Special focus – Building and construction market in Kenya and Tanzania

19-1-2015

With GDP growing steadily since 2010 at more than 4% and with a tourism industry by now a stable pillar of the economy, Kenya is a candidate to become the logistics hub for East Africa as a whole. And as if to show that the country is taking things seriously, there is precisely the fact that it has set in motion the most important inter-regional infrastructure project for years to come: the railway linking Kenya, Uganda, Rwanda, Burundi and Southern Sudan. Work on the first stage – 600 kilometres between Mombasa and Nairobi – has already begun: the estimated cost is $3.8 billion and the contract was awarded to the China Road and Bridge Corporation.
The construction industry today in Kenya accounts for 5.5% of GDP and the country is determined to modernise its infrastructures across the board. The largest portion of the budget will be set aside for the road network. Ten thousand kilometres of new roads must be completed by 2017 which, according to the National Construction Authority, the country will require government investments totalling 1.3 billion dollars for in the two-year period 2014-2015. Even the electricity power grid will receive an equally substantial proportion of investments: exploration seeking sources of hydrocarbons, the creation of wind farms and the installation of two new geothermal power plants should see the country improve capacity from 1,664 Megawatts to 5,000. 2015 should also see the onset of start work on the construction of the Itare Dam, which is set to become one of the largest artificial reservoirs in the country.
Becoming a continental logistics hub means that Kenya must also strengthen air and sea transport. This task envisages adaptation work on the two main airports in Nairobi (where the third terminal was recently completed) and Mombasa, while peripheral airports in Eldoret and Malindi will be upgraded. Another important infrastructural work concerns the construction of the new port of Lamu and the integrated road system accompanying the future oil pipeline linking Lamu with Southern Sudan: more than 1,700 kilometres of roads, 1,500 of railways, a new international airport at Isiolo and docks to adapt the port to post Panamax ships.
The capital Nairobi is an open-air building site. Over and above work to complete the ring road, there is a project to connect the international airport with the city centre through a light metropolitan railway system. Five new shopping malls will be built thanks to private sector finance, while Government programmes include the implementation of a Science and Research Centre, the Tatu City of Sciences, which is should be built about 30 miles from Nairobi.
The National Assembly, lastly, will soon have a new complex expanding space devoted to offices at an estimated cost of 67 million dollars.
In more general terms, residential building across the country has for some years seen exponential growth in works, largely thanks to private investment. Just like Nairobi, new shopping centres are also under construction in Mombasa, Kisumu and Nakuru. Public investment plans, albeit on a much smaller in scale, also and essentially include social housing projects, especially in metropolitan areas.
While less strategic that Kenya within the scope of Eastern Africa, Tanzania today is focusing on exploitation of its tourist potential. And while waiting for the start of production of natural gas, there are several interesting opportunities in the construction sector. In first place there is 2012-2032 Masterplan for the capital Dar es Salaam. The plan is ambitious: on the one hand, it seeks to transform the capital into the business centre of the country; on the other, it aims to enlarge the residential perimeter in order to reduce urban density and make neighbourhoods more functional with a better quality of life, giving priority to low and extended buildings rather than construction in height. Projects range from road networks to light urban railways, the creation of dedicated international business district and renovation of existing buildings, from redevelopment of parks to the construction of schools, sewage networks and Terminal 3 of Nyerere International Airport. It is a very long term plan and the budget for all these works has not yet been defined. The good news for Italian companies, however, is that to the tender for project design advisory services was won by Italian firm Dodi Moss srl.
Close attention is also given to the growing and thriving tourism industry with the building of a huge bridge (400 metres long by 32 metres wide), plus all associated road infrastructures, linking Dar Es Salaam with the coastal area of Kigaboni, which boasts some of the most beautiful beaches of the entire Indian Ocean but which until now has been excluded from the main tourist routes. The tender for the project was launched in 2012 and the contract was won by the China Railway Construction Engineering Group. The task – which should be ready by the end of next year – has 60% finance from the Tanzania National Welfare Fund and the rest from the Government.
Lastly, from the point of view of electricity infrastructures, the most significant plan concerns the creation of the hydroelectric power station at Rusumo Falls which, once completed, will not only supply the Tanzanian grid but also grids in Burundi and Rwanda. The project is financed by the African Development Bank and the World Bank and involves funds of 470 million dollars; it is expected to be completed by 2020.

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