How to beat high construction costs
In business, cut-throat competition in most sectors means companies that fail to change with the times are quickly elbowed out by new entrants that are more lean, quick and lithe.
For decades old iron sheets maker Mabati Rolling Mills (MRM), adaption to the fast tilting business landscape is urgent.
This is because the market for roofing materials and steel has been flooded with many new players selling cheaper iron sheets, giving established players a run for their money.
“The emergence of cheap roofing sheets and counterfeits is a real problem because it robs consumers of quality products. What happens is that you buy these things cheaply but then they quickly fall into disrepair and you are now required to buy new ones again,” MRM business head Manish Mehra told Smart Business in an interview.
These new players, Mr Mehra said, are spoiling the market with substandard products.
But stiffening competition and soaring prices of construction inputs such as steel bars, cement and labour have forced the company to be innovative to beat the market by tailoring their products to offer solutions to these problems.
Construction Input Price Indices (CIPI) data from the Kenya National Bureau of Statistics (KNBS) shows the prices of construction inputs steadily rose in the three months to June, underlining increasing the need for products that can cut these costs.
The high input prices have inhibited growth of the construction industry, one of the cornerstones of creating jobs in the economy that is still yawning but slowly waking up from the Covid-19 induced slumber.
Cost indices
“The overall construction cost indices increased by 1.60 per cent from 104.35 in the first quarter of 2021 to 106.02 in the second quarter of 2021. Similar increases are notable for the building cost and civil engineering cost indices by 1.55 and 1.63 per cent respectively,” KNBS said.
“The increase in the indices is mainly attributed to increases in the prices of doors, paving blocks, roofing sheets, fuels, steel reinforcement bars, bitumen and glass among other construction materials in the second quarter of 2021,” it said.
The data shows that the CIPI for cement, which contributes about 14.18 per cent of total construction costs, rose to 97.66 in the second quarter, up from 97.22 in the first quarter.
Meanwhile, the cost of steel and reinforced bars, which make up about 10.69 per cent of building costs, rose sharply to 126.87 between March and June, up from 120.78 in the preceding quarter.
The cost of roofing materials, which make up about 0.7 per cent of construction costs, also jumped to 97.04 in the same quarter from 93.95 between January and March.
In MRM’s strategy, the tailor-made solutions to lowering overall construction costs is to offer products and services that cut construction time, increase quality and longevity of inputs, and lower labour costs.
“Time plays a key role in setting costs that you will incur during construction. The longer your projects drag on, the more you will spend on labour, material and other costs. This is why new constructions, for instance, are embracing pre-engineered structures to cut building duration,” Mr Mehra said.
MRM launched pre-engineered steel buildings two years ago to cater to the growing demand for tailored building designs that reduce construction time and save on workers’ costs.
Official data shows labour costs in the construction industry rose by four per cent last year, highlighting their burden on developers and, therefore, need for cost-rationalisation measures
The cold-formed, galvanized-steel technology, dubbed SAFBUILD, is currently being used by developers for building warehouses, industrial structures, agro-processing units, market sheds, schools and workshops.
“This technology allows customers flexibility with their designs and reduces the time taken to put up such structures by half, which is very cost-effective,” he said.
Mechanising works with better tools and good quality materials, Mr Mehra adds, can significantly reduce building costs especially on labour. This, he says, can be as simple as using fasteners for instance, to fix roofs and choosing the correct paint for the roof can prevent rusting and early damage.
Building costs
“Saving on your building costs need not necessarily be a grand undertaking. It can be as simple as choosing the correct tools, the ideal materials, good suppliers and right price,” Mr Mehra said.
The businessman attributed the steep cost of steel to disruptions in global supply especially due to travel restrictions at the high of the Covid-19 pandemic last year, and a rise in local demand especially for domestic house construction.
“In mid last year, steel cost about $600 (Sh66,000) per tonne but this has doubled and we are currently importing it at $1,200 (Sh133,000) for a tonne. This is because our source markets which are primarily Japan, China and South Africa are having muted production due to efforts by their governments to cut on use of coal, especially China,” he said.
While the cost of inputs is fast rising this year on increased demand, the sector’s growth more than doubled last year to 11.8 per cent, up from 5.6 per cent in 2019 on the back on accelerated construction projects in both the private and public sectors.
However, the growth is largely attributed to accelerated building and construction undertakings during the year aided by record-setting low global crude oil prices that saw the cost of construction inputs increase by only 0.8 per cent, compared to 5.3 per cent in the previous year. BY DAILY NATION

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