Q1 of this year saw the construction industry contribute 5.4% of the country’s GDP—its importance to the economy cannot be understated since the entire sector is the backbone of critical infrastructure needs such as housing, roads, and public utilities. As sustainable as the industry is, value creation in the sector is as important as ever. One question we must ask ourselves is how to maximize the economic, social, and environmental returns on investment throughout the life cycle of each construction project. This is a vital question since resource efficiency and affordability are at stake for the entire sector. To answer it properly and appropriately, we must look into how said value is created, the strategies used, and the challenges faced. We must also glimpse what the future holds regarding the growth opportunities for the construction industry.
The construction industry grew at an alarming 0.1% for Q1 2024 compared to the previous year (Cytonn, 2024). Even though the growth was dismal, many major infrastructure projects have happened over the past decade. We’ve seen the marvel that is the Nairobi Expressway, the game-changing Standard Gauge Railway (SGR), and the affordable housing initiative. The Kenyan construction market was $15.6 billion in 2023 (Global Data, 2024). The market will achieve an average annual growth rate of more than 5% during 2025-2028. The Kenyan Government has proven to be a major stakeholder in this sector, accounting for more than 40% of construction demand. In contrast, the private sector mostly focuses on residential and commercial real estate. However, the industry is currently facing a myriad of challenges, including—but not limited to—the rising cost of materials such as cement, whereby a 50kg bag of cement in Nairobi is selling at an average of Sh750, up from as low as Sh600 last year; labour shortages; and countless project delays that have actively hampered value creation in the construction industry.
Well-executed construction projects are a huge factor in driving economic growth. For example, did you know that, up to February 2023, the operator of the Nairobi Expressway, Moja Expressway Company CEO Steve Zhao, said that it had collected Sh2 billion in toll fees from the route since its launch in July 2022? That’s an average of Sh 286 million a month in revenue! The SGR, too, is not to be overlooked. Kenya Railways Corporation’s (KRC) income from the Standard Gauge Railway (SGR) expanded by 21.2 percent to Sh18.2 billion in the financial year ending June last year. We can definitely see economic growth across the board! The value train does not stop
there. The construction industry actively employs over 222,000 workers, which indirectly impacts other sectors, such as manufacturing and transportation.
Under the Affordable Housing Initiative, the Kenyan government planned to build 500,000 affordable homes, which would have added significant social value to the construction industry by addressing urban housing shortages. Moreover, such initiatives have a butterfly effect on the industry and the entire nation — better and affordable houses improve living conditions, enhancing the community at large through community-wide developments and projects. This approach prevents the disruption of community ties, livelihood access, and essential services.
2030 is less than 6 years away, and Kenya’s Vision 2030 sustainability goals are still glaring at everyone in the construction industry. Projects incorporating renewable energy and eco-friendly materials reduce energy consumption by at least 25%, aligning with the vision’s sustainability objectives. Green building practices will create immeasurable value since 100% of them promote reducing environmental degradation through ecological conservation, using sustainable materials, conserving energy and water, and implementing waste management strategies. This cause-and-effect relationship results in reducing greenhouse gas emissions, combating climate change, preserving natural resources, directly conserving biodiversity, and promoting the fragile ecological balance.
