file • full report, page 18 u.s. takes on china in kenya ... · cement in kenya, leaving...

WWW.CONSTRUCTIONKENYA.COM NAIROBI, KENYA AUGUST 2018

Why wealthy Kenyans are buying highly coveted properties in DubaiVENTURING ABROAD: Rich Kenyans are acquiring properties in Dubai to house family members pursuing higher education or to accommodate business partners who often tour the United Arab Emirates. 9

Shortage of quality warehouses spells boom for builders • FULL REPORT, PAGE 3

Delivery of premix concrete a game changer for firms • FULL REPORT, PAGE 18

Eight strategies to win the war for millennial talent• FULL REPORT, PAGE 22

AMBITION: America has stepped up its hunt for mega deals in Kenya, in a move that seeks to challenge China’s near monopoly on big-ticket undertakings such as highways, railways, and hydro-power dams in the country. Page 7

There is a huge potential for Kenyan and American companies to build on each other’s strengths and markets . FILE

U.S. takes on China in Kenya mega deals race

2 AUGUST 2018 CONSTRUCTION KENYA

BY JANET MUTEGI

Falling prices and aggressive marketing initiatives have failed to lift the demand for

cement in Kenya, leaving manufac-turers of the commodity struggling to stay afloat amid stiff competition among industry players.

Official statistics show that be-tween January and May cement consumption fell to 2.3 million tonnes from 2.5 million tonnes in the same period last year – pointing to a contraction of the sector.

The slowdown comes at a time when the prices of cement in the country have dropped to a 15-year low, weighed down by cheap im-ports and increased local produc-tion of the material.

The proliferation of inexpensive imports – mainly from China, India and Pakistan – has exerted pres-sure on cement prices as local firms struggle to win customers who al-ready have the option of buying imported cement that sells for a fraction of the locally manufactured brands.

A 50kg bag of cement in Nairo-bi, Nyeri and Nakuru is being sold by dealers at an average of Sh600 from Sh750 in 2008 and 2009 – with some brands going for as low as Sh580.

The decreasing margins are seen as a threat to the survival of local companies, most of which have recently upgraded their factories through expensive bank loans.

Cement prices have been drop-ping over the past three years de-

spite a rise in raw material prices – mainly coal, electricity and fuel, which account for nearly half of ce-ment makers’ production costs.

In the first three months of the year, the construction sector grew by 7.2 per cent, the slowest growth rate in more than five years. This was compared to 8.2 per cent growth realised in the first quarter

of last year.“The deceleration was reflected

in the decline in consumption of ce-ment from 1.5 million tonnes in the first quarter of 2017 to 1.4 million tonnes in the quarter under review,” said the Kenya National Bureau of Statistics (KNBS) in its quarterly gross domestic product report for

the first quarter of 2018. KNBS noted that the decline in

consumption was also occasioned by substantial drops in the import volume of cement which declined by 15.7 per cent and cement clinkers by eight per cent.

“Similarly, the volume of imports of construction materials such as iron and steel bars, and rods de-clined by 4.9 per cent during the quarter in review,” KNBS said.

The construction sector, which peaked in 2015 as it expanded by 13.8 per cent with 6.3 million tonnes of cement consumed, has been on a decline as the government slows down on huge infrastructural pro-jects to focus on other key sectors.

This, coupled with the entry of new cement firms in the local market, has complicated matters for the established manufacturers whose market shares are shrinking at alarming rates.

To protect their turf, market players are now engaging in fierce battles for customers, leading to a significant weakening of cement prices.

A study conducted last August found that Mombasa Cement held a market share of 15.8 per cent be-hind Bamburi, which controlled 32.6 per cent of the market at the end of 2016.

The company that began oper-ations in 2007 dislodged EAPCC from the second to the third posi-tion with a market share of 15.1 per cent slightly ahead of another new entrant - Savanna Cement.

PAGE TWO

Published by Samscom Media GroupP. O. Box 26897-00100, Nairobi, KenyaTel:- +254 (0) 20 211 29 89 / 0708 858 723

Feedback:The editor welcomes readers’ responses to all articles and editorials. Please send your comments to: [email protected]. Kindly include your contacts.

Advertising:[email protected]

Corrections: Construction Kenya endeavours to get everything it publishes correct. When mistakes are made, we want to know, and a correction will be published. Please send any corrections or comments to: [email protected].

Design & Production:Samscom Media Group, Nairobi.

Between January and May cement consumption fell to 2.3 million tonnes from 2.5 million tonnes in the same period last year. FILE

Cement producers struggle as price cuts fail to spark demand

What’s Inside...Shopping mall tenants play hardball in lease negotiationsCement manufacturers are facing tough times as slug-gish demand for the construction material continues to undermine their profitability. Page 4

State lines up incentives for developers of cheap housesThe government will offer several incentives to build-ers of low cost housing in a bid to spur development of affordable housing across the country. Page 5

U.S. scouts for mega deals in Kenya with pledge to offer value for moneyAmerica has stepped up its hunt for mega infrastruc-ture deals in Kenya, in a move that seeks to challenge China’s monopoly on big-ticket undertakings. Page 7

How the U.S. lost: Overview of China’s growing foothold in Africa Now the second largest economy in the world, China is playing a key role in the world’s economic affairs and development, not the least in Africa. Page 12

London luxury homes being sold in bulk as demand drops London developers are selling off homes in bulk to corporate landlords after a drop in demand for new-build homes among individual buyers. Page 16

Goldman Sachs analysts see a dim future for global solar market The global solar market is facing tough times with ana-lysts predicting a sharp decline in the number of solar in-stallations this year. 0

SlowdownIn Q1 2018, construction posted its slowest growth rate in over five years.

AUGUST 2018 3CONSTRUCTION KENYA

BY JOY MAKENA

Bamburi Cement is consid-ering developing new technolo-gies for road construction as it eyes a share of lucrative high-way projects that are set to be undertaken across the country.

The company, which is con-trolled by French cement giant Lafarge Holcim, has zeroed on Roller Compacted Concrete and Hydraulic Road Binders that it hopes will cut road building costs while enhancing job site efficiency.

According to Fidelis Sakwa, Bamburi’s innovation and tech-nical services manager, the plan demonstrates the company’s “effort to innovations and local creation of awareness on con-temporary global technologies

and approaches for use in the construction of roads locally”.

The Roller Compacted Con-crete is a special concrete made with very little amount of water and compressed with rollers as opposed to conventional con-crete that usually has more wa-ter and is pressed by vibrators.

The material, which can be surfaced with a small layer of bitumen or left unsurfaced, has the benefit of immediate use by vehicles compared to the con-ventional concrete that requires 28 days of curing.

Hydraulic Road Binders, on the other hand, adopts cost-ef-fective cementitious products for soil treatment and stabilisa-tion in road construction.

Bamburi appears to have heeded a government’s appeal

to cement manufacturers to de-velop cost-effective products for use in soil stabilisation.

In 2014, Savannah Cement became the first cement com-pany in the region to manufac-ture Hydraulic Road Binders, a product that is used globally to stabilise road surfaces.

Stabilisation of road surfaces is a process that combines soil, cement, and water to produce a hard, durable paving material

that can be used for the founda-tion or base of road and airport pavements.

Bamburi recently completed construction of a Sh4 billion production line at its Nairo-bi Grinding Plant – raising its overall grinding capacity to 3.2 million tonnes a year.

The expansion will see the firm begin production of Power Plus and Power Max that were previously only produced at the Mombasa plant. The Nairobi plant was only producing Tem-bo and Nguvu brands.

“We are happy that the line has produced the first bag of cement three days ahead of the scheduled time. The next phase is to conduct tests on the system for efficiency and there-after commission it,” Bamburi chief executive Seddiq Hassani said in a statement on June 27.

Bamburi’s new products and capacity expansion come in the wake of anticipated demand credited to the rising invest-ment in the construction sector.

According to the Economic Survey 2018, released in April, the overall expenditure on roads is expected to increase from Sh173.7 billion in 2016/17 to Sh198.4 billion in 2017/18.

BY JOHN NDUIRE

A scarcity of quality stor-age space is driving up the prices of modern

warehouses in Nairobi as retail-ers compete for the few avail-able facilities, thus generating strong returns for commercial property investors.

Grit Real Estate Income Group reports that average warehouse rentals in the Kenyan market range between Sh375 and Sh484 per square metre a month, fig-ures that are “likely to increase in light of the shortage of high quality space”.

The Mauritius-based real es-tate firm notes that speculators have largely avoided the prop-erty class in spite of its highly promising growth outlook.

“Despite the recent rise in de-mand for warehousing in estab-lished industrial nodes, spec-

ulative development remains low,” Grit Real Estate said in a report of the Kenyan commer-cial property market.

“However, there are major master planned industrial pro-jects in the pipeline as devel-opers seek to meet the needs of occupiers who require grade A, modern industrial facilities that meet international standards.”

The company has cited pro-jects by Africa Logistics Proper-ties and South African industri-al developer Improvon Group as some of the developments that are likely to transform the Nairobi warehouse market.

Africa Logistics Properties is scheduled to deliver its logistic and distribution park by end of the year within Rendeavour’s Tatu Industrial Park in Ruiru, 24 kilometres from Nairobi.

The facility comprises 50,000 square feet of storage space,

14,000 square feet of which have been leased by Freight Forwarders Solutions.

“The ALP West project is another major industrial de-velopment which will comprise speculative and built-to-suit warehousing in Nairobi West. The project will encompass a total of 80,000 square metres of grade A warehousing units, measuring in excess of 5,000 square metres each,” Grit Real Estate said.

On its part, Improvon Group, in partnership with Actis, is set to develop industrial assets within its Northlands Logistics Park on Thika Road. The facil-

ity, according to its developer, will “feature best in class stand-ards in respect of traffic circula-tion, yards and design”.

Grit, which has just listed on the London Stock Exchange, is a key player in the local real es-tate market. The company owns the Mlolongo-based Imperial Warehouse, which it acquired in November 2016 from Imperi-al Health Sciences at a cost of Sh2.2 billion.

The company also owns a 20,200 square metre vacant plot of land adjacent to the Imperial Warehouse valued at Sh300 million. Grit also holds a 50 per cent stake in the Naiva-

sha-based Buffalo Mall. Demand for industrial space

in Kenya is predicted to grow at 5.1 per cent annually, which means international logistics companies launching opera-tions in the country will be com-peting for the available spaces.

“[This] should represent an excellent opportunity for growth and investment in the prime industrial sector,” JLL, a global commercial property firm, said in a report last year.

Embakasi is the main hub for warehouse for lease, while Industrial Area has the majority of owner-occupied warehouses.

Bamburi targets roads cash with special products

A road construction site. FILE

Shortage of quality warehouses spells boom for buildersOPPORTUNITY: Modern warehouse rentals likely to increase in light of the shortage of quality space.

Embakasi, Nairobi, is currently the main hub for warehouse for lease. FILE

BACKGROUND

Why cement firms are keen to supply road technologies

•The overall expenditure on roads is expected to increase from Sh173.7 billion in 2016/17 to Sh198.4 billion in 2017/18.

NEWS ANALYSIS


NEWS ANALYSIS

BY JUDY MWENDE

After a few years of re-lentless construction of imposing shopping cen-

tres in Nairobi and other major towns, malls landlords are in for tough times.

The throng of new shopping malls across the country has resulted in a supply glut that is now piling enormous pressure to cut rental prices in order to retain or lure new tenants.

Growing competition, in-creased supply, and shrinking demand are emboldening ten-ants to flex their muscle in lease negotiations as landlords fight to keep spaces occupied.

