Chinese fund enters pact to build 20,000 houses for civil servants

Kenya’s long-held ambition of housing civil servants has got a major boost with the entry of a Chinese equity fund in a public-private partnership deal.

China-Africa Development Fund (CAD-Fund), a private equity firm, Thursday signed a deal with the government and two construction firms; Kenya’s Suraya Property Group and China Civil Engineering Construction Company (CECC) to build 20,000 houses.

The deal will set in motion a project which has dragged for three years. Under the agreement, the government will provide land on which CECC will build the units while CAD-Fund will finance the project under the technical advice of Suraya.

“The partnership is such that the government also manages the end products,” said Suraya Group CEO Pete Muraya after the signing ceremony in Nairobi.

“We are also addressing all types of housing, where we are targeting maybe a million shillings or less and we are going up to the senior civil servants who may want, maybe a bigger house on a quarter of an acre,” he said.

Construction of the homes will help improve the shortage of shelter for government officials especially in Nairobi. The project targets the police, civil servants, soldiers, parastatal officials and county government workers.

Transport and Infrastructure secretary James Macharia admitted that there was still a huge deficit.

“This project, we believe, is very timely. It will be a catalyst for many other projects,” Mr Macharia told an audience at the Crowne Plaza in Nairobi.

“Joint ventures and public-private partnerships can help bridge the gap. For us in government, we shall provide enough incentives and we need all these partners to compliment and support our efforts.”

Kenya needs at least 200,000 units every year to deal with the housing shortage.

However, the cost of construction has put off most investors and only 50,000 units are put up annually, according to the Transport and Infrastructure ministry.

READ: Investors keep away from cheap housing project for civil servants

The cost of land in Nairobi takes about half the construction cost, meaning the end products are often very expensive, Mr Muraya said.

The police, for instance, requires about 69,000 houses yet the government has only put up 1,000 in the last four years.

CAD-Fund, which is China’s largest private equity fund controlled by China Development Bank, also opened a representative office in Nairobi on Thursday.

Mr Chi Jianxin, the fund’s chairman, told the media that the Nairobi office will also be used as regional headwaters for eastern Africa — making it the fourth such office established in Africa since 2006.

“We do not currently have many investments in Kenya but we want to make this office the headwaters of the region,” he said.

“It provides a big advantage for Kenya as we can improve local exports by directly investing in firms here.”

The fund was launched in 2007 as part of China’s bid to venture into Africa. Former Chinese President Hu Jintao spearheaded the drive following the Beijing Summit on China-Africa Cooperation in 2006.

The fund had an initial capital of $1 billion (Sh100 billion) from China Development Bank but raised it to Sh500 billion ($5 billion).

The fund often puts money in projects run by Chinese firms in Africa even though it traditionally doesn’t hold controlling stakes in those firms.

It has participated in projects around Africa such as a glass manufacturer and cement factory in Ethiopia, a power station in Ghana, a port project in Lagos and an industrial park in Egypt. This is its first project in Kenya.