East Africa – attracting attention for all the right reasons

A picture around the growing construction industry there, why and growth potential, local economy attracting inward investment, plus local government and corporate support and existing knowledge/academic base, particularly around Kenya.

East Africa is attracting the attention of Gulf businesses for all the right reasons. Relatively speaking it is on our doorstep, with well-developed transport and logistics infrastructure providing ready access to a market with a thirst for investment.

Kenya is the natural gateway to the region, armed as it is with East Africa’s highest GDP growing at a bustling 5.9 percent. While it is not the most populous country, it is harnessing the power of its people and resources to drive development. The country has outlined a long-term development plan that aims to transform the country into a newly industrialised, middle income nation providing a high quality of education, healthcare and opportunity for its citizens.

Vision 2030 rests on three pillars that propose bold growth and changes that will shape the country for decades to come. The economic pillar aims for 10 percent growth per annum, a tough but achievable target for a rapidly developing nation. The social pillar seeks just and cohesive social development, while the political pillar aims to create an accountable political system that respects the rights and freedoms of Kenyans.

To build these pillars strong enough to carry a population’s weight of expectation the foundations will have to be strong. They are being constructed with the core building blocks of any nation: infrastructure development, public sector reform and macroeconomic stability. A series of five year plans are bringing the vision to life and the country is currently in its second medium term plan (2013-2017), which prioritises infrastructure development.

This phase represents a significant investment in infrastructure. Some $2.89 trillion has been set aside for the revamp of roads, rail, ports and other transport infrastructure. The government has also announced its intent to add 5,000MW to the power grid. It hopes to achieve this through three mega projects being put out to tender, as well as nine solar power plants it hopes to develop via public private partnership agreements. Topping it off will be the commissioning of the largest geothermal plant in the world at Olkaria, which alone will add 140MW to the grid.

A burgeoning middle class across all of East Africa presents a growing market for international retailers as demand grows for products and services from the global stage. The pace of this growth is leaving the real estate sector struggling to keep up, leaving suitable floor space in high demand. As a result retail development is seeing significant investment, with projects such as the 100-acre Two Rivers and Garden City projects.

When first announced Garden City promised to deliver 50,000 sqm of retail space, 421 residential units and 3.4 acres of serviced land for sale and was touted to be East Africa’s biggest retail project. However, since then another mega project has been announced: a 58,000 sqm mixed use development that will include residential homes, a five star hotel, office blocks and shopping mall –due for completion in October of this year.

Kenya’s welcoming economic environment means many local and multinational companies are already thriving there. International brands are heading to the country as it represents one of the most affluent retail markets on the continent, where retail investments in Africa represents nearly 17 percent of the total foreign direct investment in the region.

Conditions for construction firms - suppliers and contractors - to get established in the region are ripe and that is the main reason why dmg events Middle East & Asia is taking The Big 5 Exhibition to the region.A recent study valued construction mega projects in East Africa at $67 billion, up from 60 billion in 2013, indicating plenty of demand and growth along with it. That said, challenges will remain. While construction costs in East Africa are among the cheapest in the world, the costs of operating in remote areas, as well as transporting materials, can push prices upwards and slow project progress. Companies ready to handle these challenges could stake a strong claim in a market where demand is high and expectations higher.




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