Introduction. Expansion of the Construction Sector

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2 Introduction Kenya Vision 2030 overall goal for the construction sector is to increase its contribution to Gross Domestic Product (GDP) by at least 10% per annum and propel Kenya towards becoming Africa s industrial hub. The construction industry is a major contributor to Gross Domestic Product (GDP) in the Kenyan economy and plays a leading role in determining economic growth Expansion of the Construction Sector

3 Cont. Currently, Kenya is going through a construction boom. The boom can be attributed to: Inadequate infrastructure comprising rail, roads and ports presenting opportunities for continued development in the building and construction sector. the rapid growth in population The country s 2015 Economic Outlook, shows that the construction industry is one of the major sectors drawing investors into the country.

4 Various Improvement of Infrastructure undertaken by the Government A. STANDARD GAUGE RAILWAY The project is estimated to have created 19,000 jobs provided directly by the construction firm China Road and Bridge Corporation and an additional 8,000 through the subcontractors.

5 Benefits: Cont. (SGR) Reduced Transport costs Reduce time to travel between Mombasa and Nairobi GDP Growth Job Creation Increase Industrialization Business Growth and Urbanization along the SGR Route Regional Growth East Africa and Beyond Entrepreneurship Opportunities from SGR Establishment of Training Institutions

6 Cont. B. LAMU PORT, SOUTH SUDAN, ETHIOPIA TRANSPORT (LAPPSET) CORRIDOR Kenya is spearheading the development of Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor Project to strengthen her position as a gateway and a transport and logistics hub to the East African sub-region and the Great Lakes region to facilitate trade, promote regional economic integration and interconnectivity between African countries

7 Impact: Regional Integration Trade Boost Trade Opportunities Job creation Tourism via airports Rapid Economic growth Cont. (LAPPSET)

8 Projects in LAPPSET Lamu Port (estimated cost $689 million) Highway Lamu to Isiolo Juba, Isiolo Addis Lamu Garsen (estimated cost $1,396 million) Oil Pipeline: Lamu to Lockichar crude oil pipeline, transport crude oil from South Lockichar to the Coast at Lamu for export. Railway: SGR from Lamu Isiolo Juba: Isiolo-Addis Ababa, Nairobi-Isiolo (estimated cost $7,100 million) Airports Lamu - $188 million Isiolo - $ 175 million Turkana - $143 million

9 Cont. (Projects in LAPPSET) Resort Cities Lamu $ 970 million EIRR 17.1% Isiolo $200 million EIRR 12.8% Turkana $42million EIRR 20.8% High Grand Falls Dam Along River Tana

10 The Big Four Agenda 1) AFFORDABLE HOUSING Plans to build 500,000 affordable homes in all major cities by 2022 Plans to reduce corporate tax for developers constructing at least 400 units per year Plans to increase the supply of affordable houses by partnering with the private sector to develop homes in serviced land the subject of affordable housing cannot be discussed without mentioning ancillary infrastructure. The national government must support infrastructural development in the greater metro region in collaboration with the neighbouring counties to encourage affordable housing projects by the private sector.

11 Cont. (Affordable Housing) Another key resource for realizing affordable housing would be land and by extension its optimal use. Land remains a scarce resource thus its availability and affordability especially in cities and major towns across the country where the effects of poor housing facilities is largely felt, poses a major challenge to the construction of affordable houses for the urban dwellers.

12 Cont. 2) MANUFACTURING SECTOR The Government is looking at having at least five million square feet of industrial sheds established to improve cotton production, and raising the share of the manufacturing sector from nine per cent to 15 per cent of the GDP by Low cost electricity will guarantee and accelerate the realization of the Big Four agenda. Manufacturing is expected to be a major consumer as a result of increased investment in industries, which will require massive energy, particularly in the textile and apparel, leather, agro-processing and the blue economy. The budget plans to increase the contribution of the manufacturing sector GDP to 15 per cent by 2022 by adding between $2 to 3 billion to our GDP hence increasing manufacturing sector jobs by more than 800,000. This will be achieved through establishing leather parks and textile industries in various parts of the country, reviving and transforming industries such as the blue economy and manufacturing of construction materials, and re-establishing the automobile industry which will make new vehicles more affordable.

13 Cont. (Manufacturing Sector) Apart from the high cost of energy, cheap imports have been cited as a major threat to the growth of local manufacturing. The ongoing war on counterfeits and contraband goods should therefore be viewed as a way of encouraging local manufacturers to ramp up production and thus create additional jobs for Kenyans as envisaged in the Big Four. The government has also promised manufacturers cheaper power. The expected completion of the 76 MW Garissa Solar Plant later this year is expected to bring down the cost of power to 5.6 cents per unit.

14 Cont. 3) FOOD SECURITY Expanding food production and supply, reduction of food prices to ensure food affordability, and supporting value addition in the food processing value chain. Critical initiatives that will demand energy include: enhancing large scale production; irrigation and production of agricultural inputs; adoption of post-harvest technologies such as establishing additional strategic food reserve for storage; and developing cold storage facilities. Need to expand public spending on rural infrastructure including feeder roads, extension services, and promoting agricultural research, science and technology including biotechnology.

15 Cont. The Key to achieving food security is prioritizing projects with an immediate positive and sustainable impact on food production. Fiscal reforms to spur agricultural productivity and efficiency are critical. The proposed zero-rating of materials for construction of grain storage facilities will encourage investment in the country s grain storage capacity thus reducing food loss and wastage.

16 Cont. 4) UNIVERSAL HEALTHCARE County governments need to invest in enhancing access to essential health services through provision of infrastructure and qualified health professionals. The number of referral institutions should be increased, and each county should have at least two specialized hospitals that are well equipped to the required standards.

17 Conclusion The construction industry is a major contributor to Gross Domestic Product (GDP) in the Kenyan economy and plays a leading role in determining economic growth. The industry is set to grow steadily for the next decade attributed to an increased number of projects being carried out in the country. The industry has been accelerating at a rapid pace and making a substantial contribution to the country s strong GDP growth figures on the back of major public works projects and rising demand for mixed-use and residential developments. However, the market is not without its challenges, and the funding and financing environment at all stages of project execution is tough, creating negative cost implications and a potential obstacle to the industry s long-term, sustainable growth.