SA construction materials firm eyes region with Nairobi office

Distribution and Warehousing Network Ltd (Dawn), a South African listed company that distributes construction materials, is setting up shop in Nairobi as it seeks a piece of Africa’s real estate.

It joins compatriot Broll, a property management firm that opened a Nairobi office in August, in the sector. Stanlib, the asset management arm of Liberty Group, has also said it plans to invest as much as Sh5.2 billion in developing shopping malls in Kenya within the next two years.

Sanlam plans to invest $65 million (Sh5.5 billion) in Kenya’s real estate sector through its property arm.

READ: SA’s Stanlib plans Sh5.2bn shopping malls for Nairobi

Dawn says it will open a centre next January to distribute its branded hardware, sanitary ware, plumbing, kitchen, engineering and civil range of products.

An initial $1 million (Sh88 million) will be invested and about 12 people employed. Its decision to open a fully-fledged centre is also driven by the fact that it is already familiar with the Kenyan market.

Improve offering

“We have interests in Tanzania and we have successfully exported to Kenya from South Africa during the past years. We want to have a presence and inventory in Kenya to improve our market offering. The building and construction growth is obviously an added attraction,” Dawn (International Cluster) chief executive Pieter van Niekerk told the Business Daily in an interview.

Data from the Economic Survey 2013 shows that the value of buildings completed in 2012 stood at Sh50.8 billion, a 9.6 per cent increase from Sh46.4 billion in 2011.

The value of buildings approved was higher at Sh180.6 billion from Sh156.4 billion, a 15.4 per cent increase over the same period.

Realtors say the market for finishing products in the real estate sector is expected to grow fast as it follows the growth of the sector, but also due to increased demand for higher quality buildings.

Home Afrika chairman Lee Karuri, an architect, said that windows, taps, fillings, paints, landscaping and other finishings can take up 50 per cent of costs, which he believes shows the huge potential of the segment.

Dubai was the preferred market for imports but it has since been dethroned by China, India and Turkey.

The new entrant will have its work cut out as it embarks on carving out a share of the market.

“The market is very competitive and they will have to compete on price, quality, and payment terms,” said Mr Karuri. Analysts say that increased government spending on infrastructure and banks being more willing to lend the real estate sector will be the industry’s main drivers.

“We project cement consumption growth of 1.83 per cent in 2013 compared to 1.7 per cent recorded in 2012,” says an economic outlook report by Old Mutual Securities.

The export market accounted for 28 per cent or R1.5 billion (Sh13.3 billion) of the R4.59 billion (Sh40.8 billion) revenue by the South Africa group and Dawn’s end of year report for the period ended 30 June 2013 hints that these markets will be key revenue source.

The firm said that the weakening rand should make its exports more affordable in other markets.