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ARBITRARY price increases driven by speculative parallel market rates have slowed down growth of the construction industry in the country with the cost of building materials spiking by above 100 percent in the first quarter of 2019 compared to the same period last year, according to Treasury.

The development not only threatens jobs in the sector but has resulted in dampened aggregate demand for hardware manufacturers and retailers, industry experts have said. 

The construction industry is one of the major pillars of the economy in terms of infrastructure development, which is a key investment enabler.

In its 2019 national budget statement, Government pledged to prioritise robust infrastructure development as a strategy to reduce the cost of doing business and create a supportive climate for the growth of industry and commerce. 

However, in its latest bulletin covering the period January to March 2019, Treasury has reported that the prices of construction materials as measured by the Building Material Price Index (BMPI) increased at an average rate of 29.34 percent from December 2018 to March 2019 and 110 percent year on year.

The quarterly rate of change is given by  the percentage change in the index of the relevant quarter of the current year compared with the index of the previous quarter.

“The year on year rate of change (annual percentage change from March 2018 to March 2019) for the first quarter of 2019 stood at 110.46 percent. 

“In basic terms, between the first quarter of 2018 and the first quarter of 2019, prices of construction materials as measured by the total materials BMPI increased by an average of 110.46 percentage points,” said Treasury.

According to the report, major changes were recorded in electrical goods and materials (79.98 percent), roofing (63.27 percent), cement, aggregates and allied materials (53.13 percent), timber and wood products (35.55 percent), and bricks (35.14 percent), respectively. 

The main drivers came from metal windows and door frames whose cost grew by 213.75 percent, roofing 141.71 percent, electrical goods and materials 125.35 percent, and bricks 121.06 percent, respectively, it said. 

Treasury observed that quarterly changes in the prices of construction material have been on an upward trend since the first quarter of 2018 before slowing down in the first quarter of 2019. 

“The slowdown in price build up during the first quarter of 2019 is attributed partly to the usual low peak rain season, and general reduced purchasing power as inflation continues to ravage on household savings,” it said. 

Under the Transitional Stabilisation Programme (TSP), the country has already lined up a number of capital projects meant to stimulate economic development covering areas such as roads, housing, aviation, rail, social services infrastructure like clinics/hospitals and dams’ development. Individuals are also pursuing similar housing projects as well as corporates.