According to Mauritius-based multinational Grit Real Estate Income Group, which holds substantial interests in the Ken-yan real estate market, shop-ping malls in Nairobi are facing greatest pressure to slash their lease fees as more properties enter the market.

“Even though the market has seen upward movement in rental levels in recent years, at-tributable to increased develop-ment quality and international retailers entering the local mar-ket, there is likely to be down-ward pressure in rentals as the local retail supply reaches satu-

ration,” Grit Real Estate said in a review of the local commer-cial property market.

Malls in the Kenyan capital are charging monthly average rents of between Sh3,250 and Sh4,800 per square feet, the company said in the report.

In the past few years, the estimated formal retail supply in Nairobi and Mombasa has grown rapidly to stand at the current 630,000 and 80,000 square metres respectively, ac-cording to Grit Real Estate.

Nairobi is expected to wel-come 98,000 square metres of malls this year, further tilting the market in favour of renters.

“The recent surge in retail supply has resulted in slower uptake of new retail space as well stagnating prime rents, culminating in an increasingly competitive market which has prompted some landlords to of-fer incentives in a bid to attract tenants into recently completed centres,” Grit Real Estate said.

The firm did not specify the incentives mall landlords are offering tenants but Construc-tion Kenya understands these to include rent-free fit-out peri-ods of up to three months and free parking for shoppers visit-ing specific premises.

Grit Real Estate, which has

just listed on the London Stock Exchange, holds a 50 per cent stake in the Naivasha-based Buffalo Mall.

The company also owns the Mlolongo-based Imperial Ware-house, which it acquired in November 2016 from Imperi-al Health Sciences at a cost of Sh2.2 billion.

Tenant’s marketIt also owns a 20,200 square metre vacant plot of land adja-cent to the Imperial Warehouse valued at Sh300 million.

Interestingly, the 6,121 square metre-Buffalo Mall reported a Sh271 million loss in the seven months to January, which Grit attributed to rent cuts.

This is not surprising for Kenneth Masika, a partner at valuation and property agent

Lloyd Masika, who reckons that the increased supply has en-couraged some tenants to nego-tiate better terms when renew-ing their leases.

“It’s a tenants’ market,” Mr Masika said in a recent inter-view with the Business Daily.

Countrywide, investors have built 761,805 square metres of retail space with more than 250,000 square metres expect-ed to enter the market in the next 18 to 24 months.

Nairobi accounts for about 73 per cent of the total number of shopping malls in the country, with Two Rivers Mall (67,000 sqm), Garden City (35,000 sqm) and The Hub (35,000 sqm) be-ing the largest shopping malls in the city.

According to a past study by commercial property services

firm Broll Group, Nairobi is ex-periencing an upsurge of malls, which has led to relatively high vacancies especially within newly built developments.

“The local retail scene is re-stricted by a narrow tenant base that is unable to support the vacant spaces available in the market,” Broll said in Sub-Saha-ran Africa Snapshot 2017.

“Consequently, most shop-ping centres have same tenants, hence a lack of product differ-entiation is evident.”

The report further said that the process of acquiring ten-ants for newer developments is increasingly becoming difficult, which can be evidenced by the delays in opening of some shop-ping malls due to failure in se-curing tenants and reasonable occupancy levels.

Mall tenants now play hardball in lease negotiations

The local retail scene has a narrow tenant base that is unable to support the vacant spaces available in the market. FILE

TABLES TURN: Increased supply of quality space has encouraged some renters to negotiate better terms when renewing their leases.

BY JAMES BARAZA

International Finance Cor-poration, the private sector arm of the World Bank, will spend Sh130 billion to edu-cate small and medium-sized enterprises on writing win-ning bids for road construc-tion projects as part of an initiative to spur small busi-ness growth.

IFC, which is financing several highway projects in Kenya, said in a statement last month that it will teach

companies to bid for con-tracts and manage their op-erations in a training that will help small businesses to win large construction ten-ders across the country.

“The project is expected to enable local road con-struction sector SMEs to bid and win more contracts in public sector road con-struction, rehabilitation and maintenance, and improve SME project execution in the road sector,” IFC said.

The training will involve

public and private sector players among them the Ministry of Transport & In-frastructure, and the Nation-al Construction Authority.

Major challengeIFC reckons that working with State agencies will ad-dress the circumstance in which 80 per cent of road contractors are licenced to operate in other sub-sectors of the construction industry including buildings, water and sanitation works.

“The project will contrib-ute to improving road con-struction sector SME per-formance and competitive-ness, increasing their sales revenues, job creation and growth,” the company said in a statement.

Writing bids for big con-struction projects has been a major challenge for many small and medium-sized builders, many of whom continue to miss out on lucrative contracts due to poorly structured proposals.

IFC to help start-ups bid, win road deals

Bid writing is a challenge for many builders . FILE


ECONOMY & POLICY

A low cost house. The national housing deficit currently stands at about 1.85 million units FILE

BY JUDY MWENDE

The government will offer several incentives to builders of low cost housing in a bid to spur develop-

ment of affordable housing across the country, a State official has said.

Charles Hinga, the principal secre-tary in the Ministry of Transport and Infrastructure, recently told reporters in Nairobi that the incentives are aimed to draw developers into the low-income housing market, which has remained ignored for years.

Mr Hinga said the local real estate sector has focused on the high-income housing segment due to enormous re-turns from investments, but the govern-ment is keen to defeat the market forces that have made the construction sector snub the low cost housing category.

“In order to spur development of more low-income housing units, the government has set aside 7,500 acres of serviced land for developers to con-struct affordable houses,” he said.

The provision of land to developers is seen as a game changer for the sector, considering that most builders argue that high land values have made it im-possible to build low cost homes.

According to Mr Hinga, Kenya has one of the highest prices of land in Af-rica and as a result developers tend to focus on building high end houses to make a return on their investments.

“This has led to the development of informal settlements as the poor can-not find affordable, decent houses,” he said.

Official statistics show that the national housing demand currently stands at about 250,000 units annu-ally: 80,000 units for the high-income group, and 170,000 for the low-income households.

However, the real estate sector builds an average of 50,000 housing units a year: 49,000 units for the rich, and a meagre 1,000 units for the low income segment of the population.

In addition to land provision, the government has halved corporate tax for property developers who build at least 100 low-cost units to encourage the construction of at least 200,000 tru-ly affordable houses a year.

Other incentives include a 15-percent tax relief for taxpayers who purchase houses under the affordable housing scheme, and the scrapping of stamp duty for first-time buyers of homes.

The government is also establishing the Kenya Mortgage Refinance Compa-ny, which will lend banks and saccos cash to extend inexpensive mortgages to low income earners.

The State has also pledged to install critical infrastructure such as sewer lines, water supply, power, roads, and drainage in areas where investors have proposed to build low cost housing es-tates.

Building of such infrastructure takes about 25 per cent of the total cost of a project. This cost is usually passed on to the homebuyer – which raises the pric-es of property.

Currently, it is the duty of individual housing firms to install requisite infra-structure to entice buyers – a situation that inflates costs.

The government now hopes that the planned incentives will help developers to come up with houses that sell for as little as Sh500,000.

Transport, Urban Infrastructure and Housing Cabinet Secretary James Macharia recently said that developers will be required to take advantage of various building technologies and econ-omies of scale to deliver “truly afforda-ble” homes for citizens.

For a start, the government is en-gaging private developers to undertake a pilot project in Mavoko, Machakos County, which will serve as a proto-type for a planned national roll-out of an ambitious housing plan that aims to meet the needs of the low-income ur-ban workers.

Under the pilot project, a total of 8,000 low cost two-and three-bedroom houses will be built on a 55-acre parcel of land that has been provided by the government.

Each of the houses will be sold for between Sh1 million and Sh1.5 million, Mr Macharia said.

The project is expected to promote the use of low-cost building technol-ogies that are currently shunned by many Kenyans who view them as infe-rior compared to traditional brick and

State lines up incentives for developers of cheap housesSTRATEGY: The State will offer 7,000 acres of land to private investors to build affordable houses for low income earners

mortar structures. A total of Sh750 billion will be spent

to build 500,000 low cost homes across Kenya in the next five years.

According to the State, a low-cost house is one that costs a maximum of Sh3 million.

“We are thinking of houses where the sale value will be around Sh3 million. These are houses such as studios, two bedroom and three bedroom units. If we go beyond Sh3 million it will not be af-fordable housing anymore,” he said.

According to Mr Macharia, some 800,000 houses will be built under the private public partnership (PPP) model while the remaining 200,000 homes will be built under a social housing scheme – where a unit will be sold for between Sh500,000 and Sh700,000.

Social housing refers to dwellings pro-vided for rent or sale at a fairly low price by housing associations and local gov-ernments. It is usually offered to citizens on extremely low incomes or those with special needs.


ECONOMY & POLICY

BY JOHN NDUIRE

First time home buyers in Kenya were last month handed a major reprieve

after President Uhuru Kenyat-ta signed changes to the Stamp Duty Act into law, which, among other things, spares them from paying stamp duty.

Through the Tax Laws (Amendment) Bill, the national government has amended the Stamp Duty Act to exempt indi-viduals buying their first homes from the tax that is ranked a major expenditure in property acquisition.

The State reckons that stamp duty exemption will make it more affordable for young pro-fessionals to acquire houses.

Currently, the Kenya Reve-

nue Authority (KRA) charges a stamp duty of between two and four per cent of the value of the property, piling financial pres-sure on first time home buyers.

For instance, an investor buying a Sh15 million house needs to part with Sh600,000 as stamp duty costs – an amount that must be paid within 30 days of contract execution.

Meet other outlays“Amendments to the Stamp Duty Act also include provi-sions to allow the Collector of Stamp Duties to refer a valua-tion of property for the purpose of Stamp Duty to a registered and practising valuer,” the State House’s press office said in a statement on July 18.

Removal of the tax means

that first-time home buyers will only meet other outlays such as valuation costs, lawyer’s fees (usually about one per cent of the purchase price), and a com-mitment fee to the bank.

A first time buyer is defined in the Kenyan law as an indi-vidual or individuals who have never owned an interest in a residential property in Kenya or anywhere else in the world and who intend to occupy the prop-

erty as their main residence.Until mid-last month, prop-

erty deals exempted from stamp duty included spousal proper-ty transfer, gifts to charitable organisations, and transfer of property in a will.

Others were transfers be-tween associated companies and hand over of family prop-erty to a company that is wholly owned by family members.

Save for longerAlthough the first time buy-ers stamp duty exemption is a major relief to those seeking to climb the property ladder, ob-servers see it as a double-edged sword that could potentially slow down the residential hous-ing market.

“First-buyers are likely to hold off on making purchas-es opting instead to save for longer so as to maximise the full stamp duty exemption,” said Joram Mwangi Kagechu, a Nairobi real estate agent.

Mr Kagechu said that even with the stamp duty exemp-tion, the cost of buying a home is quite high for most first-time buyers - which means young professionals will still find it difficult to save for deposit.

BY JUDY MWENDE

Kenya faces a difficult task convincing foreign inves-tors to help finance con-

struction of 500,000 low cost houses in the next five years, with some analysts already pre-dicting a bleak outcome.

In a recent interview with the Financial Times of London, Monica Juma, the cabinet secre-tary for foreign affairs, said the government is looking to match global pension funds with local funds to raise part of the Sh750 billion that developers estimate it will cost to build the homes.

“[The government is dis-cussing] matching the pension funds with the Kenyan pension funds as part of the investment”, Ms Juma said.