Value creation must transcend strategic plans in boardrooms and into the field where it needs to be implemented most. It can be through groundbreaking innovation and tech adoption, like Building Information Modelling (BIM), which has worked worldwide and has proven to improve project efficiency, reduce costs by up to 20%, and improve project timelines by 25%. Furthermore, LAPSSET is our daily reminder that automation and robotics work in mega projects by improving productivity and site safety while simultaneously reducing operational costs. Additionally, immense value can be created from sustainability and green construction. The industry should welcome the day-to-day usage of recycled materials like eco-blocks, primarily made from plastics, which reduce waste and cut construction costs by up to 15%. Kenya is also a renewable-energy country, and if we are to fulfill our goal of 100% renewable energy in public sector buildings by 2030, the construction sector has to increase its use of solar and geothermal energy in construction projects — it is a win-win scenario since renewable energy also offers long-term cost savings. Moreover, we can’t let countries like Nigeria and Ghana beat us in Green Building Certifications. They have integrated certifications like Green Star SA; we must not be left behind. Our uptake of those certifications is improving, and with it, the value of properties is up upto 15% because of their certified energy efficiency and sustainability features. Our processes and project management operations must create the most value efficiently. We must implement lean construction practices that reduce waste and improve project workflow. These practices have been proven to reduce construction costs while delivering a quality project on schedule. Value collaborations between government and private entities through Public-Private Partnerships (PPPs)
are gaining traction and have also been instrumental in delivering large infrastructure projects like roads, hospitals, and schools.
The road to a value-additive construction industry is not smooth sailing. Many challenges and predicaments make value creation harder than it should be.
The runaway increasing cost of production affects every project in the construction sector. As per the Kenya National Bureau of Statistics (KNBS) Construction Input Price Indices (CIPI) for the fourth quarter of 2023, the Year (YoY) inflation in the construction industry increased by 4.16 percent from an increase of 7.10 percent recorded in a similar period in 2022. This was partly because of increases in the indices of cement, bitumen, mix and pre-coated chippings, and hardcore, which recorded a rise of 4.08 percent, 3.80 percent, 3.41 percent, and 3.12 percent to 106.98, 170.18, 130.81, and 109.51, respectively, in quarter 4 of 2023. On the other hand, small and medium-sized construction firms cannot catch up with the ever-increasing market rates because they struggle with limited access to affordable financing. This further impedes their ability to invest in technology and innovation that drives value creation, which would have otherwise uplifted the entire sector.
75% of the country’s labour force in the construction industry is semi-skilled or unskilled. This further reinforces the sector's need to reduce the significant skills gap in key areas like digital construction technologies. We cannot fully implement BIM or even renewable energy integration if the foremen on site are severely underskilled. To counter this, both public and private stakeholders in the industry must come together and invest in skilling programs that will take construction to even greater heights. These programs should equip workers with the knowledge and practical skills to operate modern construction technologies. Vocational training institutions and technical universities must play a central role in offering specialized courses that cater to emerging industry needs, such as digital construction, energy-efficient building practices, and automation. The government can support these efforts by creating policies that encourage investment in training and upskilling. Tax incentives or subsidies for companies that invest in workforce development could help boost the number of skilled workers. At the same time, private sector companies should recognize the long-term value of investing in their workforce. Companies can increase productivity, reduce errors, and deliver projects more efficiently by equipping workers with the skills they need to operate advanced construction technologies.
Value creation in Kenya's construction industry is primarily driven by integrating innovation, sustainability, and efficient project management. However, key challenges must be addressed to unlock Kenya’s full potential in the construction sector. Financial barriers, regulatory inefficiencies, and a
significant skills gap in the labor force continue to hinder the widespread adoption of these value-driving technologies and practices. To ensure long-term value creation in Kenya’s construction industry, all stakeholders—including government agencies, private developers, and educational institutions—must actively invest in the sector's future. Embracing advanced technologies such as BIM and automation, adopting sustainable building practices, and upskilling the workforce are essential steps. Overcoming financial constraints through improved access to credit and creating clear, supportive regulations will further accelerate progress. Collaboration across the industry is vital to support Kenya’s Vision 2030 and propel the construction sector to new heights of value creation. Looking ahead, value creation in construction will be a cornerstone of Kenya’s future economic, social, and environmental development. As the country continues to urbanize and pursue ambitious infrastructure projects, a focus on innovation and sustainability will be critical to delivering affordable housing, improving infrastructure, and meeting climate goals. By prioritizing value creation, Kenya’s construction industry will contribute to national growth and set a benchmark for the rest of Africa. That’s a sight to behold, isn’t it?
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