Commitment to improving east African infrastructure spurs construction growth

CAPE TOWN, SOUTH AFRICA — The east African construction industries are primarily driven by government initiatives to eliminate urban slums that are characterized by lack of access to clean water, sanitation, and adequate housing. Additionally, the high economic growth in this region is stepping up the need for urban transport networks.

New analysis from Frost & Sullivan (https://www.buildingtechnologies.frost.com), Growth Opportunities in East Africa’s Construction Industries, finds that the total east African construction industry was valued at $5,994.3 million in 2009 and estimates this to reach $9,371.2 million in 2016. The countries covered in this research service are Kenya, Tanzania, and Uganda.

"In 2009, most governments in the East African region allocated a large portion of their annual budgets to the construction of housing, roads, and civil works," said Frost & Sullivan Environmental & Building Technologies Research Analyst Derrick Chikanga. "Approximately 60 percent of Kenya’s urban population resides in slums that are deemed unfit for human residence, thereby driving the need to provide more housing to the urban population and eliminate all slums around Kenya’s urban centers."

Various institutional reforms to promote the development of the construction industries are being implemented in east Africa. For example, the Kenya Slum Upgrading Program (KENSUP) is an initiative to eliminate the housing problem in Kenya. Such programs are expected to address Kenya’s infrastructural backlog and promote growth of its construction industry.

However, intense competition from Chinese construction companies and the high cost of borrowing are some of the major obstacles to the development of the east African construction industries.

"Chinese construction companies are largely preferred over local companies due to their comparatively low bidding prices," Chikanga explained. "Major contracts are awarded to these companies that make the construction business highly competitive."

Stringent building planning regulations and high infrastructural standards are boosting companies to implement best practices for greater chances of receiving contracts in the east African construction industries. Therefore, participants that offer superior construction materials are more likely to receive government contracts in the long run. Furthermore, the projected high economic growth is expected to ensure continued growth of the construction industries in east Africa.

"The east African construction industry has a poor reputation of producing sub-standard infrastructure," Chikanga said. "The implementation of best practices by utilizing high quality construction material will give companies an edge and enhance their construction business."

Growth Opportunities in East Africa’s Construction Industries is part of the Building Management Technologies Growth Partnership Services program, which also includes research in the South African construction industry market. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.