MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO.38
PERIOD: MAY 9 to 15, 2016
Disband the NCA
09/05/2016 : The standard, Page.16
- According to a report by Solomon Njenga of The Standard, President Uhuru Kenyatta should disband the NCA, and order immediate demolition of substandard houses in Kenya to avoid threats.
- Audit report presented by the NCA indicated that over 60% of buildings in Nairobi were unfit for habitation, yet no action has been taken.
- It has also failed to enforce the existing physical planning and building laws and regulations.
- It has also failed to identify, review the impediments to the current building regulations, legal and institutional arrangements in the building and construction industry and to propose the institutional framework for achievement of sustainable, well-planned, safe and healthy built environment.Read more
Soaring prices of steel set to push up cost of construction
10/05/2016: The Daily Nation,Pg.44
- Local steel millers, who import raw materials ant semi-finished products, say prices have increased by up to 20% over the past 2 months in the global market, pushing up local prices.
- Devki Group, which operates a steel mill in Ruiru town, said that prices have increased to sh60600 per tonne from sh50,500 in March.
- Kenya is among the countries that have benefited from the recent slump in steel prices, spurring the construction sector that expanded by 13.6% last year.
- The construction of the sh327b standard gauge railway consumes a lot of steel. Developers have also stepped up investments in skyscrapers and shopping malls to meet demand for top grade office and retail space.
- Local manufacturers rely on scrap metals and semi-finished products like wire rods to make steel for East African market, but have recently come under pressure from cheaper Chinese steel, prompting calls on Kenya to control imports.
Shopping mall collapses in Mombasa
10/05/2016 : The Standard, Pg.7
- A section of a 6 storey mall in Mombasa’s Nyali collapsed on 9th May causing immense damage on adjacent properties. Sections of the mall and adjoining properties were shut down for the fear of damage.
- Reports indicate that the part which collapsed was an unauthorized annex that was erected without proper foundation.
- Architectural Association of Kenya officials, led by Steven Ogwapit, were questioned on how the annex was constructed saying it was a clear indication that proper supervision was not done during construction. He said that the section that collapsed was just an addition and no columns were erected while constructing the building.
- County Secretary Francis Thoya said an audit of all buildings will be done soon in Mombasa to establish if they were constructed professionally.Read more
Chinese firm clinches deal to construct sh15.5b cement plant
10/05/2016 : The Standard, Business Beat pg.3
- China Investment Trustee International Corporation China (CITIC) has been contracted to construct a cement factory planned for West Pokot, scheduled for completion in June next year.
- The plant is expected to create direct employment for 600 people once operational and hundreds of indirect jobs through sub-contracts and supply deals.
- According to the managing director of the Indian firm, Sanghi Cement Group (which is the holding company for the Kenyan subsidiary, Cemtech), the sh15.5b Kenyan project, once complete will be Africa’s most ultra-modern, eco-friendly cement-producing unit.
- The plant will produce 1.2m tonnes (24m bags) of cement per annum, and will include a 30-megawatt power plant.
- The factory is expected to meet the local cement demands, with the surplus exported to the East African market.
- Borrowing technology and centuries of experience in cement production from India, it is expected to be the first cement factory in the region to produce its own clicker. This is intended to help maximize exploitation of natural resources and ease the strain on foreign exchange used to import clinker.Read more.
Mike Sonko to sue as faulty buildings set to be spared
11/05/2016 : The Daily Nation,Page 12
- Nairobi Senator Mike Sonko plans to sue the county government for negligence following the collapse of building in Huruma that claimed 51 lives.
- He has hired 6 lawyers so that the families of the victims are compensated.Read more
Surveyors want regulation enhanced
11/05/2016 : The Daily Nation,Page 12
- The Institution of Surveyors of Kenya (ISK) wants the government to enact the Built Environment Bill to strengthen regulation in the construction sector and prevent buildings from collapsing.
- ISK also wants all those involved in the collapsed Huruma building investigated and held responsible if found to have broken the law.
- It said that the county government should evacuate and demolish buildings deemed unsafe.
- It further wants the ministry of lands and national land commission to revoke ownership of all land in wetlands to prevent environmental degradation.
Kenya builds few power plants as demand falls
12/05/2016 : The Business Daily
- Kenya’s drive to build new electricity plants to support economic growth slowed last year after hitting a record high in 2014 as demand for power slows down.
- Demand for electricity grew at a slower rate of 5.5% last year compared to a growth of 12% in 2014.the country in 2014 injected additional 280MW of geothermal energy to the grid from Olkaria power plants in Naivasha, which helped cut power bills by about 30%.
- But the quest to build new power plants has slowed down amid fears of the government that excess electricity supply would lead to expensive electricity bills for homes and businesses.
- The slowdown has led to the cancellation of planned construction of a 700MW natural gas power plant in Mombasa.Read more
Demolition of buildings put on hold- Land Prinicipal secretary says
11/04/2016 : The Standard, page 3
: The Daily Nation, page 12
- The demolition of buildings marked and substandard has been suspended for a week.
- Lands principal secretary, a committee has been set up to take a second look at them and give final analysis and advice owners on what to do. Where there are any structural reinforcements to be done, it will be done so as to secure.
- A second committee” operational committee” will focus on the residents and find amicable solutions to their relocation where necessary.