“This is not corporate social responsibility. We’re offering real opportunities for returns.”

A raft of incentives are on of-fer for prospective developers, among them provision of gov-

ernment land for low cost hous-ing projects.

Indeed, investors who have met President Uhuru Kenyatta say he has appeared willing to give out land for the project.

The government is also cre-ating the Kenya Mortgage Re-finance Company, which will lend banks and saccos cash to extend inexpensive mortgages to low income earners.

However, behind the plan are

two major hurdles. According to Oliver Hamil-

ton, a principal consultant at Aon – a global investment advi-sory firm, pension funds may be reluctant to commit themselves to the scheme considering the return expectations.

“These funds are high risk with private equity-style return expectations,” he says.

“The list of requirements to make this sort of investment in-

stitutionally sound is always go-ing to be incredibly long — with a clear understanding of the rel-evant laws as a start.”

The fact that Kenya’s 10-year US-dollar sovereign debt is of-fering a yield of about 8 per cent is itself a hurdle. It means that a riskier investment like a housing fund would need to in-clude an additional risk premi-um, which would make it costly for those raising funds.

Investment advisor Aly-Khan Satchu is, however, optimis-tic that international pension funds will be quick to invest in the project if the yield and in-vestment vehicle is suitable.

“Bricks and mortar invest-ments are seen as less risky to hold so this should be an inter-esting sector for them,” he said.

Housing and Urban Develop-ment Cabinet Secretary James Macharia said in April that the Chinese government had agreed to invest into a soon-to-be-established fund that will support the planned low cost housing scheme.

“We have had talks with the Chinese government and they are looking into investing in this fund. They are into big infra-structure projects but given the returns that are expected when this housing project comes into fruition, they definitely want to be part of it,” Mr Macharia said.

The National Housing De-velopment Fund is also eyeing money from pension funds, saccos, and commercial banks as well as ordinary citizens’ sav-ings, according to the minister.

“We are planning to come up with a bond, like the M-Akiba bond, to see if ordinary Ken-yans can contribute by putting their savings in this fund.”

Win for first-time home buyers as stamp duty is axed

Stamp duty is major expense in property acquisition. FILE

Fundraising challenges for low cost housing planCAPITAL: The National Housing Development Fund is eyeing money from foreign investors, pension funds, saccos, and banks

A total of Sh750 billion will be spent to build 500,000 low cost homes across Kenya in the next five years. FILE

BACKGROUND

Why scrapping of tax is a great deal for first-time buyers

•An investor buying a Sh15 million house had to part with Sh600,000 as stamp duty – an amount that was to be paid within 30 days of contract execution.


TOP STORY

BY DANSON KAGAI

The U.S. has stepped up its hunt for large-scale infra-structure deals in Kenya,

in a move that seeks to chal-lenge China’s near monopoly on big-ticket undertakings such as highways, railways, and hy-dro-power dams in the country.

Just last month, a heavy delegation from America led by Ray Washburne, the chief executive of Overseas Private Investment Corporation (Opic) — one of the U.S. government’s development finance institutes — was in Nairobi to explore in-vestment opportunities and to tour U.S. funded projects.

Mr Washburne, whose visit came shortly after the close of a bilateral conference in Nai-robi that was organised by the US Chamber of Commerce, brought along a big message: America is eager to invest in Kenya and to “provide value for money” in the local projects.

“The American private sec-tor has the ability to play a huge role in this growth by bringing critical investment, value, and American business practices,” Mr Washburne said in Nairobi on July 24, adding that Opic was eager to support U.S. com-panies to undertake projects in the country.

He singled out San Francis-co-based engineering giant Bech-

HF Group to offload Sh50bn mortgage book

U.S. scouts for mega deals in Kenya with pledge to offer value for moneyAMBITION: Move seeks to challenge China’s near monopoly on mega projects in the country.

There is a huge potential for Kenyan and American companies to build on each other’s strengths and markets. FILE

BY PETER MWANGI

HF Group is seeking to of-fload its home-loans portfo-lio to raise cash for a fresh push into low cost housing lending, chief executive of-ficer Sam Waweru has said.

The company plans to sell its existing loans to the Kenya Mortgage Refinance Company, which will lend banks and saccos cash to ex-tend inexpensive mortgages to low income earners.

The planned sale will free

up capital that will enable HF Group to build a new loan book that mainly focus-es on the affordable homes market segment.

“We can release, off the top of my head, about Sh50 billion from our own book,” Mr Waweru told Bloomberg on July 27.

“That would mean we can lend another Sh50 billion to the economy immediately.”

The company plans to provide home loans of as low as Sh2.5 million for about

200 new housing units over the next 12 months.

HF’s loan book growth slowed by 9 per cent last year as the limits on inter-est rate charges took hold, elections slowed down activ-ity, and the failure of three banks in 2016 caused credit demand to slow, according to the firm’s annual report.

HF Group, Mr Waweru said, is helping the govern-ment to set up the Kenya Mortgage Refinance Compa-ny – which is set to be opera-

tional by end of the year. The government will in-

ject Sh1.5 billion into the company for a 20 per cent stake, while the balance will be held by banks, credit unions and development fi-nance institutions.

The World Bank will pro-vide Sh16 billion in financ-ing to the company, which will issue bonds to investors to fund its loaning.

“The benefits will start accruing early 2019 and into the future.” Mr Waweru said.

HF Group chief executive Sam Waweru : We can release about Sh50 billion from our own book. FILE

tel International Inc. as one American company that has a strong commitment to value for money.

Bechtel last year signed a contract with the Kenya National Highways Author-ity (KeNHA) for construc-tion of the proposed Nairo-bi-Mombasa Expressway at a cost of Sh300 billion.

According to the KeNHA director general Peter Mund-inia, the signing of the con-tract paved the way for mo-bilisation of financing from export credit agencies in the United States.

“Bechtel has been select-ed to build the first high-speed expressway in Ken-ya. The new 473-kilometre route will vastly improve the connectivity, efficien-cy, and safety of the road between Nairobi and the country’s main sea port of Mombasa,” Mr Mundinia said in a press statement in August last year.

The highway, which is designed for consistent speeds of 120 kilometres per hour, will have four lanes with provision for future increase to six lanes

and 19 interchanges.It is expected that agen-

cies such as the U.S. Ex-port-Import and Opic will finance the project. Indeed, Mr Washburne, who met with Bechtel last month, emphasised the agency’s “ready support” for the Nai-robi-Mombasa Expressway.

The Kenyan government and Bechtel are, however, yet to agree on the funding model for the project.

Transport and Infra-structure Cabinet Secretary James Macharia recent-ly said the project will be

funded by private investors who will then recover their costs and margins by charg-ing toll fees.

On the other hand, Bech-tel is against the adoption of the Public Private Part-nership (PPP) model on the argument that it would be too expensive - costing Ken-ya Sh540 billion in the next 25 years.

The matter is still being discussed.

On June 28, deals worth Sh10 billion were signed in Nairobi at a conference that was attended by a 60-mem-ber American delegation led by U.S. Under-Secretary for Trade Gilbert Kaplan.

Some of the key deals signed on that day include a Sh4.5 billion contract between Rendeavour and Unity Homes for the con-struction of 1,200 low-cost homes at Tatu City in Ruiru, and a Sh2 billion deal be-tween Kenya and American firm Medtronic for estab-lishment of a dialysis centre in Nairobi.

A Sh1 billion credit line to Victoria Commercial Bank from the World Business Capital, a global small and medium enterprise (SME) financier, was signed.

The American delegation included government offi-cials and executives from major U.S. firms in the con-struction, chemicals, infra-structure, energy, transpor-tation, finance, logistics, and healthcare sectors.

U.S. ambassador to Ken-ya Robert Godec said there is a huge potential for Ken-yan and American compa-nies to build on each other’s strengths and markets, and to create shared successes.

“Together, we will build greater prosperity for both Kenyans and Americans,” Mr Godec said.

473The length (in kilometres) of the planned Nbi-Mombasa expressway


BY PETER LUGARIA

Building materials mak-er Devki Group has an-nounced plans to set up a

Sh45 billion raw steel produc-tion plant in Kilifi County in a move that will give local steel products manufacturers access to cheaper industrial steel.

The facility, whose design drawings and environmental impact assessment have al-ready been approved, will be the region’s first raw steel pro-duction plant and it will seek to utilise locally sourced iron ore.

Devki chairman Narendra Raval said the factory will cre-ate about 1,600 direct jobs and 9,000 indirect opportunities in related activities such as iron ore mining and transportation when it starts production in 2020.

“Only South Africa has an industrial raw steel production plant and our plan is to give Kenya steel products manufac-turers cheaper access to indus-trial raw steel,” he said.

The steel factory, said Mr Raval, will operate blast fur-nace technology for main steel manufacturing using internally

generated power supplemented by the supply from the national grid.

The first phase of the plant will be financed by Devki and its partners to the tune of Sh20 billion – with phase two of the project expected to begin short-ly after the completion of phase one in 2020.

“This project is funded by banks and internally generated funds by Devki Steel Mills Lim-ited,” Mr Raval said.

Construction Kenya under-stands that the International Finance Corporation (IFC), the World Bank’s private in-vestment arm, will inject Sh9.7 billion into the project, while Mr Raval – the majority share-holder – will contribute Sh10.3 billion.

Devki hopes the plant will help Kenya avoid importation of industrial steel products.

“Kenyan steel factories rely on industrial steel products im-ports as well as scrap metal to manufacture TMT bars, steel tubes, angles bars, barbed wire nails among others,” Mr Raval said.

The plant comes a time when Devki is setting up two

cement factories in Kilifi and Nakuru counties as it seeks to further slash the prices of the key building material. The fac-tories will cost Sh6 billion.

Devki, which produces the Simba cement brand, owns a cement grinding plant in Machakos and a clinkering plant in Kajiado.

The company also owns steelmaking factories in Athi River, Machakos and Ruiru town in Kiambu County.

CORPORATE UPDATES

Insurance firm Britam takes cover in property as markets lose shine BY DANSON KAGAI

On July 20, Britam Holdings Plc opened to the public its newly built flagship property Britam Tower, marking a key milestone for the company in its diversifi-cation journey that seeks to re-duce its reliance on the volatile capital markets.

The 31-storey office complex in Nairobi’s Upper Hill district, which is now ready for occupan-cy, has overtaken its neighbour UAP Old Mutual Tower as Ken-ya’s tallest building.

The Sh7 billion tower, which sits on 1.5 acres on Hospital Road, comprises two separate buildings: a 31-storey office tow-er and a 15-storey parking silo with an interlinking bridge at the top floor which offers alter-native means of evacuation dur-ing emergencies.

It has a total lettable space of 350,000 square feet with 1,000 parking bays and is ready for occupation by diplomatic mis-sions, multinationals, and finan-cial institutions.

Speaking during the official opening ceremony which includ-ed a tour of the building, Britam CEO Benson Wairegi said the financial services company’s de-cision to venture into property was part of a strategy meant to ease portfolio risk and exposure to the unpredictable stock ex-change market.

Through its subsidiary Britam Properties (Kenya) Limited, the company is currently under-taking several major real estate projects in Nairobi – key among them a Sh12 billion mixed-use development in Kileleshwa.

Last year, the company told its shareholders that it would build a 140,000 square feet shopping centre in Kileleshwa to meet the demand for quality retail space in upmarket estates of Nairobi.

Mr Wairegi said the company

was pursuing property manage-ment as its core business follow-ing the creation of a real estate subsidiary to push new deals.

