Construction industry grapples with impact of corona pandemic

Professionals plead for a building industry stimulus package to cushion casual workers as opportunities for factories re-open following Chinese supply chain bottlenecks.  

As the Covid-19 pandemic continues to sweep across the globe, Kenya’s building and construction industry has been driven to its knees. 

The sector has witnessed closure of new projects on the side of professionals while construction sites have been abandoned to reduce transmission.

The few sites still open have also been affected by a reduced labour force as well as seen a slowing of pace of work due to social distancing rules.

Closure of movement into and out of counties has also affected materials supply to sites. 

A Cytonn Investments report of the impact of the pandemic on the economy says the virus may have a 10 per cent to 25 per cent dent on GDP growth for 2020 if the authorities manage to contain the disease and a 25 per cent impact in the event if it is not stopped.

“There is evidence of the existence of a very strong relationship between construction activity and economic growth.

Put better; the state of a country’s economy and its construction industry are interdependent,” says Nashon Okowa, chairman, Association of Construction Managers of Kenya (ACMK).  

“This sector is crucial for economic growth and employment of any country. I am uneasy on the future of the industry’s growth prospect amidst this pandemic.

Since 2015, the industry growth has been plummeting and the virus has caught up with us while not in a good state either,” says Okowa. 

Key sector

According the Kenya National Bureau of Statistics (KNBS) Economic Survey 2020, construction activities continued to be an important sector in the economy despite recording a slower growth for the fourth year running in 2019.

The gross value added for the construction sector was estimated to have risen by 6.4 per cent in 2019 compared to 6.9 per cent in 2018.

The construction and real estate industry jointly contribute about 12.4 per cent of the GDP. 

Okowa says the domino effect of government restrictions to curb the spread of coronavirus is hitting hard on casual workers in the sector. 

“These are hard working women who toil daily to serve food for construction workers on sites or the manual labourers who must wake up at dawn to be on construction sites by 7am if they are to stand a chance of getting a day’s work,” he says. 

“In addition, jobs for the formally employed are on the line in coming months. Not to mention the sundry manufacturers of construction products,” says Okowa. 

China, the world’s largest supplier of construction materials is still recovering from the pandemic, which has had a direct effect on the global construction supply chain.

Most of the basic materials required for plumbing, steel, concrete boards, millwork, flooring tiles as well electrical fixtures come from China. 

Supply bottlenecks

 “The pandemic has affected the supply chain by disrupting the smooth flow of supplies to sites.

These include raw materials right from source countries,” says Maurice Owiti, Chairman, Kenya Federation of Master Builders, one of the largest associations of Kenyan contractors by numbers.

 For locally available materials such as sand, the lockdown and curfew has meant that deliveries either can’t take place or are taking almost double the normal time. 

Prices have gone up in the process, leading to an overall rise of the cost of delivery of a project.

“Work in the construction sites cannot go on as planned since employees have to be reduced and still paying them to observe the mandatory social distancing,” adds Owiti.

The hygiene observations at site means additional costs too. “Up to now, no Covid-19 -proof PPEs  (Personal Protective Equipment) have been prescribed hence we are not sure whether what we have on the sites are adequate,” says Okowa. 

Project owners are now be forced to re-negotiate prices even as they look into sourcing for alternative materials. Consequently, delays will lead to postponement of projects, impacting on revenues. 

Lenders, too, are hesitating to fund construction projects due to the uncertainty surrounding the completion of projects.

“Most clients are not paying, citing the pandemic as the reason. Most consultants are locked in Nairobi hence upcountry supervision work has been affected,” says Owitti. 

Learning curve 

Architectural Association of Kenya President, Mugure Njendu, sees supply  bottlenecks as  opportunities for local manufacturers, who have suffered over the years. 

She also sees settling the outstanding bills as the low hanging fruit for the industry.  

“Various directives have been given over the years about settling outstanding bills, yet many professionals are owed large sums of money by the national, county governments and even public institutions,” says Mugure. 

Okowa advocates for the government to come up with a Construction Industry Stimulus package to cushion casual workers as well as the formally employed. 

“Waive all construction renewal fees approval due to delays that will be experience during this crisis,” he says.