Stalled Uhuru megaprojects damper cement and construction sector
Abandoned road barriers lie dangerously in the middle of the ever-busy Ngong Road as it connects to Haile Selassie Avenue under Nairobi’s iconic Expressway. In some sections, the giant pillars stick up like abandoned Stonehenge with exposed steel beams signaling where they should have carried the unfinished road connection.
The road projects that had earned Nairobi the moniker of one huge construction site complete with humming earthmovers round-the-clock have stopped, stalled, or been completed sending alarms to the industries churning out cement that has been a key pivot in Kenya’s robust economic growth supported by mega projects.
Kenya’s construction sector growth fell to 4.3 percent in the third quarter of last year from 6.7 percent in 2021 coinciding with a decrease in the volume of imported Bitumen from 36,762 tonnes in the third quarter of 2021 to 24,930 tonnes last year.
Stalled projects especially incomplete roadworks are now the relics of the end of former President Uhuru Kenyatta’s infrastructure-led economy even as the new hustler government shifts focus and budget plan to a ‘bottom-up economy’ deeply anchored on cheap microloans.
Economic data from the Central Bank of Kenya (CBK) shows that cement production and consumption have dipped in the negative over the last six months in sync with the completion of mega projects such as the Nairobi Expressway.
The 27.1-kilometer Nairobi Expressway was financed and built by the China Road and Bridge Corporation (CRBC) under a Public-Private Partnership (PPP) agreement.
CBK Governor Dr Patrick Njoroge did not outrightly state that the problem has been compounded by stalled projects only mentioning that delayed payments (the main reason for stalled and abandoned projects) were a big concern in the industry.
“Cement there was a decline in June, July, and August. And really we talked to the cement producers and you can see there is that dip since mid-year, and they assess this as related to the completion of large projects, and I mentioned this last time, the expressway etc. But also some concerns about payments that are delayed,” Dr Njroge explained during the Monetary Policy Meeting briefing on Tuesday.
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“But also they indicate that they are recovering well and expect they will be back at the normal level sometime in February,” Dr Njoroge added.
Treasury Cabinet Secretary Professor Njuguna Ndungu’s priority spending for President William Ruto’s first budget will go into establishing the Hustler, Settlement, and Film Funds while downgrading infrastructure spending to completion of ongoing projects and upgrading rural roads.
Whilst Mr Kenyatta’s focus was largely fixated on big-ticket infrastructure projects that have left the country cracking under the weight of debt, the new administration is focusing spending on lending to small businesses by creating a multitude of State-backed funds. This is the approach they believe will open job opportunities for millions of unemployed youth.
Prof Ndung’u said the budget will prioritise bottom-up interventions to support small businesses, rural and affordable housing, and art and craft while strengthening healthcare systems by reforming the National Health Insurance Fund in a move that has been fashioned to ‘Leave No One Behind’.
“The government will develop interventions to correct market and institution failure problems through schemes that will ensure that benefits of growth are distributed and shared fairly across all clusters of the society by creating opportunities for all,” Prof Ndung’u said.
President William Ruto launched the Kes250 billion Hustler Fund last year with a plan to disburse Kes50 billion annually to individuals, owners of small businesses, chamas, groups among other organised units doing trade.
Treasury CS says the government will also create a settlement fund for rural housing, a film fund for art and craft even as legislators pursue a return of the constituency development fund and a new senate fund.
Economists, however, say Prof Ndungu’s interventions to put money in people’s pockets will have to be funded at a time when all the country’s resources are being taken up by debt, wages, and salaries at a time when international banks are edging Nairobi out of the dollar debt market due to very high-interest rates.
The new government spending priorities are further clouded by the drying up of cheap global capital that had fueled sovereign borrowing during the era of low-interest rates, beginning with the 2008 financial crisis.
The end of cheap global debt has come as a result of the US raising interest rates to tackle high inflation caused by post-Covid-19 and the negative effects on global supply chains as a result of the ongoing Russia-Ukraine war.
Kenya is facing the twin problem of lacking an avenue to borrow even as the country is still struggling to recover from the decline in revenues from the impact of Covid-19 pandemic on tourism receipts, election-induced economic malaise besides the worst drought in a half-century.
The poor economic conditions will make it challenging to attain the National Treasury’s lofty budgetary ambitions targeting moderate inflation, low-interest rates, and increased revenues while cutting spending to inspire a 6-percent GDP growth this year.