“We want to build a mall be-cause there is pent up demand in Kileleshwa and there are no malls in that proximity,” he said.

“The mixed-use development includes offices, serviced apart-ments and a hotel – all valued at approximately Sh12 billion, including land.”

The company, which has in-terests in insurance, asset man-agement and property manage-ment, has acquired land worth Sh10 billion to facilitate its prop-erty development initiatives.

Britam is also building 11 floors of fully furnished and ser-viced apartments in Kilimani as it seeks to cash in on the rising demand for non-hotel based ac-commodation among business tourists visiting the city.

The Sh3.3 billion project, which is earmarked for com-pletion in 2020, comprises 117 two-bedroom and 46 one-bed-room rental apartments located on a 1.6 acre piece of land on Nyangumi Road in Kilimani.

At Sh12,000 to Sh20,000 for a two-bedroom unit and Sh8,000 to Sh12,000 for a one-bedroom unit a night, the development looks quite promising consider-ing that Nairobi is positioning it-self as the regional business hub.

“The market will need at least 1,000 serviced apartments in the next three years and Britam Properties will help in bridging this gap,” Mr Wairegi told guests who attended the project’s ground breaking ceremony in June last year.

Cash-rich companies are in-creasingly diversifying into real estate development in a bid to meet the rising demand for housing in the country, which stands at nearly 2 million units.

Devki bets Sh45 billion on Kilifi raw steel factory BIG DEAL: The plant will create 1,600 direct jobs and 9,000 indirect jobs in related activities such as iron ore mining when it starts production in 2020.

The company hopes the proposed plant will help Kenya avoid importation of industrial steel products. FILE

QUICK FACTS

Devki raw steel factory in figuresSh45 billionThe total amount of money that will be spent to set up the Kilifi County-based raw steel factory.

Sh20 billionThe estimated building costs for phase one of the factory whose completion is planned for 2020.

Sh9.7 billionThe amount to be injected into Devki by the International Finance Corporation (IFC).

Britam Holdings chief executive Benson Wairegi. FILE


OPINION & COMMENTS

Africa’s growing cities present an opportunity for not only economic

growth but also for sustainable construction amidst the effects of climate change and energy demands.

Indeed, the continent has had a long history with green building. The Djenne mosque in Mali built in the 13th century stands out as a stellar example of green building both in terms of design and energy efficiency.

In advancing the conversa-tion around green building in 21st century Africa, we must be cognizant of our history and ap-ply it accordingly to the unique challenges and opportunities that present themselves in the continent.

A key consideration for Af-rica, but which has global res-onance, is how to advance the conversation about green build-ing while taking into account other development issues that are equally, if not more, impor-tant for donors, governments and communities.

We often focus on global, seemingly abstract goals like energy and greenhouse gas emissions in the green building movement – yet in our enthu-siasm for the big picture, we must not lose sight of the hu-man-sized one.

In seeking to address envi-ronmental issues, we cannot forget that building is about homes not houses; about places that people live, learn, and play.

African communities are places where people share, so building must support, rather than disrupt them.

This must be reflected in the narrative around green build-ing. We must enable communi-ties to develop sustainably, on their own terms; together.

That is why we are using the UN Sustainable Development Goals (SDGs) to anchor our work; to be the connective tis-

sue for individuals, the environ-ment and society.

The SDGs make clear that the world’s most pressing is-sues are interrelated – we can-not tackle climate change if we ignore poverty; we cannot as-sure access to affordable energy if we do not strive for peace.

Green buildings are an op-portunity to save energy, water and carbon, but also to provide jobs, to improve health and to

strengthen communities.While climate change is a

global problem, African coun-tries are likely to feel the effects most acutely and women are the most vulnerable of all, as a result of their dependence on the natural resources that are threatened by climate change.

Yet women are also some of the best people to develop solu-tions.

Because of their responsibili-ties in households and commu-nities, they are well placed to contribute to strategies that re-spond to the changing climatic realities.

The ripple effects of putting resources in the hands of wom-en can be incredibly powerful.

Working collaboratively is crucial if we are to develop sus-tainably, not only across com-munities, but across countries and across continents.

Our strategy is to develop mentoring relationships be-tween countries with more established Green Building Councils with those that are just starting on their journey – to share experiences, to learn from each other and to develop best practice. jobs.

We must recognize differ-ence, but end inequality; devel-op in a way that benefits both communities and the environ-ment; to use green building as a catalyst to address our most critical issues and work towards the achievement of the Sustain-able Development Goals.

Ms Jane Afrane is the Region-al Head for WorldGBC’s Afri-ca network of Green Building Councils in eight countries.

In the past few years, de-velopers have spent bil-lions of shillings to put up

show-stopping malls in Kenyan cities to meet the rising demand from international retail brands expanding into the country.

This has left the capital Nai-robi with 630,000 square me-tres of existing mall space with an additional 98,000 square metres expected to enter the market this year, according to Mauritius-based multinational Grit Real Estate Income Group, which holds substantial inter-ests in the Kenyan real estate market.

Countrywide, investors have built 761,805 square metres of retail space with more than 250,000 square metres expect-ed to enter the market in the next 18 to 24 months.

Nairobi accounts for about 73 per cent of the total number of shopping malls in the country, with Two Rivers Mall (67,000 sqm), Garden City (35,000 sqm) and The Hub (35,000 sqm) be-ing the largest shopping malls in the city.

While this can be described as a booming market, the shop-ping mall business itself is struggling to make money. Al-though the mall culture is gain-ing popularity among residents, many retailers are complaining that the footfalls (the number of ‘shoppers’) are not getting con-verted into business.

Residents of Nairobi and oth-er major cities and towns where stunning malls have been erect-

ed throng the facilities on week-ends - spending cash on bites at food courts - but are very reluc-tant to shop at the malls espe-cially at expensive outlets.

Poorly performing retailers are increasingly exiting malls midway through their lease contracts forcing landlords to find creative ways such as scrapping goodwill charges to woo tenants.

Other common incentives include rent-free fit-out periods of up to three months and free parking for shoppers visiting specific premises.

These strategies are, howev-er, short-lived and mall own-ers must come up with well-thought-out strategies to re-main in business.

One such strategy is the stratification of mall spaces to accommodate small and medi-um-sized enterprises at lower grade level.

The trick here lies in careful-ly segmenting a shopping mall’s targeted tenants and strategi-cally attracting the right mix of customers.

Since majority of the Kenyan population comprises of the lower middle-income and the low income earning groups, it does not make sense to put up facilities that only target high income earners – who make up less than five per cent of the population.

Shopping mall owners should also look beyond the usual ar-rangement of enlisting top su-permarkets as anchor tenants, considering that the local retail market is restricted by a narrow base that is unable to support the vacant spaces available in the market.

The scraping of stamp duty for first-time home buyers under the affordable housing scheme, targeting low income earners, marks an important step in the on-going efforts to make home ownership affordable.

Stamp duty is one of the ma-jor expenditures in property acquisition with the Kenya Rev-enue Authority (KRA) current-ly charging between two and four per cent of the value of the property.

This heaps more financial pressure on first time buyers considering the existing diffi-culties in securing financing.

For instance, in the afforda-ble housing scheme, a 3 bed-room house is set to sell at Sh3 million meaning an investor

has to part with a whopping Sh120,000 as stamp duty which has to be paid not later than 30 days after contract execution.

Removal of this tax, coupled with the new 15 per cent of gross income tax relief for Ken-yans buying homes under the scheme, is a major reprieve for the targeted population – who still have to grapple with lawyer fees, valuation costs and com-mitment fees to the financiers.

Hopefully, the government has put in place strict policies on eligibility and minimum oc-cupancy period that will ensure these excellent incentives ben-efit genuine prospective home owners and not speculative buyers who will buy with intent to sell at a profit.

How African countries can, quite literally, build a greener tomorrowCOMMENTJANE AFRANE

“How can I think outside the box when I work in a cube?”

Mall owners must rethink their strategies to win, retain tenants

Axing of stamp duty timely

EDITORIALREVIEW & OUTLOOK


OPINION & COMMENTS

Hundreds of infrastructure projects valued at bil-lions of dollars have been getting off the ground in Asian, European and African countries under China’s Belt and Road Initiative (BRI), along with controversy, hurdles, delays and polarized public opinion in several countries.

As the backbone of global economic development, physical infrastructure is critical to the success of the BRI agenda.

But as a large number of Chinese enterprises seem to have rushed overseas, expanding their foothold across BRI-related countries, the process has not been smooth at all times.

Hence nearly five years after the BRI launch in late 2013, the third BRI summit in Hong Kong last month was really the right time of reckoning, on the pace of the implementation of BRI projects.

This reflection included contemplating why in sev-eral countries BRI projects have caused so widely po-larised public opinion.

The BRI scheme has been designed by President Xi Jinping to build a network of overland road and rail routes, oil and natural gas pipelines, and other infra-structure projects that will stretch from central China, through Central Asia, Europe and Africa.

But the main concerns raised about BRI project implementation in several South and Southeast Asian countries are related to the alleged lack of local worker participation and companies, the risk of unmanagea-ble debts and the rather dominant geostrategic inter-est of China, rather than the economic viability and shared benefits, in several projects.

Economic risksAs most BRI projects are funded by long-term and very low-interest-rate loans from China’s state banks, most of the investment and construction also have under-standably been made by Chinese companies.

Problems usually arise because many of these com-panies still lack work experience in foreign countries where they have to face a web of local and internation-al laws, not to mention the full spectrum of political, security and economic risks.

The BRI understandably still seems far away from being a coherent blueprint of interconnected interna-tional infrastructure investment.

Infrastructure investment is very complex, involv-ing strategy planning, technical assessment, feasibility studies, deal structuring, financial and tax planning, financing, project management and risk control.

The greatest benefit, though, is that physical con-nectivity could create a virtuous cycle to expand and deepen economic, social and cultural connectivity.

The writer is a senior editor at The Jakarta Post.

TALKING POINT | VINCENT LINGGA

Time of reckoning on the pace of execution of Belt, Road Initiative projects

Letters to the editorThe editors welcomes readers comments on topical issues. Send your letters via email to [email protected]. Letters may be edited for space, clarity and legal considerations. Views expressed here are not necessarily those of the editor or publisher.

The on-going logging ban by the govern-ment is for the good

of us all as a country and should not be politicised.

Given, wood has always been a major part of our everyday life especially in building and construction and while we sympathize with those who have lost livelihoods as a result of the ban, we cannot turn a blind eye on the effects of deforestation which have been evident in the prolonged droughts that have ravaged the country in recent years.

To conserve the little that is left of our forests, there is need for contrac-tors to think beyond tra-ditional building materi-als. It is time to embrace alternatives such as steel for roofing trusses, scaf-

folding and furniture.Contrary to popular

belief, steel is not expen-sive and might in fact be cheaper than timber in the long run.

This is because it has many benefits compared to wood including zero

wastage during construc-tion, fire resistant, du-rability, not susceptible to warping and termite attack as well as fast con-struction time, just to name a few.

Steel has been in use for construction projects

of varying shapes and siz-es around the world and it is time we took it up to avert calamities such as water crisis and reduced food production.

MILLICENT NDUNGEThe writer is a resident of Nakuru.

Builders need to think beyond traditional building materials such as timber. FILE

A training organised by the International Finance Corporation seeking to educate small and medi-um sized enterprises on writing bids for road pro-jects is a timely step in the right direction.

