Multinational drive growth in Kenya

Improvements in one form of infrastructure can benefit another but predicting the impact is more of an art than a science. A number of companies have set up regional operations in Nairobi over the past year but this is not entirely due to the attractions of the Kenyan economy.

In the Knight Frank Africa Report 2013, the managing director of Knight Frank Kenya, Ben Woodhams, says: “A significant proportion of the recent take-up has been due to large corporations setting up regional headquarters in Nairobi, in preference to the traditional regional hub of Johannesburg, mainly because of new routes opened up by Kenya Airways which enable direct flights to Central and West Africa.”

The company ranks Nairobi alongside Lagos and Luanda in terms of real estate growth. Retail floor space is also growing in the city, with the development of the Galleria Mall, The Junction Phase Two and Roysambu Mall, all in Nairobi, plus the City Mall in Mombasa.

The Tatu City project in Nairobi could also now be back on track. Minority shareholders in the venture had sought to have the development company wound up but the High Court has rejected the attempt. With 22,000 homes and 2m square metres of business space, it would be the biggest single real estate project ever undertaken. The pressure will now be on the majority shareholders to see if they can push ahead with development.

Huge expansion in cement production

One of the biggest signs of the growing construction sector is the fact that new cement plants are being developed on a regular basis. In November, HeidelbergCement opened a plant in Tema with production capacity of 1m tonnes a year. It is also constructing an 800,000 tonnes a year facility in Ghana’s other main port city, Takoradi, at a cost of $30m. When the latter is completed next year, it will give the German company a cement production capacity of 4.4m tonnes a year in Ghana. This investment underlines the construction boom taking place in Ghana, where cement consumption is growing by 8% a year.

HeidelbergCement Bernd Scheifele said: “The construction of the new cement mill in Ghana is another project in the context of our strategy of expanding our clinker and cement capacities in growth markets. In particular, the countries of sub-Saharan Africa have a very high growth potential due to their early stage of industrialisation and rich natural resources.” He added: “Together, the two cement grinding plants in Ghana constitute our largest capacities in West Africa. With the new mill, we want to expand our capacities in line with the rapidly growing cement consumption and maintain our dominant position in this key market.”

Another German firm, G Power Cement, is investing $90m in a new cement plant in Cameroon with a capacity of 800,000 tonnes a year. The output will supply the domestic market but also Chad and the Central African Republic.

Nigeria’s Dangote Cement and Addoha Group of Morocco have also both begun to develop cement plants in Cameroon over the past year. The triple investments will create competition in the Cameroon market, where a single company, CIMENCAM, currently accounts for the country’s entire cement output of 1m tonnes a year. Such competition should both drive down prices and help encourage greater house building. Addoha has already announced its intention to invest in the Guinean and Ivorian housing markets.