MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO.41
Chinese railways builders deny local 40pc contracts
PERIOD: May 30 to JUNE 5, 2016
30/05/2016 : The Business Daily, Pg. 1
- Kenya has paid foreign suppliers Sh167 billion for the ongoing construction of the standard gauge railway (SGR), leaving only a small share for locals in the multi-billion shilling project.
- The amount represents 72 per cent of the money so far spent on the mega project whose civil works are 80 per cent complete.
- Transport secretary James Macharia said the 28 per cent share that local businesses have earned from the multi-billion shilling project came through deliberate push, signalling a determination by the Chinese contractor to enjoy its full benefits.
- From Mombasa to Nairobi, there have been complaints that the contractor did not meet the obligation of taking up materials from local suppliers and even the 28 per cent has been won through a big push,” Mr Macharia said
- He added that the second phase of the project would make it a contractual obligation that 40 per cent of the supplies be sourced from local businesses. Read more
Kenya demands back Sh 4bn from Chinese contractor
16/05/2016 : The Business Daily, Pg. 1 &6
- Kenya is demanding a refund of Sh4 billion from a Chinese firm whose contract to build the second terminal at the Jomo Kenyatta International Airport (JKIA), Nairobi was cancelled amid fears the botched deal could cost taxpayers hundreds of millions of shillings in compensation.
- The Kenya Airports Authority (KAA) scrapped plans for a new terminal building at JKIA, whose construction President Uhuru Kenyatta launched in December 2013, due to financial pressures and excess capacity caused by recent upgrades to existing facilities.
- Kenya has been in talks with the China National Aero-Technology International Engineering Corporation (Catic) over the past month and negotiations are expected to end in two weeks.
- Transport secretary James Macharia says Catic will have to pay back Sh4 billion as a refund on what the government had paid them before the contract was cancelled
- Mr Macharia said no work had been done at the airport despite Catic receiving money from the State amid reports the Chinese firm is demanding billions of shillings as compensation for the botched contract.Read more
Counties set ambitious revenue targets as pressure to spend grows.
16/05/2016 : The Business Daily, Pg. 12
- County governments are eyeing a raft of strategies to grow their revenue collection to finance bigger expenditure plans.
- Nairobi, Kenya’s metropolis has launched the most ambitious target of Sh17 billion up from last year’s Sh11.5 billion mainly sourced from new investments in real estate and industrial developments by multinationals that have made the city their East African hub.
- Nairobi is also sailing on its global fame as a conferences capital where reputable firms fly in to hold global meetings creating an insatiable demand for new hospitality facilities.
- According to the just released New World Wealth 2016 report, Nairobi saw the number of high net worth individuals with over Sh1 billion each hit 6,200. They reportedly invested their money in infrastructure and real estate sectors as well as in financial markets.
- The report said Kenya’s ease of doing business and lenient land ownership terms helped spur interest in multi-million investments where investors have recorded returns of above 50 per cent, the highest returns on investments compared to investing in established markets which are saturated with nearly all products and services.Read more
Kenya Lowers lending rate to 10.5 per cent
May 28 – June 3, 2016: The East African, Pg. 39
- Kenya’s Central Bank last week cut its policy rate for the first time in nine months, in a bid to revitalize an economy weighed down by mounting bad debts.
- The regulator reduced its benchmark lending rate to commercial banks –the central bank lending rate (CBR) from 11.5 per cent to 10.5% to encourage spending by households and businesses, even as analysts projected a sustained high interest rate due to the coming elections.
- Analysts attribute the rising bad debts to high interest rates, the government’s delayed payments to contractors and suppliers, a weaker currency that has led to underperformance by companies, and increased surveillance by the Central bank on how banks report their financial statements.
Residents in Court to stop Vipingo Mega City
02/06/2016 :The Daily Nation, Pg.19
- A group of residents from four locations have sued to block the construction of the multimillion shilling Vipingo mega city.
