MPs critise private sector push to scrap Nema, building fees

PERIOD : 17 – 23 OCTOBER 2016

17/10/2016 : Business Daily,pg 6

• The scrapping of levies charge by environment and construction  authority will hurt Nema nad National Assembly’s Environment and Natural Resources committee has said.
• Amina Abdalla, who chairs the committee said the decision by the Kenya Private sector Alliance  (Kepsa) to lobby President Uhuru Kenyatta to stop the National Environment Management Authority (Nema) and NCA would affect the operations of the agencies.
• The Private sector players had called on parliament to review a number of legislation that they say impose levies that have hindered economic development, trade and upped the cost of doing business. I
• The Treasury in June announced in the budget statement the scrapping of levies charged by Nema and NCA .
• This is expected to ease the burden of investors seeking to venture into real estate and fast track procedures to start such businesses.

Chinese firm to build sh2.6bn power line to Tanzania

19/10/2016 : Business Daily,pg 8

• Kenya has awarded a Chineses firm the contract to construct a power transmission line connecting to Tanzania to grow electricity trade with countries in East and Southern Africa for reliable supply.
• The 96 Kilometre line will run from Isinya substation in Kajiado to the border  town of Namanga.
• Kenya plans to use the line to link up with the southern Africa power pool comprising Tanzania, Zambia, Mozambique and Zimbabwe, Mozambique and Zimbabwe for power exchange.
• The Kenya Electricity Transmission Company (Ketraco), the agency overseeing construction, yesterday awarded the contract to North China Power Engineering Company Ltd. (NCPE)
• With a capacity to transfer 2,000 megawatts in either direction, the interconnector will have positive impacts on the development of renewable of renewable sources of energy in Kenya and Tanzania because the interconnected system of both countries will result in a larger, more stable system said Kenatro in a statement.
• The line will be jointly financed by Kenyan Government (Shs. 439.4 million) and the African Development Bank (AFDB) which will offer shs. 2.2 Billion ($22.4 million). Construction will take 22 months.

• The project is set to interconnect the East African power pool, comprising Kenya, Uganda, Rwanda and Ethiopia with the southern markets.Kenya already has a transmission line connecting to Uganda and plans another line with Ethiopia.Read more

Industrial real estate in Kenya is witnessing increased investments from both the public and private sector, with the IFC planning to invest Kshs 1 billion equity in Africa Logistics Park, and Nakuru County Government planning to launch two industrial parks in the county

20/10/2016 : Cytonn Weekly Report No. 46

• The industrial real estate theme continues to grow with the International Finance Corporation (IFC) planning to invest Kshs 1 billion in equity in Africa Logistics Property (ALP), an integrated commercial property investment platform based in Nairobi.
• ALP is raising Kshs 7 bn to invest in three industrial parks that are
  • (i) Tatu City in Ruiru,
  • (ii) Tilisi in Limuru, and
  • (iii) Embakasi area in Nairobi.
• The company has acquired 71-acres of land, and is set to begin construction on the three sites Q1’2017.  The company plans to deliver Grade-A warehouses to attract key international players in the fast-moving consumer goods, importers of construction equipment and players in the nascent oil and gas industry in Kenya, which is the long-term strategy for the firm.
• The move comes as the government and other players have increased their focus on industrial development, driven by an improvement in infrastructure and growth in the economy, which have created a demand for specialised logistics and industrial parks.
• Other firms in the logistics business seeking to expand include Bollore Transport and Logistics Ltd Company, which aims to invest Kshs 2.2 bn to create a logistics hub as part of its expansion efforts.
• County Governments are also picking up the trend, with the Nakuru County Government announcing that it is set to open two industrial parks in the county, one in Nakuru and the other in Naivasha.
• Industrial parks as a real estate theme is growing in Kenya due to several factors including:

1. Improved infrastructural development especially road networks such as the Lappset Project, the Standard Gauge Railway (SGR) and the bypasses (Eastern and Northern), as well as the Thika Superhighway. These infrastructural developments have increased ease of access of warehouse zones such as Mombasa Road, Industrial Area, Ruai, Ruiru and Baba Dogo, which are close to the Jomo Kenyatta International Airport in Nairobi,
2. Growth in the retail and Fast Moving Consumer Goods (FMCG) segment, which has resulted in increased demand for warehousing space. Retail space in Nairobi alone has grown by a 17% CAGR over the last 5-years,
3. Government support through provision of infrastructure including electricity and water and establishment of Export Processing Zones, and,
4. Growth of master planned cities which factor in industrial precincts and offer land at relatively lower prices attracting investments such as Tatu City, Konza Tech City, Tilisi and Northlands City.

• The above factors have made the industry, initially full of owner-occupation, become more institutionalized with the ratio of owner occupiers to developers being 35:65 according to Mentor Management Limited.
• The industry has also witnessed increased standards of quality and specialization with higher, better equipped warehouses such as the Imperial Logistics Warehouse for Pharmaceutical products along Mombasa Road.
• Currently the sector earns average returns, but with increased institutionalisation, competition and innovation we are likely to witness higher rents being charged on warehouses.
• According to Cytonn, on average, the rental yield in warehouses in Kenya as at February 2016 was 6.2% with average rental rates of 37 per square foot, prices of 5,749 per square foot and occupancy rates of 82%. Our outlook for the sector is positive driven by increased industrialization.Read more