Kenya's Construction Craze
Gisa, an economics undergraduate at Durham University, examines the Kenyan construction boom and wonders what kind of future his nation is building.
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Visiting Nairobi for the first time, you could be forgiven for thinking that some kind of tectonic upheaval was underway. The ground seems to tremble under the wheels of heavy lorries, and the vibratory wail of drills is incessant. Hills are routinely shaved and flattened, trees felled and then dismembered. At the end of each ten-week term at university, I come home to find the horizon refashioned, another skyscraper here, another superhighway there. More looming cranes have sprouted in the distance, from which enormous concrete islands dangle ominously over the city. Construction, according to the International Trade Administration, is the fastest growing sector in the Kenyan economy. It expanded by 6.3% in 2020 alone and is projected to grow by a further 4.5% this year. Clearly, Kenya is experiencing a construction boom. But what does this mean for the future of the country?
Superfluous construction makes sense only if the value of the building lies not in what it will earn, but in what it can hide.
The optimistic view, to which government functionaries cling, is that the thriving construction sector represents a stepping-stone towards a glorious economic future. Public investments in transportation infrastructure, by widening and streamlining access to the national market, are promoting economic growth. Innovation, industrialisation, shared prosperity – all these things are sure to follow. Meanwhile,
the private sector is refurbishing the nation, providing modern amenities to newly affluent consumers. There is, in my opinion, little truth to this view. The boom is not a sign of national regeneration, but a symptom of a national illness. It is not a rational, well-managed phase of economic development, but has all the attributes of a frenzy – greed, irrationality, myopia and disorder.
It is not a rational, well-managed phase of economic development, but has all the attributes of a frenzy – greed, irrationality, myopia and disorder.
Let’s take the private sector first. What is most striking here is that nobody seems to want much of what is built. Towering office blocks remain in perpetual half-emptiness. There are more shopping malls than the small stratum of affluent shoppers can possibly sustain. Many are eerily empty on most days, like temples with lapsed congregations. These are not the natural adjustments of an efficient market. Supply is not rising to satisfy demand but is clearly dislocated from it. For this seeming departure from economic logic, only one explanation is plausible. Superfluous construction makes sense only if the value of the building lies not in what it will earn, but in what it can hide. Construction, in other words, is a useful way of laundering illicit funds, and illicit funds, in Kenya, are never in short supply. Last year, for instance, at least $71.96 million of public money vanished in a major procurement scandal, relating to the
purchase of COVID-19 equipment by the health ministry.
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This pattern of construction without any possible benefit for the future holds for the public sector as well. Consider, for example, the plethora of road construction projects undertaken by the current administration. According to AfriCOG, a Nairobi-based NGO, road construction saw “unexplained cost escalations” totalling Ksh49 billion between 2013 and 2017. This means that, once we account for rises in wages, raw material costs, surveying costs et cetera, the roads built by the current government have cost taxpayers about $437 million more than they should have. Where this extra money went should be obvious – it was stolen. High-cost projects, moreover, have been prioritised, because irregularities are easier to conceal on larger investments. This explains the frenetic construction of massive highways in Nairobi, whilst rural infrastructure remains underdeveloped. Public sector spending was never about regional integration or economic development, and will consequently do little to further those ends. It is simply another expression of the rapacity of the governing class. Just look, if still in doubt, at the alacrity with which slum areas can be razed when the next superhighway is agreed. If the roads were built to serve these people, could they be swept aside like so much rubble?
The Standard Gauge Railway (SGR), completed in 2017, is perhaps the most high-profile illustration of the fraudulence and futility of the construction boom. In 2019, President Kenyatta proclaimed that it would “spread the fruits of our prosperity to every corner of our Republic.” In reality, however, the line has thus far generated a net loss of $200 million. Repayment of the Chinese loan that financed the project, according to economist David Ndii, is costing the taxpayer over Ksh50 billion ($448 million) every year, despite the fact that the railway cannot facilitate any expansion in domestic trade, as its freight capacity (less than half what was promised) is exhausted by the volume of transit cargo alone. The Kenyan government is (still) yet to make public the terms of the loan contract, in violation of its constitutional obligations, fuelling accusations of Chinese “debt-trap diplomacy.” Such concerns are almost certainly exaggerated: the Kenyan construction frenzy seems, to me, to have less to do with Chinese dependency-inducing investment than the manifest lack of accountability in Kenyan politics. The government is set to spend billions of dollars on an inefficient railway, and the electorate knows neither who got what, nor on what terms.
The construction craze, then, gives little succour to hope, because its motive forces are greed, self interest and institutional dysfunction.
The construction craze, then, gives little succour to hope, because its motive forces are greed, self-interest and institutional dysfunction. SGR and its sister monoliths are emblems, signs in stone and steel, of all the reasons to be gloomy about the future. They are indicative of an economic system that has
become anti-competitive, rent-seeking, distortionary and, consequently, hostile to long-term growth. They are also reminders of promises unfulfilled and services unprovided, of overcrowded schools and understaffed hospitals; shortcomings which can only breed disaffection in a young, growing population. Perhaps such anger will fuel demands for greater transparency and genuine rule of law in Kenyan politics. More likely, it will only exacerbate existing social and ethnic tensions.
Writing this article I was reminded of a chapter in Victor Serge’sThe Case of Comrade Tulayev,which describes the frantic period of Soviet industrialisation during the early 1930s. Capital extracted from the peasantry has paid for a sleek, modern meat-canning factory, with a tannery attached, but only at the cost of a devastating famine. The factory is completed, absurdly, just in time for the disappearance of meat and hides. Here, as in Kenya, a building is meaningless if what fuels its construction is strangling the country. The title of the chapter is apt: “To Build Is to Perish.”