The construction sector contracted for two consecutive quarters last year, a bleak performance that was last seen 22 years ago during the reign of the late President Daniel arap Moi.
Shrinking of the construction and mining sectors, as well as high interest rates, contributed to the slowest economic growth in four years despite the favourable exchange rate and low inflation, a new report from the Kenya National Bureau of Statistics (KNBS) shows.
The KNBS report showed that the construction sector continued its negative growth in the third quarter, shrinking by 2.9 percent in the period between July and September and 2.0 percent in the second quarter.
Similar performance in the construction sector was last recorded in the second and third quarter of 2002, when the largely corrupt regime of President Moi had been denied foreign loans from the West even as it struggled to mobilise domestic revenue to build roads, railways and ports.
The contraction in construction reflects the significant budget cuts on mega infrastructure projects, particularly roads, by the Kenya Kwanza government as well as the high cost of building materials such as cement and bitumen.
“During the review period, the sector (construction) recorded a 2.0 per cent contraction, compared to 4.0 per cent growth in the third quarter of 2023,” said KNBS in its Quarterly Gross Domestic Product Report for the third quarter. KNBS is the body responsible for computing gross domestic product (GDP), or the country’s total output.
The shrinking of the construction sector—and that of mining—dragged the growth of the overall economy in the review period.
The economy grew by 4.0 percent in the third quarter, the worst since the pandemic year, dragged by the shrinking of the construction and mining sectors, noted KNBS. In the corresponding period in 2023, the GDP grew by 6.0 percent.
Cement consumption, critical in determining the final output in the construction sector, declined by 10 percent to stand at 2.197 million tonnes in the third quarter of 2024, from 2.44 million tonnes consumed in a similar quarter of 2023.
The quantity of imported bitumen, used for tarmacking roads, decreased by 40.9 percent to 18,353.0 tonnes in the third quarter of 2024 from 31,053.5 tonnes imported in the third quarter of 2023.
In each of his first two financial years, President William Ruto’s administration has managed to construct in each year around a third of the length of kilometres of paved roads that his predecessor Uhuru Kenyatta left in the financial year ending June 2022.
In the financial year ending June 2024, an additional 542 kilometres of tarmacked roads had been built while in the previous year 495 kilometres.
In his last financial year, President Kenyatta’s government added 1,729 kilometres of paved roads in a period when the Nairobi Expressway was completed.
Uhuru’s administration also built the standard gauge railway from Mombasa to Nairobi and then Naivasha, Nakuru county, stimulating economic growth.
The slowdown also came at a time when interest rates topped the 20 percent mark, a fact that might have curtailed cash circulation in the economy, according to Ken Gichinga, an economist.
"Interest rates are the most important determinant of the vibrancy of an economy and even in the second half, interest rates remained high," said Gichinga.
Most of the sectors decelerated compared to the corresponding period in 2023 leading to the slowest quarter three growth since 2020 when the government restricted the movement of people and social gatherings to curb the spread Covid-19 pandemic muffled economic activities as many people were rendered jobless.
Although agriculture, which contributes over a fifth of the national cake, registered a slower growth of 4.2 percent compared to the 5.1 percent growth in 2023.
“This growth (in agriculture) was largely on account of favourable weather conditions that prevailed throughout the first three quarters of 2024, albeit less in intensity compared to 2023,” said the national statistician on Tuesday.
The growth in agriculture was dragged down by a 12.2 percent decline in tea production from 138,771.6 tonnes in 2023 to 121,868.3 tonnes in a similar quarter last year, though cane deliveries and milk intake by processors improved.
Other sectors that registered slower growth include manufacturing, accommodation services, electricity and water supply, ICT, professional and administration, financial and insurance services, and real estate.