The move is spot on, coming at a time when the government has em-barked on major highway

projects across the coun-try, yet most tenders have been awarded to foreign-ers leaving local compa-nies feeling disgruntled.

Largely, this missing out on projects has been attributed to poorly struc-tured proposals but this is set to change as contrac-tors will be taught how to write winning proposals.

SMEs contribute sig-nificantly to employment and economic growth and the importance of their success in terms of competitiveness and in-creased sales revenue, at a time when the coun-try’s unemployment rate remains high, cannot be stressed enough.

Considering that most

road construction compa-nies are licensed to oper-ate in other sub-sectors of the construction industry including buildings as well as water and sanita-tion works, their growth will definitely have an im-pact in the job market.

- Jane NdungeEmbakasi, Nairobi

IFC training is a timely step in the right direction

Logging ban is a wake-up call for property developers

China President Xi Jinping . FILE

“You can design and create, and build the most wonderful place in the world. But it takes people to make the dream a reality.” - Walt Elias Disney, American entrepreneur and film producer.


NEWS INDEPTH

to respond to. His proposed budget-cuts and

short-sighted policies have conveyed the impression of xenophobia and careless-ness in America’s fragmented foreign policy towards Africa.

Meanwhile, China has been building on its legacy of diplomatic engagement.

In early 2018, the Chinese Foreign Minister Wang Yi started a long trip to Rwanda, Angola, Gabon, and Sao Tome and Principe (a country that has only re-cently normalized relations with China) to promote solidarity and cooperation.

In 2017, both Wang Yi and President Xi visited countries throughout the con-

The U.S. is undergoing veritable a diplomacy crisis in Africa. FILE

Over the past two decades, the People’s Republic of China (PRC) has undergone extraordinary

economic growth, transitioning from a low-income economy to an upper mid-dle-income economy and maintaining its status as the largest contributor to global growth.

Now the second largest economy in the world, China is playing an increas-ingly important role in the world’s eco-nomic affairs and development, not the least in Africa.

While well-established traditional donors like the United States (US) and the European Union (EU) are pivoting to confront domestic challenges, China is deepening its involvement with the continent.

The US is not only falling prey to what Fareed Zakaria termed ‘the rise of the rest’, but also forfeiting its role in in-ternational fora that do not fit the Presi-dent’s agenda.

America firstIn just the first year of his presidency, Donald Trump has withdrawn the US from the United Nations Educational, Scientific, and Cultural Organization, the Trans-Pacific Partnership, and the 2015 Paris Agreement.

He has also closed the Office of Global

Criminal Justice slashed the budget of the United Nations by $285 million and boycotted the ‘Intergovernmental Con-ference to adopt the Global Compact for Safe, Orderly and Regular Migration.’

The ‘America First’ policies are espe-cially damaging due to the rise of com-peting countries and alternative value systems.

For centuries, “modernity” and the “Western way of life” have been closely interlinked, but the dawn of the ‘Asian century’ has created an ever-growing gap between Westernization and mod-ernization.

A 2017 Pew Research Center study found that enthusiasm for US democrat-ic ideals has greatly diminished in coun-tries such as Senegal, Ghana, Kenya, and Tanzania.

The same study also gauged the de-gree of confidence in four different lead-ers to do the right thing in world affairs. Germany’s Angela Merkel ranked first, China’s Xi Jinping ranked second, Rus-sia’s Vladimir Putin ranked third, and America’s Donald Trump ranked last. As time passes, it becomes increasingly clear that the current US administration has no coherent vision for Africa, and that US prestige is in decline on the Af-rican continent.

The US is undergoing a veritable di-plomacy crisis in Africa.

Due to obstruction by the Senate, Donald Trump failed to appoint an As-sistant Secretary for the Bureau of Afri-can Affairs within the United States De-partment of State.

Since September 2017, Donald Yukio Yamamoto has been acting in this role, guiding US diplomatic operations in sub-Saharan Africa.

Vulgar languageThis might be the underlying reason why the appointment of new ambassadors to Africa has been so remarkably slow.

Of the fifty-five countries on the Afri-can continent with which the US main-tains diplomatic relations, only five have seen the accreditation of an ambassador during Trump’s presidency.

Moreover in his first year as President of the US, Donald Trump has conducted sixteen state visits, but none to African nations.

On the contrary, he has created diplo-matic incidents by praising the non-ex-istent country of ‘Nambia’ and using vul-gar language to describe African coun-tries and their citizens.

His remarks spurred international condemnation that the President failed

How the U.S. lost: A quick overview of China’s fast growing foothold in Africa STRATEGY In early 2018, the Chinese Foreign Minister Wang Yi took a trip to Rwanda, Angola, Gabon, and Sao Tome and Principe to promote cooperation.

Unlike the U.S., China sees Africa as a key economic partner. FILE


NEWS INDEPTH

tinent to call for unity in meeting vari-ous challenges in the global south.

These strong dialogues that China has initiated for the past few years will be particularly instrumental as the 7th Fo-rum on China Africa Cooperation (FO-CAC), to be held in September this year, approaches.

Financial investmentIn this Ministerial Forum, China and Af-rica will redefine priorities and presum-ably strengthen cooperation.

China’s activities in Africa benefit greatly from domestic uncertainty in

traditional donor countries – especially in the cases of post-Brexit United King-dom and Trump’s America.

According to a 2018 EY report that measures private investment in Africa, China is ramping up the volume of fi-nancial investment in Africa.

In 2016, China emerged as the lead-ing job creator on the continent and the third largest investor as the number of Chinese-funded projects rose by 106%.

Overseas financial flows from China into Africa have largely taken the form of development assistance through grants and very low-interest-rate loans.

But when it comes to evaluating the volume of Chinese investment and aid, analysts and researchers are confronted with a number of ambiguities regarding the financing of activities.

Foreign aid, development finance, and overseas direct investment are con-cepts that are sometimes interchangea-ble, and that do not necessarily reflect the nature of the projects they fund.

This is further complicated by finan-cial data being treated as secrets, trans-actions that fly under the radar, and the under-reported volume of investment.

However, underlying Chinese aid and

investment in African states is the egali-tarian nature of a ‘win-win’ cooperation under the auspices of “South-South Co-operation” (SSC).

SSC can be defined as the pursuit of development objectives by enhancing countries’ capacities through exchanges of knowledge, skills, resources and tech-nical know-how, and through regional and inter-regional collective actions.

This framing allows China to tran-scend the traditional norms of the OECD’s official development assistance (ODA) and include business-driven co-operation which is not recognized as a form of ODA.

As FOCAC explains, “China’s foreign aid policy has distinct characteristics of the times.

It is suited both to China’s actual con-ditions and the needs of the recipient countries.”

Grim circumstancesThis setting serves as a reminder to host countries that China’s financial contri-butions differ from the assistance pro-vided by developed countries.

The intentional contrast with West-ern forms of aid and investment is part of China’s strategy to promote its model as the standard for developing countries.

The US is failing to spearhead Africa’s economic growth and development.

Aid for development was deprior-itized by President Trump, who has threatened to shut down healthcare programs and to reduce funding for the Global Fund to Fight AIDS, Tuberculosis (TB) and Malaria.

Moreover, Donald Trump announced his intention to tie aid to countries based on their support to US foreign policy, and cut aid to “countries that hate us”.

Under these grim circumstances, countries must shield themselves from aid cuts by becoming Trump’s regional allies.

It would be unfair to attribute sole responsibility to Trump for the dysfunc-tional character of US-African foreign policy.

The US, even before Trump, has lacked an overarching strategic frame-work for foreign policy in Africa.

Foreign policyThe continent has never gained a prom-inent role in America’s global strategy, and strategic interests in Africa have been regarded as secondary.

To date, Washington is still struggling to find a balance in its foreign policy and to incorporate African priorities in its vi-sion.

What is attributable to Trump is his transactional understanding of aid dis-bursement.

In his inauguration speech, the Pres-ident highlighted that he will not “seek to impose our way of life on anyone, but rather to let it shine as an example for everyone to follow.”

Linking aid to foreign countries’ loy-alty to the US is a perverse mechanism of retribution for those states who dare question the US ‘example’.

Trump should ask himself what ex-ample his policies are setting; far from being the leading light in global govern-ance, Trump’s America is appealing to fewer and fewer developing nations.

- CHINA HANDS MAGAZINE


REGIONAL NEWS

Tanzania’s largest commer-cial city Dar es Salaam is set for a dramatic facelift

in the coming months as sever-al multi-million dollar highway projects take shape.

Top in the list of projects that are expected to transform the city is the Selander Bridge, a $126 million bypass that will be built by a South Korean con-struction company.

Selander Bridge will stretch from Barack Obama Drive to connect the Aga Khan Hospital and Coco Beach at the junctions of Kenyatta and Toure roads.

The contract for the project

was formally signed in Dar es Salaam last month by officials of the Tanzania Roads Agency and executives of South Korean GS Construction Company.

President John Magufuli and South Korean Prime Minister Lee Nak-yeon witnessed the signing of the contract between the two entities on July 23.

Mr Magufuli urged the con-tractor to expedite the project.

“With advanced technology that Korea has, I don’t expect the contractor to delay the pro-ject,” he said.

Selander Bridge is one of the projects that the Tanzania is un-

dertaking to ease traffic jam on Dar es Salaam roads, which has been costing the economy $1.82 million annually.

In addition to monetary loss-es, traffic jams are blamed for environmental pollution that leads to diseases such as cancer, which cost a fortune to treat.

Other projects initiated to ease traffic snarl-ups in Dar es Salaam include the Tazara fly-over, Ubungo interchange, and the Kigamboni Bridge.

The $45 million Tazara flyo-ver, which is fully-funded by the Japan International Coopera-tion Agency (Jica), is nearing its completion – with the contrac-tor putting the final touches on the facility in readiness for its official opening in October.

Work on the $80 million

Ubongo interchange is under-way as the State seeks to de-congest the junction between Morogoro, Sam Nujoma and Mandela expressways – one of the city’s busiest locations.

Past studies have shown that an estimated 65,000 vehicles use the passage daily.

Construction of the Kigam-boni Bridge, which was com-missioned by President Magu-fuli in 2016, is currently under-way at a cost of $135 million.

Plans are underway to build seven new flyovers in Dar es Sa-laam. The proposed bridges will be built at the intersections of Chang’ombe, Uhasibu, Kamata, Morocco, Mwenge, Magomeni and Tabata.

- JANE MWANGASHA

With the new Nile Bridge due for commissioning later this year, Japan has said it is now “in constant discussions” with government to kick start the long overdue Kampala flyo-ver project.

Mr Fukase Yutaka, the Ja-pan International Cooperation Agency (Jica) country repre-sentative, recently told Daily Monitor they hope construction of the first phase of the project to start before the end of the year.

“It all depends on communi-cation on selection of the pro-ject consultant and contractor by Uganda National Roads Au-

thority,” he said last month, at a reception organised by the Jap-anese ambassador to Uganda

Kazuaki Kameda.The flyover project, to be

executed in phases will start

at Clock Tower in Kampala through Kibuli, Nsambya Traf-fic Lights and connect to Muk-wano Roundabout in the first phase.

The second phase will con-nect through Kitgum House, Garden City and Jinja Road at a cost of $183 million.

Jica conceived the flyover project eight years ago after commissioning studies to ex-plore options for alleviating chronic traffic jams around Kampala.

Uganda and Japan signed a loan agreement for the project in 2015.- THE MONITOR

BRIEFLYHARARE

Work finally begins on RG Mugabe International Airport

The launch of works for the RG Mugabe International Air-port, which was recently offi-ciated by President Emmerson Mnangagwa, signals the first steps of ensuring that the air-port reclaims its former posi-tion as one of the best airports in the region and beyond.