- This follows a disagreement among Mjumwa/Bambani community over allocation of 10,500 acres of land to Centum Investments ltd for what is expected to be the largest business hub and industrial city at the coast.
- Suppoters of the project have objected to the action to move to court, even as they push for an out of court settlement, but have not filed a counter suit.
- They sought an injunction to stop Vipingo Estate Ltd, Rea Vipingo Plantation Ltd, Vipingo properties ltd, Centum and their servants and agents from evicting, developing, interfering and selling the land within Vipingo Sisal Estate
Basco in deal to produce paints for leading Italian Firm
02/06/2016:The Daily Nation,DN2 Pg 2
- Paint manufacturer Basco paints have entered into a deal with Italian company Colorificio San Marco, to produce its brand of textured paints locally.
- Basco will under the partnership manufacture the Sam Marco range of paints after a two year distributorship deal. San Marco brands are distributed in 85 countries.
- Basco becomes the first company to receive a license to manufacture the San Marco range outside its nine production facilities in Europe. The deal is expected to see the price of the San Marco range, come down in the region .
Questions over legality of KRA amnesty to Landlords
02/06/2016 : The Daily Nation, DN2 Pg 2
- The Legality of the rental income tax amnesty currently granted by the Kenya Revenue Authority (KRA) has been questioned, given that the clause granting the moratorium no longer exists.
- The amnesty was granted under the income Tax Act but another law, the tax procedures Act, which became effective in January this year, included a deletion of the amnesty clause. Under the amnesty, KRA was to refrain rrom assessing or recovering taxes, penalties or interest in respect of all rental income earned before and during 2013, as well as and penalties or interest on rental tax payable in respect of 2014 and 2015.
Runda Residents in row with Njonjo firm over construction of commercial centre
02/06/2016 : The Daily Nation, DN2 Pg 3
- A company associated with former attorney general Charles Njonjo is set to face off with Runda residents in court over plans to build a Ksh 1 Billion shopping centre in the area.
- The residents are heading to court after the National Environment Tribunal dismissed an appeal in which they had objected to the construction of the low density commercial estate in the upmarket suburb. Grenadier, through its subsidiary, Grove Ltd, plans to build a hotel, an office block and a shopping centre in Runda targeting business tourists and diplomats.
- The Runda residents had sought a hearing at the tribunal in March last year challenging National Environment Management Authority (NEMA) license given to Grove Ltd to develop the seven acre plot.
- But in a decision on May 9 that offered relief to the Njonjo group, the tribunal unanimously dismissed the Runda residents’s appeal and affirmed Nema’s decision to approve the project after conducting an environmental Impact assessment (EIA)
Price of luxury homes up by 2.9 in 2015
02/06/2016 : The Daily Nation, DN2 Pg 3
- The prices of high end homes in Kenya rose by 2.9 % in 2015 from the marginal 1.4 % performance recorded in 2014, according to a new report by property management firm Knight Frank.
- The growth was attributed to two reasons: Luxury homes in the capital looked attractive to high net worth individuals last year as other investment classes such as equities under-performed.
- Demand also slightly exceeded supply for the very top quality residential property, despite a recent increase in new build.
Laws should be updated to put Kenya at par with other states
02/06/2016 :The Daily Nation, DN2 Pg 3
- Housing is a major aspect in the success of urbanisation. But as Kenya urbanizes, formal housing supply is not keeping pace with the growth, so informal housing is filling the gap. The World Bank review classifies roughly 27 per cent of Kenya’s population as urban, areas that are projected to grow at a rate of 4.4 per cent annually, compared with the national rate of 2.7 per cent.
- As most housing is provided by the formal or informal private sector, housing policy needs to be responsive to the conditions and modes of operation in the sector at large.
