Kenya leads region in construction projects

China Road and Bridge Corporation workers use cranes to lay T-beams over the Standard Guage Railway line at Kyulu Bridge flyover near Mtito Andei. SGR is Kenya‘s biggest infrastructure project. [PHOTO: GIDEON MAUNDU/STANDARD]

Kenya leads the East African region in terms of mega construction projects. The country has 20 ongoing large projects followed by Ethiopia at 12.

East Africa holds 20 per cent of all construction projects in Africa and 15 per cent in dollar value at $57.5 billion (Sh 5.8 trillion) in 2015, which is a slight fall from $60.7 billion (Sh6.2 trillion) in 2014.

Basic infrastructure projects, transport and energy, are top on the Kenyan development agenda, with transport taking the lion's share of 51 per cent and energy at 30 per cent.

The figures were released yesterday by consultancy firm Deloitte East Africa in a report titled Africa Construction Trends 2015.

Kenya's standard railway project (SGR) is the fourth most expensive project in the region, gobbling up $3.8 billion (Sh386 billion at current rates), with Tanzania's port at Bagamoyo coming top at a cost of $11 billion (Sh1.119 trillion).

The report also indicates Kenya is experiencing growth in the retail sector, where hotel space, modern office parks, entertainment and lifestyle facilities are experiencing a boom due to expansion of towns and cities and a growing middle class.

East African projects are predominantly financed by International Development Finance Institutions (DFIs), followed by funding from the governments.

Local firms are involved in the construction of 36 per cent of these projects, followed by China at 21 per cent. It is therefore not surprising that 85 per cent of the projects are in the public domain, 13 per cent in private-public partnerships and 2 per cent in the private domain.

"Big international financiers are favouring Kenya as a destination for their investment, among other countries in the region," said Mark Smith, Head of Infrastructure and Capital Projects, Deloitte East Africa. "...this interest might however plummet given the uncertainties surrounding the next election, and the current global liquidity issues."

The report cites donors previously preferred to fund projects with a social impact, channeling their funds through Non-Governmental Organisations (NGOs), but now are more inclined to fund projects that have a purely economic end.

Ethiopia continues to be hot on Kenya's heels as the regional economic powerhouse, with its rapid growth engineered by mega infrastructure projects attracting investors who traditionally preferred Kenyan shores to Addis Ababa.

However, Ethiopia's lack of a rejuvenated middle class, unlike Kenya, and a closed currency due to its past protectionist policies make it lag behind Kenya in development, the report indicates.