The $153 million modernisa-tion of the airport will bring in new technologies and efficiency in the facilitation of passengers, aircrafts and cargo.

KIGALI

Rwanda joins Africa50 to fix its crumbling infrastructure

Rwanda has announced its membership in the Pan-African platform that will help spear-head the country into achieving its infrastructure goals.

The EAC member states are focusing on infrastructure de-velopment, not only because it has an economic impact but as a hook to attract investors.

Africa50 hopes to accelerate economic transformation and unlock business potential in its involvement in the projects.

DAR ES SALAAM

Tanzania set to benefit from transnational highway project

Tanzania is set to gain from a new route which will open up SADC trade corridor to capture and channel trade flows from Zambia and DR Congo to Dar es Salaam port.

Zambia and DR Congo will begin upgrading the 182-km Kasomeno-Kasenga - Cha l -we-Mwenda road to dualcar-riageway next year to feed into the Dar es Salaam port to raise its capacity from its present 13.8m tonnes of cargo per a year, to 28m tonnes by 2020.

KHARTOUM

Deal signed for construction of new 90-km Darfur highway

Sudan’s National Roads and Bridges Corporation and El Ju-neid Company have signed a contract for the construction of the Nierteti-Rokoro-Tarny-Tabit road in Darfur, with a length of 90 km, to be implemented with-in 30 months.

The road is expected to en-courage agriculture and farm-ers to facilitate production, productivity and marketing process to provide security, at-tract investment, investors and develop tourism.

TRAFFIC JAM: Several multi-million dollar projects have been initiated to ease congestion in the city.

Dar es Salaam to get a dramatic facelift with big-dollar projects

A view of Tanzania’s largest commercial city Dar es Salaam. FILE

Work to begin on Kampala flyover project

A view of Ugandan capital Kampala. FILE


WORLD NEWS

BY OXFORD MAIL

A husband who had financial difficulties after the collapse of Carillion died by suicide in his Carterton home, the Oxford-shire coroner has concluded.

Nigel Tonkin, 28, was found in his York Road home on Feb 8, Oxford Coroner’s Court heard.

After the collapse of Carillion, Mr Tonkin – a self-employed plumber who had sub-contract-ed to the company – was left with ‘significant debts’.

However, friends, family and colleagues said that he had shown few signs of distress pri-or to his death and a GP report showed that he had no history

of mental health issues. Coroner’s officer David Free-

man described him a ‘well liked, respected and very hard-work-ing young man’.

A post mortem found no al-cohol or drug use and the coro-ner said he saw no evidence of third party involvement.

Born in Hong Kong, Mr Tonkin served in the RAF un-til 2014, before re-training as a

plumber and setting up West Oxon Plumbing and Heating.

A customer and colleagues had raised concerns that Mr Tonkin had not been seen for days nor answered his door, while his wife Victoria was in the USA with the RAF.

She said he ‘seemed fine...’, when she last saw him.

BY BLOOMBERG

The U.K. government has a “depressing inability” to learn

from repeated mistakes in contracting for outside services and must use the collapse of Carillion Plc to learn how to do better, according to a parliamen-tary report.

Carillion, an outsourc-ing company with deals in everything from hos-pitals to a high-speed rail project, collapsed in January and left behind debts of about $2.1 billion after a series of construc-tion agreements soured.

The failure has led to a number of parliamentary inquiries and increased scrutiny of government procurement.

In a report from the Public Administration and Constitutional Affairs Committee published last month, lawmakers said the government must stop prioritizing cost over risk and quality.

“Despite the U.K. lead-

ing innovation in this field for some 30–40 years, there has been a depressing inability of central government to learn from repeated mis-takes,” the report said.

“To some extent the collapse of Carillion and the state of the sector re-flect this.”

The U.K. government spends about 250 billion pounds a year on out-sourcing and contracting, according to the report, but decisions are often unclear. The government should be forced to jus-tify its reasons publicly and better understand the risks it’s transferring to third parties before awarding contracts, the report said.

The report also criti-cized the use of deals in which private firms are contracted to fund, con-struct and maintain pro-jects, getting repaid over many years.

There are currently about 700 such arrange-ments, which keep debt off the government’s bal-ance sheet, worth about 60 billion pounds in the U.K.

“Government’s pre-occupation with price has been noticed by the market and is a matter of grave concern,” the com-mittee said.

U.K. urged to learn from Carillion Plc’s grand failureLESSON: Company collapsed in January leaving behind debts of about $2.1 billion.

Plumber took his own life after collapse of Carillion Plc43,000

The total number of Carillion employees globally

$2.1bnDebt pile under which Carillion fell after failing to reach rescue deal


WORLD NEWS

China last month escalated a crackdown on property spec-ulation, saying it is embarking on a six-month campaign in 30 cities to root out all kinds of vi-olations in the housing market.

The special campaign will target unlicensed real estate agencies, developers’ violations and false advertising, according to the housing ministry.

Cities including Beijing and Shanghai will be involved in the six-month operation start-ing early July, according to the statement, which said that offi-cials will focus on rent manip-ulation, postponement of sales by developers to fetch higher prices and non-compliant loans to fund down-payments.

Regulators’ multi-year cam-paign to cool home prices in China gathered steam last month, with officials ratcheting

up pressure on the sector on multiple fronts.

The nation’s policy banks tightened approvals on new lending for shanty-town rede-

velopment projects. China is looking to plug a

loophole in companies’ off-shore bond sales by banning short-dated dollar note issu-

ance, people familiar with the matter said last month.

The National Development and Reform Commission also said Chinese developers should

use proceeds from overseas bond sales to repay debt instead of investing in domestic prop-erty projects and replenishing working capital.

China’s home prices rose the most in 19 months in May even as the State pressed ahead with curbs to cool housing demand.

New-home prices in 70 cit-ies tracked by the government gained 0.8 per cent from a month earlier, according to Bloomberg calculations based on data from the National Bu-reau of Statistics released earli-er this month.

That compared with a 0.57 per cent increase in April.

The housing ministry said in a statement last month that it will regularly expose violations to “shake the market.”

- BLOOMBERG

China escalates crackdown on property speculation

A mansion for sale in Beijing, China. COURTESY

BY FINANCIAL TIMES

London developers are sell-ing off homes in bulk to corporate landlords after

a drop in demand for expensive new-build homes among indi-vidual buyers.

Almost 40 per cent of Lon-don new-build sales in the sec-ond quarter of 2018 were to bulk buyers, who generally pur-chase at a steep discount with the aim of setting up portfolios of rented homes for large-scale investors.

Such purchases are masking continued drops in individual sales of new apartments, many of which are in central London high-rise schemes approaching completion, said researchers at Molior London, which monitors housing developments.

Some 2,008 new-build homes — or 39 per cent of sales in the quarter — were bought in bulk in the three months to June, while private sales declined by a third to 3,142.

Discounts to asking prices “from 10 to 15 per cent were becoming quite normal, while those between 20 and 30 per cent are rare but possible on

selected schemes”, Molior said.An analyst in the sector, who

asked not to be named, said bulk discount sales can create a “snowball effect”. “As more of this comes through, it becomes obvious to the rest of the mar-ket and triggers further sales among those who had been hoping to ride out [the tough market],” he said.

Many bulk sales are driven by lenders seeking to protect loans to developers, he added.

Most bulk purchases during the quarter were made by so-called “build-to-rent” providers, including the US group Grey-star, the housing association L & Q, the fund managers M&G, and Quintain, owned by the pri-vate equity investors Lone Star.

State-backed loansThe chief executive of Crest Nicholson, Patrick Bergin, said last month the housebuilder had sold 69 homes at the Dylon Works project in south London to a housing association.

“We did this [sale] because we knew we would otherwise have [unsold] built stock,” he said.

“With the discount, com-

pared with the costs of holding stock and the costs of market-ing, we generally find a bulk sale can be achieved at a level that makes a contribution to ebit [earnings before interest and tax] even if not at the gross margin we had anticipated.”

Developers in the Nine Elms area south of the Thames made a series of bulk sales in 2017 to landlords including Residential Land and Greystar.

Molior said individual sales this year have mostly been supported by the Help to Buy scheme, which provides state-backed loans that enable people to acquire London homes cost-ing up to £600,000 with depos-

its of only 5 per cent.That scheme is seen as the

“only game in town” for individ-ual purchases in outer London, where prices are lower, Molior said.

After land costs spiralled, the prices of new homes in central London are out of reach of most owner-occupiers. Meanwhile overseas investors have largely deserted the market for indi-vidual homes, and tax changes have cut into appetite among UK-based buy-to-let investors.

However, Molior said new housing units under construc-tion had reached a high of 68,000, with 46 per cent of those still unsold.

Construction costs in the U.S. rose again in June, with steep increases for a wide range of building and road construc-tion materials as tariffs against foreign goods come into effect, according to an analysis by the Associated General Contractors of America.

Association officials say con-tractors will have to assume much of the costs as tariffs in-crease the costs of many key construction materials, said a recent media release.

The U.S. producer price in-dex jumped by 20 per cent for aluminium mill shapes, 17.4 per cent for copper and brass mill shapes and 12.3 per cent for steel mill products between June 2017 and June 2018.

Other construction inputs that rose sharply in price from May 2017 to May 2018 include diesel fuel, 52.8 per cent; lum-ber and plywood, 18.3 per cent; asphalt felts and coatings, 7.5 per cent; ready-mixed concrete, 5.5 per cent; and paving mix-tures and blocks, 5 per cent.

“Contractors’ costs for a wide range of materials and services have escalated dramatically in the past few months, putting a squeeze on profits and dimming the outlook for both public and private projects,” said the asso-ciation’s chief economist, Ken Simonson, in the statement.

- NEWS AGENCIES

U.S. building costs rise as Trump tariffs take effect

London homes being sold in bulk as demand dropsGAME PLAN: Many bulk sales are driven by lenders seeking to protect loans to developers.

A house for sale in East London. COURTESY


SPECIAL REPORT

Kenyan cement manufacturers and dealers are increasing-ly venturing into ready-mix

concrete delivery business to meet the growing need for the solution among developers putting up large-scale constructions.

Ready mix concrete is a facto-ry-prepared mixture of cement, sand, and aggregate, which is deliv-ered to a construction site for im-mediate use.

The material, which is prepared to a customer’s specifications, seeks to enhance construction project efficiencies by cutting on site con-crete mixing costs and time.

With this solution, all a customer needs to do is to prepare the foam work and to ask a supplier to deliv-er the concrete already pre-mixed on site. The product offers an al-ternative to buying materials – ce-ment, sand and ballast – and bring-ing in workers to mix and pour.

Aware of the rising demand for the product, Alliance Concrete Limited has partnered with Savan-nah Cement to provide ready-mix concrete for building sites in Nairo-bi and its neighbourhoods.

The company has invested Sh600 million into construction of two batching plants; one in Kitenge-la, and the other one in Dagoretti – from where it will be producing ready-mix concrete using Savannah Cement products.

Each facility is fitted with a 120 cubic meters per hour batching

plant. The concrete firm has two boom pumps with over 40-me-tre pumping capacity, two fixed pumps, and a fleet of 15 concrete truck mixers.

“After having spent almost two decades in the ready-mix concrete market in Turkey, which is the big-gest ready-mix concrete producer in Europe, we brought our expertise to Kenya to meet the challenging demands of its booming construc-tion sector by using our large, mod-ern fleet and fully automatic plants

situated strategically in Nairobi,” Alliance Concrete general manager Kemal Gocmen said in a statement.

