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November 16, 2018

Sluggish economy hurts growth in cement output

The construction of the National library in Nairobi Upper hill. 
Photo/Enos Teche.
The construction of the National library in Nairobi Upper hill. Photo/Enos Teche.

PRODUCTION of key building materials declined year through October, underlining a slowdown in real estate sector growth which has witnessed a boom in the recent years.

 A slower growth in the output of cement, a key indicator of performance in the building and construction sector, and a further dip in production of galvanised sheets points to reduced activity.

 During the first 10 month of the year, cement manufacturers increased output by 10.58 per cent year-on-year, latest provisional data collated by the Kenya National Bureau of Statistics shows. This is a slower pace of growth compared to 15.59 per cent in a similar period last year.

 In the review period, about 5.33 million metric tonnes of cement were pumped into the market, a modest growth over 4.82 million tonnes churned out in the first 10 months of 2014.

 Highest monthly production this year was recorded in July at 570, 904 tonnes, but that has since slowed to 553,929 tonnes and 547,509 tonnes in August and September, respectively.

 “The quantity of cement produced decreased from 556,873 tonnes in September 2015 to 547,509 tonnes in October 2015,” KNBS said in its Leading Economic Indicators report for the month of October released last week. “Consumption of cement rose from 478,011 tonnes in August 2015 to 514,072 tonnes in September 2015.”

 Devki Group-owned National Cement Company, an Athi River-based cement firm with a capacity of two million tonnes a year, said the 9,364 tonnes month-on-month drop in production is reflective of contraction in the economic growth.

 “This year [compared to last year] is much more rocky. There are ups and downs in economy, in exchange rates and politics,” Devki Group chief executive and founder of National Cement Narendra Raval said on phone. “The politics are affecting the economy because people are not starting new projects.”

 Reduced activities in the sector was one of the main reasons the overall expansion in the economy slowed to 5.5 per cent in the second quarter of this year [April to June] from six per cent last year, the KNBS said on September 30.

 The sector’s growth decelerated to 9.9 per cent over the review period from 16.6 per cent, the KNBS said.

 “We wish it could pick from next year but the economy has to pick up and political noise tonned down,” Raval said.

 For the nine-month period to September, growth in the consumption of the commodity also slowed.

 An estimated 4.22 million tonnes was consumed, 11.64 per cent more than 3.78 million tonnes between January and October 2014.

 The pace of growth was slower compared with 22.33 per cent posted in the same period of 2014 when consumption climbed from 3.09 million tonnes in nine months to September 2013.

 The KNBS provisional data further points to a drop in production of galvanised sheets – a widely used roofing material despite gradually-rising competition from alternative materials.

 Output of the sheets declined 12.29 per cent or 26,230 metric tonnes to stand at 187,248 tonnes in the nine-month period through September.

 That was a higher fall compared with last year's 6.80 per cent or 14,700 tonnes to 213,475 tonnes from 228,177 tonnes in 2013.

 The private sector has also been increasing investment in the real estate sector, targeting largely the mixed-use developments comprising apartments for middle-income earners and shopping malls.

 The sector's performance is mainly being driven by increased expenditure by the government on key infrastructure projects including roads and the 480-kilometre Mombasa-Nairobi standard gauge railway line.

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