THE CONTSRUCTION ECONOMIC IMPACT OF COVID-19 ON KENYA'S CIVIL ENGINEERING SECTOR & THE ROLE OF BAD POLITICAL POLICIES ALONGSIDE GOVERNMENT FOREIGN DEBT(S)
The COVID-19 pandemic has been a significant disruptor in economies around the globe, and its effects on Kenya' construction and civil engineering sector have been particularly severe. Coupled with the challenges posed by the pandemic are the detrimental effects of bad political policies and high taxation, exacerbated by the government's misuse and illegal acquisition of foreign loans. This combination has created a perfect storm, making recovery for the civil engineering sector increasingly difficult.
SCARCITY OF PROJECS
The pandemic brought many construction projects to a halt in both private and public sectors, leading to a scarcity of work in the construction and civil engineering sector. Lock-downs and restrictions on movement delayed essential approvals and inspections, resulting in significant project cancellations and postponements. With fewer projects available, civil engineering firms—already operating on thin profit margins—struggle to survive. Since 2020 the industry thrived on a steady influx of projects, which led to the current project turnover drought forcing many firms to the brink of insolvency.
PROFIT TURNOVER CHALLENGES
Excavation works (e.g basement excavation) often yield modest profit margins in, typically taking between 2 to 5% off the whole project value. However, with increased competition for limited projects, many firms find themselves bidding lower than the said fraction, further squeezing their profit margins. This situation is unsustainable and has lead to a decline in the quality of work, ultimately damaging the reputation of the industry as a whole. Most Developers in Parklands and Eastleigh areas have been victims of poor civil engineering services due to project under-quoting, which end up being double expensive in procuring second or even third contractors to finish the required job.
BAD POLITICAL POLICIES
The impact of COVID-19 was compounded by a series of poor political policies created an environment rife with inefficiency and corruption. Bureaucratic red tape often hindered the timely approval of projects, causing unnecessary delays. Moreover, the 2022 general elections and post election political instability led to inconsistent policy shifts that deter investment and created uncertainty. This unpredictability discouraged both local and foreign investors from committing to new projects, thus limiting opportunities for construction and civil engineering firms.
HIGH TAXATION AND FOREIGN DEBT MISMANAGEMENT
High taxation levels since 2020 emerged as another significant burden on the construction and civil engineering sector. The Kenyan government, grappling with mounting debts largely due to mismanaged and sometimes illegal and unconstitutional foreign loans, has turned to increased taxation as a means of revenue generation. These taxes place additional financial strain on businesses that are already struggling to stay afloat.
The misuse of foreign loans through out the years has raised serious concerns about accountability and transparency. When funds meant for infrastructure development are miss-allocated or siphoned off, it not only stifles growth but also affects the quality and sustainability of projects. The resulting high levels of taxation, aimed at servicing this debts, further inhibit the growth potential of civil engineering firms. With less money available for reinvestment and innovation, many companies face bleak prospects for recovery.
WORKFORCE CHALLENGES
The pandemic led to a significant loss of skilled labor in the construction sector. Many skilled professional staff like engineers, project quantity surveyors and architects are leaving the industry for more stable opportunities or migrated to areas with better prospects. This skills gap poses a further challenge as projects eventually come back online, potentially delaying timelines and increasing costs by hiring independent firms.
FUTURE OUTLOOK
Looking ahead, the path to recovery for Kenya's construction and civil engineering sector, we will require a multifaceted approach. Like the recent civil up-rise demands by the youths, the government must prioritize transparency and accountability in its handling of foreign loans, and majorly fighting against corrupt and wasteful fiscal policies, ensuring that funds are used effectively for infrastructure development. Streamlining bureaucratic processes especially in county levels and reducing unnecessary regulations and paperwork especially on small projects will also help create a more favorable environment for project approvals.
Moreover, the government should consider tax reforms aimed at alleviating the burden on struggling firms. By fostering a more conducive economic environment, Kenya can attract both local and foreign investment, ultimately revitalizing the construction and civil engineering sector.
CONCLUSION
The combined effects of COVID-19, bad political policies, and high taxation resulting from mismanaged foreign loans have created a challenging environment for Kenya's construction civil engineering sector. As the country is still seeking to recover from the pandemic economic damages, it is crucial for stakeholders to advocate for policies that promote transparency, reduce bureaucratic hurdles, and support the construction industry. By addressing these underlying issues, Kenya can pave the way for a more resilient and prosperous civil engineering sector in the future.
For top-notch excavation and civil engineering services, we invite you to visit our website and see how our expertise can help you navigate these challenging times. Let's build a better future together!
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