- Physical planning is an important aspect for any building code in regulating and enhancing the physical look and aesthetics of any locality. The current building code has many flaws and has not been able to control the planning of the structures. This could be attributed to the fact that the laws are outmoded, there is lack of enforcement of the regulations, lack of qualified physical planners, corruption and negligence by the local authority
- Negligence by the local authorities has contributed to the mushrooming of slums in almost all towns in the country. Investigations into the collapse of buildings that have cost tens of lives and material losses running into millions of shillings invariably show that they resulted from negligence by local authorities in not condemning aged structures, inadequate preparedness, and lack of enforcement of building safety, under-designed concrete columns and poor building processes and curing methods. The processes are rushed, and there are no clear passages and exits in case of fire or other emergencies.
- The absence of a competent authority to implement and certify building requirements might be another reason behind all the problems in the construction industry. Read more
Kusco’s Ksh 1.3 bn estate in Kitengela nearly done.
02/06/2016 : The Daily Nation, DN2 Pg 4
- The Kenya Union of savings and credit Co-operatives (Kusco) is set to complete a Ksh 1.3 billion estate in Kitengela as it diversifies into real estate to increase its earnings.
- The 120 three bedroom maisonette, which target middle income earners are going for Ksh 10.5 million each.
- Kusco is the Umbrella body for saccos in Kenya and is engaged in advocacy and representation on the savings societies matters.
- The houses are set on an eighth of an acre each in a gated community with auxiliary facilities like swimming pool, paved roads, borehole and a shopping Centre, which have become a defining feature of such developments.
Nairobi Western Bypass set for construction after Chinese firm signs deal
03/06/2016 :The Business Daily, Page 6
- The government has announced the start of construction works for the Nairobi Western Bypass aimed at reducing traffic congestion in the capital.
- The Nairobi Western Bypass project will be implemented as an engineering, procurement and construction contract (EPC). The total EPC cost estimate is Sh17.3 billion and will be funded through a concessionary loan from the Government of China.
- The Western Bypass, which will link Ruaka to Waiyaki Way, will help decongest the city and facilitate easy movement of those traveling outside Nairobi.
- The bypass is planned as a four lane highway measuring 16.5km with a design speed of 100km/hour.
- It will connect with the Nairobi Southern Bypass at Gitaru, and the Northern Bypass at Ruaka. It will involve construction of interchanges and overpasses at major junctions at Wangige, Kihara, Ndenderu and Ruaka.Read more
Real estate sector continues to attract investments from both private and public sectors as the government adopts Euro code construction standards in a bid to improve on quality of buildings and match global construction standards.
05/06/2016 : Cytonn Monthly Report – May
- During the month of May, there was increased focus on design and structural integrity of buildings in the country. This was brought about by the collapse of a six- storey building in Huruma Estate in Nairobi.
- The collapse was blamed on the fact that the building was substandard, constructed on a swampy ground and took only 5 months to construct.
- As a result, the National Construction Authority launched a nationwide campaign to identify and demolish substandard buildings in the country
Government adopts Eurocode Construction standards
- The government also approved the adoption of Eurocode construction standards leaving the long used British standards.
- This is as the Eurocode standards allow for uniformity in structural designs of buildings and civil engineering works such as Geo-technical aspects and structural features apply the most updated aspects of structural behaviour and allow for greater scope for innovation using advanced analysis technique hence giving better value for money.
- This adoption is aimed at curbing incidents of substandard buildings, unqualified personnel and achieving global construction standards locally.
Real estate sector continues attracting investments buoyed by the high returns and demand for real estate products.
- Key projects that were launched or broke ground in the month of May include:
i.Life Style Properties that announced plans to develop 120 residential units in Tatu City Masterplan
ii.Kenya Women Holding that broke ground on a Mall in Nakuru
iii.Several Public Private Partnerships were announced including an ambitious Kshs 300bn project by the Nairobi County Government to redevelop several old estates
iv.Express Kenya broke ground on a 15.8-acre residential project in industrial area encompassing 1500 units and a shopping mall. Read more