Savannah Cement sees the part-nership as a means to explore al-ternative market opportunities to guarantee its growth in an increas-ingly competitive market.

“This constitutes increasing the production volume of ready mix concrete deliveries to complement the existing bagged and bulk ce-ment sales,” Savannah Cement CEO Ronald Ndegwa said.

Alliance Concrete will be com-peting for business with Bamburi Cement and the East African Port-land Cement, both of which pro-duce ready mix concrete and deliv-er the same to construction sites by their concrete mixer trucks.

In 2015, the Ministry of Land, Housing and Urban Development disclosed that it was drafting a law that would obligate builders of houses with more than three floors to use ready mix concrete supplied by cement makers as a means to en-sure quality workmanship.

The ministry said the regula-tions were aimed at reversing the trends of building collapsing due to the use of poorly mixed concrete.

Construction Kenya under-stands that the draft law had re-ceived unanimous support from key industry players after research

found that buildings were collaps-ing across the country mainly due to the use of weak concrete mixture and sub-standard materials.

Although the proposal is yet to see the light of day, a growing num-ber of builders are now sourcing for

ready mix concrete from suppliers as a means to save time and costs.

When preparing concrete on site, a contractor hires a mixer and workers to mix cement, sand, and gravel in order to get the required ration – a task that takes three to four hours of intensive labour.

“However, with the ready mix concrete we deliver to the contrac-tor a finished product saving them time, and once delivered it can be applied immediately thus saving on cumulative costs,” says Gocmen.

- DANSON KAGAI

Delivery of premix concrete to sites could be a game changer for firms CONCRETE SOLUTION: Ready mix concrete is delivered on site - thereby saving contractors time and labour costs.

A concrete mixer truck . COURTESY

Alliance Concrete’s batching plant. The company is producting ready-mix concrete using Savannah Cement products. FILE

QUICK FACTS

Kenya’s cementsector in figures2.3 millionThe volume (in tonnes) of cement that was consumed between Jan and May.

Sh600The average price of a 50kg bag of cement in Nairobi, Nakuru, and Nyeri.

15Cement prices have dropped to a 15-year low on cheap imports and increased production of the material.

Sh600mThe amount of money Alliance Concrete has spent to set up two batching plants


BY MIRIAM NKIROTE

Wealthy Kenyans are in-creasingly acquiring highly coveted prop-

erties in the heart of Dubai to house family members pursu-ing higher education or to ac-commodate business partners who often tour the United Arab Emirates.

This has prompted several Dubai property developers to arrange road shows and meet people trips in Nairobi as they seek to cut multi-million shil-ling deals with Kenyans eyeing property abroad.

Dubai-based Danube Proper-ties, for example, was in Nairobi recently to scout for buyers – a tour that saw the company sell-ing five properties to Kenyans in just four weeks. The success of the trip prompted the com-pany to plan a second clients’ meet in the city.

“Kenya is emerging as an important market for us where affluent families are buying apartments to facilitate resi-dence for their members pur-suing an education or to house business partners who often

visit Dubai,” said Danube’s in-ternational property consultant Alice Maigida.

According to Maigida, a ma-jority of Kenyans buying prop-erty in Dubai are interested in holiday homes and residences for children attending college.

“Some also seek to own fully furnished homes as an invest-ment that can be leased to other Kenyan families visiting Dubai for holiday,” she said.

Dubai laws facilitate tax-free purchase of property and an automatic issuance of two-year residency visa for buyers and their family members.

Title deed“It is automatically renewable after every two years and the Dubai government is actively involved in every step of con-struction where their task is to ensure the building is up to the required standard,” says Dan-ube’s Arslan Arshad.

Payments made are received by the Dubai Lands Office, which registers a buyer’s in-terests. The office issues a title deed on completion of payment.

“As a developer, you never

touch the buyer’s cash until you have delivered on the project. This ensures all transactions are above board,” Arshad said, adding that the company is scouting for off-plan buyers of upcoming properties.

Emaar Properties, the largest property developer in Dubai, has been marketing its three properties in Nairobi: The Ad-dress Residence Sky View, Burj Vista II and The Hills where

prices starts at Sh66 million for a one-bedroom unit.

Other Dubai-based property developers; Damac Properties, Deyaar and Seer Acquisition have also toured Nairobi to pro-mote houses sales in the city.

A past report by Knight Frank showed that Dubai is the second favourite investment destination after the U.K. where 25 per cent of super-rich Ken-yans invest in property.

Why rich Kenyans are buying Dubai propertiesDEMAND: Among Kenyans, Dubai is the second favourite investment destination after the U.K.

A house for sale in Dubai. COURTESY

BACKGROUND

For Kenyans, the grass looks greener in the Arab Emirates

•Wealthy families are buying apartments to facilitate residence for their members pursuing an education or to house business partners who often visit Dubai.

MONEY & INVESTMENTS

BY JOHN NDUIRE

A nationwide logging ban aimed to protect Kenya’s fast depleting forest cover has re-sulted in a steep increase in the prices of timber and wooden products, dealing a severe blow to builders across the country.

A quarterly Producer Price Index by the Kenya National Bureau of Statistics indicated that between March and June, the producer prices of wood and related products rose 23 per cent – driving up consumer prices.

The price upsurge coincided with a three-month ban on har-vesting of trees in all private, public and community forests, which was imposed by the na-tional government to save the

country’s water towers that are facing extinction due to human activity.

The ban resulted in escala-tion of prices of timber prod-ucts, with the cost of wooden poles more than doubling from Sh150 a piece to about Sh320 last month due to scarcity of the commodity.

Many builders who had al-ready acquired poles just be-fore the prohibition were una-ble to transport them to their sites since the ban included the suspension of timber and logs movements.

“Some of us had stocks worth over Sh50 million in our yards and other uncollected felled logs inside forests, which are wasting away,” Timber Manu-facturers Association chairman

Herman Thogoto said in April. Although the State has now

lifted the ban on logging for commercial tree growers, the prices of wood products are still high due to limited supply of the commodity.

Considering that the price of sand has also hit an all-time high at a time when industry players are finding it hard to obtain credit, many builders are postponing their projects indef-

initely – a situation that threat-ens the growth of the sector.

A Sh65 million office block at the county assembly in Wun-danyi town, for example, has stalled due to lack of wooden poles. The building is meant to house county assembly commit-tees and members of staff.

“The current assembly is congested. It does not have pub-lic and press galleries. The as-sembly has 33 members. That is why we need the new building for committee and staff,” assem-bly clerk, Michael Ngala said.

The rising prices of timber have forced some developers to explore the use of light gauge steel trusses as a means to dodge the costs.

A steel truss is made from steel coils coated with a pro-tective alloy of aluminium that forms a protective barrier against corrosion.

It also uses zinc for safe-guarding the edges and scratch-es and silicon as a binding agent.

During installation or roof-ing, the material is cut to size then delivered to site in neat packs. Truss members are screw-fastened using self-tap-ping screws and a screw gun.

Logging ban hits builders hard as costs skyrocket

The ban has resulted in escalation of prices of timber products. FILE

BACKGROUND

Why logging ban is weighing heavily on construction sector

•The cost of wooden poles more than doubling from Sh150 a piece to Sh320 last month due to scarcity of the commodity.


MONEY & INVESTMENTS

Analysts see a dim future for global solar market

BY JUDY MWENDE

The global solar market is facing tough times with analysts predicting a

sharp decline in the number of solar installations this year.

Goldman Sachs Group Inc., said in a research note on July 18 that it expects global so-lar installations to drop by 24 per cent in 2018, marking the first-ever contraction.

Goldman is not alone. Credit Suisse Group AG is predicting a 17 per cent drop, while Bloomb-erg NEF sees a 3 per cent fall.

China is greatly responsi-ble for the slowing demand for solar installations after it took 20 gigawatts of solar projects offline in May to curb financial aid to developers after record installations last year.

The clampdown pulled glob-al installations down to 75 gi-

gawatts from 99 gigawatts last year, Bloomberg reported, quot-ing Goldman analyst Brian Lee.

“Lowering our coverage view to cautious, we believe over-supply is set to continue in the near-to-medium term as de-mand from the solar markets remains tepid,” Lee said.

Goldman expects supplies across the entire supply chain to rise by 12 to 32 per cent, with big increases of 24 to 32 per cent in the segment that manufac-tures individual solar cells. This will further complicate matters for solar equipment dealers.

“To put this into perspective, at current 4-4.5 g/W conversion rates, this would imply 25 to 35GW of new supply potential vs. what we now forecast to be a roughly 25GW decline in year-on-year demand,”Goldman said.

The company forecasts that solar modules and cells will fetch about 15 to 30 per cent

less than they did for manufac-turers last year.

In June, Goldman Sachs predicted a 40 per cent drop in sales volumes in China – a huge decline for a country that accounts for half of the global market for solar equipment.

U.S. tariffs on imported pan-els and modules are expected to result in drops in demand in the United States, India, and Japan.

In February, the U.S. govern-ment implemented tariffs of up

to 30 per cent on Chinese solar panel imports – its first safe-guard tariffs in 16 years – say-ing the products had “seriously injured” U.S. manufacturers.

Such high tariffs have practi-cally barred Chinese manufac-turers from the U.S. market.

Already, solar casualties of the America-China trade con-flict are emerging. Mid-last month, Norway’s REC Silicon posted a quarterly pre-tax loss of $374 million for the second

quarter, compared with a $60 million profit the previous quarter, according to Reuters.

The company said the loss was occasioned by the “market disruption from the curtailment of solar incentives in China, as well as continued trade barriers that prevent access to primary markets inside China”.

The projections have sent shock-waves across the market, with most solar stocks falling.

JinkoSolar Holding Co., the world’s largest panel maker, is quickly sliding towards its 52-week low of $11.48, while the Bloomberg Intelligence Global Large Solar index has recorded a significant decline.

But even with a weakening market, Chinese manufacturers raised production in the first half of 2018.

This happened while the total installed generation re-mained unchanged compared to the same period of last year, China Photovoltaic Industry As-sociation Vice-Chairman Wang Bohua said on July 26.

ENERGY: Goldman Sachs expects global solar installations to drop by 24 per cent this year.

Workers arrange solar panels on-site. FILE


STRATEGY & MANAGEMENTLEADERSHIP I TRENDS I SUCCESS

Eight strategies to win the war for millennial talentsionals proudly cited their benefi-cial impact on society (“we build things”), their contribution to de-velopment, and their engagement with some of the serious modern challenges such as urbanization and climate change.

And this is true - construction accounts for 6 per cent of global GDP, creates the physical milieu for other industries to flourish and directly affects everybody’s quality of life through social infra-structure such as housing, trans-port systems, and schools.

Industry stakeholders should collaborate more in communicat-ing this impact, and should relay their fascinating stories more broadly by means of social media.

Collaborate systematicallyThe seven actions listed so far may take some time to implement and will certainly take some time to succeed.

They require a shift in para-digm, spanning the entire con-struction ecosystem.

One crucial facilitator will be collaboration between companies – to leverage synergies and coor-dinate campaigns.

Collaboration with external organizations is likewise crucial – with universities, for instance, in providing continuous L&D of construction professionals and in tailoring curricula to the future needs of the industry.

- WORLD ECONOMIC FORUM

According to the US Nation-al Association of Home-builders, 82 per cent of

construction companies consider their main concern to be a short-age of construction workers.

