President William Ruto's economic advisor, David Ndii, has sounded an alarm that Kenya will continue to witness a decline in the construction sector, largely affecting employment.
Ndii was reacting to the latest report by the Kenya National Bureau of Statistics (KNBS), which showed that the construction sector had a decline in growth of 0.7 per cent in 2024 compared to the 3 per cent growth registered in 2023.
According to Ndii, the sector that at once drove the economic momentum and employed thousands of Kenyans was declining because, at its peak, most construction projects were financed by debts, which the government is now halting.
''The construction boom was debt-financed. Party is over," Ndii revealed.
For a while, there was a big boom in the construction sector, with lots of new buildings, roads, and projects popping up everywhere.
However, according to Ndii, most of this growth wasn’t funded with existing money but with borrowed money, meaning the government or developers took out loans to pay for it.
Ndii now warns that the rapid expansion is over because the debt has piled up, and it’s time to pay it back.
According to the KNBS report, the construction sector has been facing major declines, with the average annual inflation for construction materials and other inputs rising to 2.83 per cent in 2024, up from 2.30 per cent in 2023.
Loans and advances from commercial banks to the construction sector declined from Ksh602.7 billion to Ksh528.0 billion in 2024.
Cement consumption also decreased by 7.2 per cent to 8,537.0 thousand metric tonnes over the same period.
The decline has categorically affected the employment in the sector, which registered a downward trend, decreasing from 226.3 thousand in 2023 to 223.4 thousand employees in 2024.
Despite the government championing the affordable housing project, the report showed that affordable housing units fell by 50.7 per cent to 1,655 in 2024, down from 3,357 in 2023, according to the Economic Survey.
The value of completed works also dropped from Ksh11 billion to Ksh4 billion.
Engineers, contractors, masons, carpenters, and labourers who depend on these projects are now staring into job losses as these declines continue.
The ripple effect goes beyond construction sites as suppliers of materials like cement, steel, and paint will also feel the pinch, and businesses tied to construction, such as transport and machinery rentals, may experience reduced demand.
