Across the globe, the coronavirus (COVID-19) pandemic has severely disrupted economies, with devastating effects on global trade and simultaneously affecting households, businesses, financial institutions, industrial establishments and companies in general.
The building and construction industry has not been spared, with the Kenyan sector feeling the full impact of the pandemic. Due to the pandemic, the sector has been hit by challenges ranging from supply chain disruptions, transportation problems, labour shortage, financial constraints, project delays to loss of jobs.
In Kenya, the construction industry contributes about 5.6 per cent to the gross domestic product (GDP) and provides employment to almost half a million people. Government statistics indicate that last year, the industry growth shrank to 0.6 per cent from an upward of 5.6 per cent projection at the beginning of the year before the pandemic hit the country in March. During its peak a decade ago, the industry was growing at an annual average of 13 per cent but this year it is projected to expand at 3.9 per cent, a sign of recovery from Covid-19 pandemic according to a report by the Architectural Association of Kenya (AAK).
“We forecast Kenya’s construction industry growth to accelerate to 3.9 per cent year-on-year in 2021 as the sector recovers from the negative impact of the Covid-19 pandemic,” said the Status of the Built Environment report. It added that while this puts Kenya in line with the 2021 Sub-Saharan Africa average of 4.4 per cent for construction industry growth, the country will not be able to recover its pre-Covid-19 growth rate.
Growth will mainly be propelled by huge infrastructural investments by the government. These include the ongoing construction of the Nairobi Expressway as well as the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor project. Other factors that will drive the sector’s growth and recovery include the dualling of the Nairobi-Mombasa Highway as well as the implementation of the affordable housing agenda.
“2021 brings with it new hope of recovery in the sector as the Kenyan government continues to remain committed in implementing investor-friendly reforms and driving large-scale infrastructure projects aimed at boosting regional integration and economic diversification,” states a report by Deloitte. The construction industry has witnessed the turmoil of Covid-19 including rising cost of steel. The increase has also been attributed to the high demand for steel amid low global supply, thereby resulting in prices of construction metals shooting up by up to 25 per cent in Kenya.
Data from the London Metal Exchange, the centre for industrial metals trading, shows that the price of a tonne of steel bars has risen from Sh40,000 in April 2020 to Sh81,000 in July this year. Steel is a vital component in the building and construction industry and is used to make roofing sheets, reinforcement bars, steel beams and columns, windows and doors, among other products. Thus, any upward change in its price means higher cost of projects. It is important to note that the iron and steel industry in Kenya forms about 13 per cent of the manufacturing sector, which in turn contributes significantly to the GDP. However, the local steel industry is heavily dependent on imported raw materials, as no local sources have been developed to date. It is estimated that the country spends about KSh60 billion annually on importation of steel, mainly from China.
Despite the unprecedented Covid-19 related disruptions and challenges, the construction industry in Kenya has deployed resilience as its response mechanism. Construction companies like Accurate Steel Mills and Devki Group have stepped up to help the country tackle the pandemic and ease the suffering witnessed due to a shortage of oxygen and cylinders in both public and private hospitals.
Accurate and Devki have been involved in initiatives to provide free medical oxygen to help deal with these shortages amid a surge in demand as a result of rising hospitalization driven by increased infections. Several other companies have also decided to help the country tackle the pandemic despite being forced to scale down operations by as much as 50 per cent since Covid-19 struck. However, others have been forced to reduce staff levels and cut down production, affecting their stability.
The pandemic has also presented an opportunity for businesses to reengineer their production lines and manufacture new products for the market, especially those that are essential in curbing the spread of the virus. The new products include alcohol-based hand sanitizers, personal protective equipment (PPE) and ventilators.
As human capital is a key factor in the construction industry, companies have undertaken different measures to curb the spread of Covid-19 in line with protocols laid out by the government. These include placing decontamination points in their workplaces and sites, social distancing, enhanced awareness of protective measures and provision of PPE among workers. Other measures taken by companies to curb transmission include provision of internet data and equipment for remote working, fumigation of workspaces, payment for Covid-19 tests when necessary and arranging for vaccinations in conjunction with county health departments.
“The adverse effects of the pandemic coupled with investor uncertainty continued to drive down employment levels, with some companies facing difficulties in paying salaries and wages to their employees,” notes a report by the Kenya Association of Manufacturers (KAM). It adds that this comes amidst an increased cost of doing business due to Covid-19 employee related support and reduced productivity.
The sector is optimistic that the roll-out of the national vaccination campaign by the government will result in containment of the pandemic and facilitate resumption of normal economic activities. Kenya is targeting to vaccinate at least 10 per cent of the population by the end of September. By the end of July 2021, over 1.2 million doses of vaccines had been administered across the country according to the Ministry of Health.
