The slower growth is in stark contrast to that of the general economy, which grew 7.5% compared to -0.3% in 2020 when it suffered the biggest drop since the disruptions caused by the 2007/2008 post-election violence.

During the period under review, consumption of cement – which is a key input in the sector – rose 23.0% to 9.1 million tonnes from 7.4 million tonnes in 2020.

Loans and advances from commercial banks to the construction and real estate sectors rose 0.9% to Sh531.3 billion last year up from Sh526.5 billion in 2020.

Completed buildings

In 2021, 431 buildings were completed by the State Department for Housing (SDH), comprising 360 housing units for the national police and prison services, and 71 housing units constructed through the Appropriate Building Materials and Technologies.

“Approximately 3,480 housing units were under construction, with an estimated construction cost of Sh6.9 billion as of 31st December 2021,” says the Economic Survey 2022.

At the same time, there were 424 housing units under construction by the National Housing Corporation at an estimated cost of Sh1.7 billion.

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The value of completed buildings reported in the Nairobi City County (NCC) fell to Sh88.1 billion in 2021 compared to Sh100.0 billion in 2020. The value of completed housing units by the SDH also fell from Sh7.3 billion in 2020 to Sh741.3 million last year.

In 2021, the total value of building plans approved by the NCC was Sh102.9 billion, representing a decline of 33.0% from Sh153.6 billion recorded in 2020.

“The value of building works completed decreased by 11.9% to Sh88.1 billion in the same period. [This] could be attributed to the increase in the cost of construction materials, transport, and fuel,” says the Economic Survey 2022.

Last August, the KNBS said the local cement market saw a demand increase of 26.6% in the first five months of 2021, driven by public infrastructure and home construction projects.

According to the statistics agency, cement consumption stood at 3.35 million tonnes in the January to May window compared to 2.64 million tonnes in 2020.

RELATED: Kenya’s Cement Demand Rises 27% on State Projects

During the period, production rose 27.3% to 3.38 million tonnes, from 2.65 million tonnes in a similar period of 2020 as producers raced to meet the rising demand.

This growth was attributed to projects such as the Nairobi Expressway, Dongo Kundu Bypass, James Gichuru-Rironi highway, Nairobi Western Bypass, and the ongoing construction of mega dams in parts of the country.

Private developers and individual households, who continued to build even during the toughest months of the pandemic, also boosted the market.

However, it is now feared that the sector may suffer slower growth this year due to a cocktail of factors among them the August polls and project delays and stoppages due to the current shortage of building materials and price escalations.

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