Sure enough, figures show that the average age of the workforce is rising faster than ever: the UK Chartered Institute of Building reports that the number of work-ers over 60 is increasing faster, and the set under 30 decreasing faster, than any other set.

In a recent construction survey conducted for the World Econom-ic Forum, with more than 100 re-spondents, 77 per cent of respond-ents agreed that the industry is not doing enough to attract and retain talent.

Here are eight things the indus-try can do to attract more talent:

Prioritize talent managementTraditionally, workforce manage-ment in construction was equiv-alent to living a boom-to-bust cy-cle: hiring and firing followed the general trend of the economy.

Winning the war for talent, however, requires a fundamental-ly longer-term approach.

This involves strategic work-force planning: i.e. thinking stra-tegically about the company’s fu-ture demand in terms of quantity

and quality of skills, and the likely availability of those skills, to plan recruitment, and retention.

Rejuvenate corporate cultureWhen Elon Musk, exasperated by the traffic in Los Angeles, tweet-ed his intention to develop a tun-nel-boring machine and create underground roadways, many people would have dismissed it as yet another crazy idea.

Some construction profession-als, though, including the German tunnel-boring specialist Herrenk-necht, took it far more seriously.

By setting out a bold vision and creating a culture that is un-daunted by tradition, Musk and other successful innovators man-age to attract the best talent.

Invest in diversityConstruction firms should tap into non-traditional pools – com-munity specialists, women, those with backgrounds in technology.

A study by Boston Consulting Group found a clear link between workforce diversity and innova-tion – mixed teams with diverse backgrounds and career paths tend to make a powerful impact.

Leverage tech and innovationEmbracing innovation and new technologies, helps construction

firms to meet the talent challenge.Increased automation, off-site

prefabrication, new collaboration tools – such advances will help to enhance productivity (and wages) as well as reduce the time spent on site (two key wishes for the re-spondents in our survey).

Foster career developmentContinuous learning and career development (L&D) is particular-ly important in a radically chang-ing industry environment that requires different skills.

Construction firms should be integrating continuous L&D into their culture, whether through internal academies, partnerships with external training institu-tions, or both.

Create relevant incentivesToday’s young talents look beyond salary packages and benefits, and emphasise flexibility (“own your time”), purpose and ethics.

Many companies in the tech sector and others have already adapted their recruitment and retention schemes to reflect those new priorities; construction com-panies need to up their game if they are to compete for talent.

Redefine image of constructionConstruction still has a “dull and dirty” image, but companies are well positioned to create a more appealing image – of a dynamic and purpose-driven industry.

In our survey, industry profes-

INCENTIVES: Young talents look beyond salary and benefits, and emphasise flexibility, purpose and ethics.

Businesses must find new ways to attract, recruit and retain millenials. FILE


STRATEGY & MANAGEMENT

Digital technologies are gradually entering the construction indus-try, changing how infrastructure,

and other built assets are designed, con-structed, operated, and maintained.

Those technologies include building information modelling (BIM), prefabri-cation, wireless sensors, automated and robotic equipment, and 3D-printing.

The economic impact could be sub-stantial, as the construction industry ac-counts for 6 per cent of global GDP and employs over 100 million people.

Within 10 years, full-scale digitization could help the industry save an estimat-ed 12-20 per cent, equal to between $1 trillion and $1.7 trillion annually, accord-ing to The Boston Consulting Group.

In parallel to the new technologies, there are several global megatrends that urge players in the construction indus-try to rethink long-established practic-es. Among the most impactful are fast urbanisation, climate change, resource scarcity and a growing talent gap.

The last of these is especially press-ing. Already today, more than two-thirds of U.S. contractors have difficulties fill-ing key positions, while in the U.K. con-struction sector, hard-to-fill vacancies have doubled over the past five years.

In other countries the talent gap is expected to grow further, given the im-minent digital transformation of the in-dustry and the new skills it will require.

Players along the construction in-

dustry’s value chain need to prepare strategically and make the right moves to thrive amid the disruptions the new technologies could cause.

However, the myriad potential chang-es in the industry will make it difficult to predict the future.

To help, the World Economic Forum, together with the Boston Consulting Group and more than 30 leading compa-nies from the construction world, creat-ed three future scenarios to prepare the industry for possible futures:

• Building in a virtual world. Artificial intelligence (AI), software systems and autonomous construction equipment re-place most manual work throughout the construction value chain.

• Factories run the world. Construc-tion moves largely to factories and the industry uses lean principles and ad-vanced processes to pre-fabricate mod-ules that are later assembled on-site.

• A green reboot. The construction industry uses sustainable technologies

and new materials to meet tough envi-ronmental regulations.

It is still unclear which route con-struction will take, and very likely that the future will include elements of all three scenarios.

Current business models, strategies and capabilities will not be sufficient in any of these future worlds.

This underscores the fact that players along the construction value chain need to prepare strategically.

Many proposed actions relate only to a particular scenario, but six key actions will be relevant in any possible future.

• Attract new talent and build up re-quired skills – as any future scenario re-quires talent with substantially different skills than today’s workforce possesses, and adequate upskilling processes are largely not in place.

• Integrate and collaborate across the industry’s value chain – as the construc-tion industry is characterised by a dis-integrated and highly fragmented value chain, which hampers the seamless data flows and integrated systems that are es-sential in any future scenario.

• Adopt advanced technologies at scale – as the construction industry has been slow to adopt new technologies and still heavily relies on manual labour and mechanical technologies, resulting in poor productivity.

Further key actions are: to maxi-mize the use of data and digital models throughout processes; to review existing product portfolios and embrace new business opportunities; and to enable change-management and adaptiveness.

- WORLD ECONOMIC FORUM

TOPPING OUT

1. Prioritize customer serviceWhen hiring employees, it is obvious-

ly important to determine whether they have the necessary contracting skills.

However, almost as critical is ensur-ing that they can provide quality custom-er service. Assembling a great team will go a long way in getting your business repeat customers and valuable referrals.

2. Find your nicheThere are many different areas of con-

tracting – if there is something in which you specialize, make that known.

Promoting your company as superior in one specific niche, whether it be win-dow installation or roof repair, is a great way to ensure that you’re the one a client calls when the the roof starts to leak.

3. Market, market, marketThough it is always great when you

can acquire clients through word of mouth, developing a marketing strategy is a sure way to grow your business even further. Applying some simple branding tools can really help to get your compa-ny’s name out there so that people think of you when they need a contractor.

4. Cover your basesA company needs insurance, especial-

ly when working with heavy machinery and electric tools is on the daily agen-da. Make sure you are covered when it comes to injuries, damage and lawsuits.

5. Stay involvedThe more time you set aside to hear

customers out and alleviate their con-cerns, the more comfortable they will feel hiring you in the future or recom-mending you to a friend.

6. Don’t cut cornersIt might be tempting to go with less

expensive materials, but it is important to keep in mind that often, saving now means spending later.

Make sure that all the equipment you work with is up to the task and can with-stand the test of time.

7. Be organizedKeeping everything in order is crucial

to running a business. You want to main-tain thorough bookkeeping to ensure you are sticking to your budget and, of course, getting paid for your work.

Full-scale digitization could help construction save an estimated 12-20 per cent, equal to between $1 trillion and $1.7 trillion annually. COURTESY

How builders can flourish amid new tech disruptionsOUTLOOK: Current business models will not be sufficient in a fully-digitised future world.

7 Practical steps to building a profitable construction business

Establish a budget and stick to it. FILE

RELATED

How technology is changing the construction landscape

i) Re-organising workforceArtificial intelligence (AI), software systems and autonomous construction equipment are replacing most manual work throughout the construction value chain.

ii.) Factories run the sectorConstruction is moving to factories and the industry is using new tech to prefabricate modules that are assembled on-site.


SITE REPORT

BY CK CORRESPONDENT

It can take years to build a World Cup soccer stadium, but a Chinese company has

come up with a quicker solution for the next tournament that will be held in Qatar in Novem-ber/December 2022.

China International Marine Containers (CIMC) is preparing to set up a 40,000-seat stadium out of 990 ocean shipping con-tainers that have been stacked, in a move that is likely to rev-olutionise the global sports ground construction sector.

The Ras Abu Aboud Stadium, which should be as easy to take down after the games as it was to put up, offers a solution to the problem of speedily coming up with a world-class facility for the next World Cup games – one of 12 pitches needed.

Not only will the containers be stacked seven storey high to create a structure, but they can be outfitted as rooms needed for the games.

For instance, one demonstra-tion model was turned into a restroom with sparkling porce-lain sinks and black partitions like those might be found in a luxury hotel.

“After the site is selected, the framework of the entire sta-dium is constructed with steel structure, then containers are

put in place like Lego build-ing blocks, and finally painting and decoration are carried out,” said Fei Wang, project manag-er of the manufacturing base of CIMC in Yangzhou, East China’s Jiangsu province.

Smaller venuesOnce the games are over, the stadium can be taken apart and reused elsewhere for other com-petitions.

It can also be combined into a few smaller venues or the con-tainers can be put to new uses,

like housing refugees, accord-ing to CIMC.

The stadium will be complet-ed in June 2020.

This is the first time that this

cutting-edge building concept will be adopted in the construc-tion of a large stadium.

Modular construction is a form of prefabricated construc-tion that allows major struc-tures or components of a build-ing to be made in factories and transported to a construction site for assembly, thereby sav-ing time and reducing waste.

“Strictly speaking, we are not ‘building’ the stadium, but ‘manufacturing’ it,” Wang said.

Manufacturing work is ex-pected to start this month

and be completed in April 2019. The container modules will

be shipped to Qatar in batches from October onward.

“By using container modules, the stadium’s construction time can be cut by three years. It can also save building materials and reduce emissions,” Wang said.

One of the selling points for the stadium is that the can be recyclable and easier to build compared to other stadiums.

“The prefabricated modular structure makes it possible to use less material and give rise to less waste and emissions, and three years may be saved for the whole construction,” Wang said.

China is promoting modular construction domestically, as the country attaches ever high-er importance to environmental protection.

Supportive policiesAccording to a guideline issued by the central government in 2016, China will create more supportive policies to promote the use of prefab construction, with the aim of making it ac-count for 30 per cent of new buildings within 10 years.

A State-level economic zone set up last year, the civic service centre of Xiongan New Area in North China’s Hebei province, is a typical example.

The landmark project in-cludes 89 serviced apartments covering 4,475 square meters and six office buildings. Nearly 600 modules are needed.

Globally, modular construc-tion is being applied in more and more countries.

According to CIMC, it has so far provided more than 35,000 hotel rooms and apartments for its partners in the United States, Britain, Japan, Australia and other countries.

An impression of the Ras Abu Aboud Stadium in Doha, Qatar. The 40,000-seat stadium will be built out of 990 ocean shipping containers. COURTESY

Made-in-China containers to form stadium for 2022 Qatar World CupTECHNOLOGY: Modular construction allows major structures or components of a building to be made in factories and transported to a construction site for assembly, thereby saving time and reducing waste.

An up-close view of the Ras Abu Aboud Stadium. COURTESY

SUMMARY

Qatar World Cup stadium in figures

40,000The seating capacity of Ras Abu Aboud World Cup stadium.

900The number of containers that will be used to set up the facility.

450,000The total size (in square metres) of the land on which the proposed stadium will be constructed.

2020The stadium is scheduled for completion in June 2020.

40,000The maximum seating capacity of Ras Abu Aboud Stadium in Doha, Qatar

file • full report, page 18 u.s. takes on china in kenya ... · cement in kenya, leaving...

Documents