The Construction Industry Value Chain

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THE CONSTRUCTION INDUSTRY VALUE CHAIN

DBA ASSIGNMENT
PRESENTATION BY HENRY B NJUGUNA, ESAMI
THE CONSTRUCTION INDUSTRY IN KENYA AND
TANZANIA: UNDERSTANDING THE MECHANISMS
THAT PROMOTE GROWTH.
The construction industry is a very important one. Globally the annual value of the construction industry is of the order of 1.5 trillion dollars constituting about 8% of GDP and about 60% of fixed capital formation. It is one of the most relevant forces of the world economy representing 7% of its total employment. In Kenya and in Tanzania, the construction industry is a key indicator and driver of economic activity and wealth creation

The construction sector involves the construction of a wide range of public and private sector facilities including but not limited to:
Transport and communications sector – roads and public works, bridges, airports and sea-ports, telecommunications systems, etc
Water and sanitation projects- dams, portable water schemes, sewage schemes, irrigation systems, etc
Energy – Power stations, power transmission lines, renewable energy schemes, etc
Buildings- Residential buildings and estates, slum redevelopment, hospitals, schools and other educational facilities, hotels and touristic facilities, factories, shops and other commercial and industrial facilities Thus the output of the construction industry has a profound impact on our lives: the homes and offices we live and work in, the transport systems that we use to travel, the water we drink, and the electricity that makes our lives bearable. Given the breadth of the construction sector, it does, as can be expected attract many players.

HENRY B. NJUGUNA enghbnjuguna2@yahoo.com [ESAMI updated Sept. 2008]Page 1

FIGURE 1 - MAIN PLAYERS IN THE INDUSTRY
The main players in the CONSTRUCTION industry are:
Clients and business promoters including the public sector which is an important client, the private sector and individuals from many stations in life. Contractors who execute the work. These include:

Small scale contractors handling small projects upto us$ 1million Medium scale contractors handling medium contracts –us$ 1-10 million.
Large contractors handling large contracts – us$ 10 and above at both national and international levels.
Professionals from the building and construction industry including engineers, architects, quantity surveyors, land surveyors and lawyers Resource input manufacturers for construction materials, machinery and Transport. Resource input manufactures are many and varied. They include small and medium scale quarry owners and operators for building stone aggregates and murrum, and marble products, cement and cement product makers, logging, timber and timber products manufacturers and a wide array of transporters all of whom are add value. In addition there are machine manufacturers who bring into the market machinery required by the construction industry.

Banks and financial institutions

HENRY B. NJUGUNA enghbnjuguna2@yahoo.com [ESAMI updated Sept. 2008]Page 2

FIGURE 1 THE MAIN PLAYERS IN THE CONSTRUCTION
INDUSTRY`AND THEIR INTER-RELATIONSHIPS

Contractors

Professions

Clients

THE
CONSTRUCTION
INDUSTRY

Banks and
Financial
Institutions

Equipment
Manufacturers

Resource
Inputs

FIGURE 2: THE CONSTRUCTION INDUSTRY VALUE CHAIN POSITIONING OF THE VARIOUS ACTORS The contractors are dependent on a number of basic resource inputs. each of these resource inputs has its own value chain. the contractors access these inputs either directly or through wholesale/retail traders.

the manufacturers of steel and steel products
the quarry operators who provide sand, building stone,
aggregates, marble, etc
the cement manufacturers
the timber and timber products sawyers and traders

HENRY B. NJUGUNA enghbnjuguna2@yahoo.com [ESAMI updated Sept. 2008]Page 3

Transport is an important ingredient in the industry and is essential to both recourse manufactures and contractors

The professions...
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