The manufacturing sector has been boosted by the recovery of construction as the demand for inputs such as cement, iron and steel increases.
Construction grew by three percent in the first quarter to March 2025 from 0.4 percent in the first three months of 2024 amid resumption of various road projects following the settlement of pending bills.
The settlement of pending bills to contractors has also resulted in secondary payments to manufacturers for goods supplied previously.
The Kenya Roads Board (KRB) began paying verified pending bills to the roads sector earlier this year using a short-term commercial bank loan facility ahead of the issuance of a Sh175 billion bond to clear outstanding arrears.
The Kenya National Bureau of Statistics (KNBS) noted that the growth in construction was observable through the increased consumption of manufacturers’ inputs as the sector grew by 2.1 percent in the same quarter from 1.9 percent previously.
“The growth in the sector was reflected in the increased uptake of inputs into the industry such as cement, iron and steel during the review period,” KNBS said.
“Cement consumption increased from 1,942,900 tonnes in the first quarter of 2024 to the 2,344,800 tonnes in the first quarter of 2025, marking a 20.3 percent growth. The quantity of iron and steel imports increased from 230,785 tonnes in the first quarter of 2024 to 313,289 tonnes in the first quarter of 2025.”
In 2024, the construction sector marked its lowest performance since the Moi era, falling for two consecutive quarters in the second and third quarters.
The sector caved under the weight of pending bills and high interest rates, pulling down growth for other parts of the economy such as manufacturing.
Productivity for the manufacturing sector also marked a recovery in the opening quarter of 2025 as construction emerged from contraction.
“The non-food manufacturing subsector supported the overall growth in the manufacturing sector with production of cement, assembled motor vehicles and galvanized sheets recording significant growths,” KNBS stated.
Kenya Association of Manufacturers (KAM) said it expected productivity for manufacturing to improve as payments for the road sector pending bills filter through.
“As the payment of road contractors happens, then definitely the manufacturers would also get paid and then they are able to produce more,” KAM chief executive officer Tobias Alando said.
The government has commenced settling pending bills beginning with the roads sector where it is piloting securitisation as an innovation to settle the long-standing arrears which have left cash-strapped contractors and suppliers.
In June, the Treasury told a National Assembly committee that the Cabinet had cleared KRB to allocate Sh12 of the Sh25 per litre Road Maintenance Levy Fund (RMLF) to compensate investors who buy into two bonds to clear the sector’s pending bills.
KRB is set to issue a Sh175 billion bond using Sh7 per litre of the RMLF to cater for current pending bills.
A further Sh125 billion bond is to be issued using the balance of Sh5 per litre from the levy to cater for future contractor’s bills.
KRB said it has wired Sh60.6 billion to the respective road agencies from disbursements of the short-term loan facility, including Sh29 billion to the Kenya National Highways Authority (KeNHA), Sh27 billion to the Kenya Rural Roads Authority (KeRRA) and Sh4.67 billion to the Kenya Urban Roads Authority (KURA).
Road contractors have accepted government terms to reduce the interest charged on delayed payments by 35 percent.
The Central Bank of Kenya (CBK) has projected construction to grow by four percent after contracting by 0.4 percent last year.
“For 2025, we expect a turnaround in the construction sector to be anchored on the reduction of pending bills to the roads sector. Some of the contractors have already been paid and have gone back to work. We expect that to generate additional value for the construction sector,” CBK Governor Kamau Thugge said in June.
