Fresh fears over economy as construction sector declines

Kenya's cement consumption declined sharply in the first quarter of 2024, official Government data shows, stoking concerns about the health of the country's construction sector and broader economy.

Cement sales fell 12.7 per cent to 1,949,900 metric tonnes in the January to April period, compared to 2,234,200 metric tonnes in the same quarter of 2023, according to the Kenya National Bureau of Statistics (KNBS).

“During the quarter under review, the construction sector registered a decelerated growth of 0.1 per cent, down from the 3.0 per cent growth recorded in the first quarter of 2023,” said KNBS.

“Cement consumption declined by 12.7 per cent to stand at 1,949.9 thousand metric tonnes from 2,234.2 thousand metric tonnes in the corresponding period of 2023. The quantity of imported bitumen decreased from 25,482.6 metric tonnes recorded in the first quarter of 2023 to 17,237.8 metric tonnes in the period under review.”

The drop in cement usage, a bellwether for construction activity and economic growth, comes as President William Ruto's government has placed affordable housing as a key plank of its policy agenda.

"The decline in cement consumption is a clear sign of jitters in the construction industry and the wider economy," said John Mwangi, a Kiambu-based developer. "It's a wake-up call for the administration to re-examine its policy priorities."

The ="https://www.standardmedia.co.ke/entertainment/real-estate/article/2001497928/why-new-construction-solutions-are-not-getting-into-market">construction sector< registered a decelerated growth of 0.1 per cent in the period, down from 3.0 per cent in the first three months of 2023, the KNBS data showed.

Imports of other key construction materials, such as bitumen, also declined during the period, while iron and steel imports rose, potentially indicating a shift in the sector's activity.

Credit extended to enterprises in the construction sector grew by a modest 0.6 per cent to stand at Sh 140.9 billion as of March 2024, compared to a 4.8 per cent increase in the same period in 2023.

The slowdown in the construction industry raises questions about the government's ability to meet its ambitious affordable housing targets, which are seen as crucial for addressing the country's chronic shortage of decent and affordable homes.

"The president has made housing a centerpiece of his agenda, but these numbers suggest the sector is facing significant headwinds," Mr Mwangi said. "Urgent interventions may be needed to get the industry back on track."

For decades, a booming construction sector marked by high-rise buildings across city suburbs and most corners of the country had earned Kenya the moniker of a "big construction site", pointing to the robust economic health of the nation. However, the sharp decline in cement consumption now raises concerns, as the construction industry has long served as a bellwether for the country's broader economic performance, said analysts.

President Ruto has placed ="https://www.standardmedia.co.ke/business/real-estate/article/2001498302/should-state-focus-on-affordable-housing-or-slums-upgrading">affordable housing< as a key policy priority, aiming to build hundreds of thousands of new homes across the country. 

This ambitious agenda is not only meant to address Kenya's chronic shortage of decent and affordable accommodation, but also act as a driver of job creation in the construction sector, according to him.

 For years, the booming construction industry had been a symbol of Kenya's robust economic growth, with high-rise buildings springing up in city suburbs and across the country.

This construction boom had earned Kenya the moniker of a "big construction site", underscoring the sector's importance as a barometer of the nation's economic health. 

However, the sharp 12.7 per cent decline in cement consumption during the second quarter raises serious concerns, as it suggests a worrying slowdown in construction activity. 

This poses a significant challenge to President Ruto's affordable housing plan of injecting 250,000 units a year, which relies heavily on a vibrant construction industry to deliver on its ambitious targets and provide much-needed employment opportunities for Kenyans.