- The feedback from both committees will be made public and a comprehensive list of the buildings to be demolished will be published and they will be taken down immediately.
- He also says that at least 12 houses of the 70 buildings marked for demolition will be reinforced to make it safer for habitation. Read more
Building demolished to pave way for superhighway
12/05/2016 : The Standard Page 3
- Building in Changamwe is demolished to pave way for Changamwe-airport-superhighway.
- Most of the houses near the road have been demolished and owners compensated.
- The road is expected to reduce traffic congestion from Mombasa town to the Moi International Airport and the mainland.
Construction of Thiba dam set to start in August
12/05/2016 : The Standard Page 3
- The construction of the sh20b Thiba dam in Mwea meant to boost rice farming will begin in august, after 20 of the plan being conceived.
- The construction will be launched by President Uhuru Kenyatta.
- The government will ensure the project is completed within 3 years.Read more
Avoid NCA levy at own risk
12/05/2015 : The Standard, Home& Away Page 9
- The NCA imposed a levy of 0.5% of the value of any building whose value exceeds sh5m, which is in line with the provisions of section 31 of the NCA Act that the charge should not exceed 0.5% of the value of the building.
- According to the NCA regulations passed in 2014, every owner must notify the authority and give details of any project contract awarded to a contractor for purposes of levy.
- The NCA should notify the owner of the amount of levy payable within 14 days of the notification and this should be paid before construction begins.
- The NCA may revoke, suspend or cancel registration of a contractor who starts construction of a building whose owner has not paid the levy.
- The authority must issue a compliance certificate to prospective owners as a proof that they have settled the levy.
- Developers are required to register their projects with the authority within 30 days of awarding a contract to a contractor.
- The authority also has powers to undertake and commission research in the construction industry and register contractors and regulate their professional undertakings.
- It is also mandated to promote and ensure quality assurance, initiate and maintain an information system in the construction industry.
- Other statutory laws include providing, promoting, reviewing and coordinating construction industry training and accrediting skilled construction workers.
- It further requires at least one director or partner of a firm applying for registration to hold technical qualifications, skills and experience.Read more
Nairobi rejects 2000 titles deeds of properties on riparian land
13/05/2015 : The Business Daily, Page 11
: The Daily Nation Page 28
- This comes after the county started demolishing buildings on river banks following the collapse of building in Huruma.
- Houses that can be reinforced will not be demolished, but those in riparian lands and on river banks will be brought down despite their structurally correct nature.
- In addition, the sh1b complex overlooking T-Mall shopping centre on Mbagathi road will be demolished despite the court order. The Governor says they hired 3 lawyers to challenge the court order barring the county from bringing down the building.Read more
RVR loses deal to run the SGR to a Chinese contractor
07-13/05/2016 : The east African, Page 13
- The rift valley railways have lost the priority to run the newly built standard gauge railway after a regional presidents meeting at the recent northern corridor summit decided to give the deal to a Chinese firm to operate the business.
- This means that Kenya could end up paying RVR for lost business due to the operationalization of the SGR line.
- Legal documents amending the concession agreement, signed in August 2010, provide for compensation for lost business. This mechanism was put in place to ensure that RVR’s operations were not put at risk by the new railway, while offering it equal opportunity and a level playing ground.
Real estate companies are struggling to meet investment objectives given the capital intensive nature of the business.
15/05/2016 : Cytonn Weekly Report No.19
- Real estate companies are struggling to meet their investment objectives given the capital-intensive nature of the business which leads to huge financial costs. Last week Home Afrika, the only listed property firm, released their 2015 results, posting a loss per share of Kshs 0.91, from a loss per share of Kshs 0.04 in 2014 driven by a 62.2% drop in revenue coupled with an 18.7% rise in operating expenses. Gross sales decreased by 62.2% from Kshs 390.1 mn to Kshs 259.8 mn. The drop in revenue is due to reduced sale of plots from their various projects including Migaa Golf Estate in Kiambu
- At the same time, Kamuthi Housing Society is facing the risk of losing property worth over Kshs 4.0 bn due to unpaid debts. The Cooperative Society has been unable to service their debt due to poor sales that can be attributed to poor location with roads to their projects being impassable. Some of their projects include Buffalo Hills Leisure and Golf Village in Thika and Soya Estate in Murang’a.
- In Cytonn’s view , Home Afrika, and other real estate companies need to address the following;
- Financing Structure – The real estate sector being a capital intensive sector requires proper planning on financing and at reasonable costs. In addition, returns from real estate usually take a while hence firms need to seek ways to enhance liquidity. Firms have done this through structured funding that can provide liquidity while the project is ongoing, use of pre-sales and diversification of income sources.
- Exit Strategy – There’s need to put in place working strategies on product positioning and marketing so as to generate sales from projects within a reasonable period of time. A proper exit strategy will ensure adequate cash flows and profits, allowing pay back to the financiers of the project within the required timelines.
- Market Research – Before venturing into a project, it is important to conduct a feasibility study to determine demand, uptake, and market gaps. This will prevent undertaking a high-risk investment that may result in capital loss due to poor market uptake.
- Governance and management – Management ought to consistently work to increase the value of shareholders’ equity through proper running of day to day activities. Good governance will improve investors’ sentiments enabling it to access financing at fair costs. Read more.