Construction and capital formation in less developed economies: Unravelling the informal sector in an African city

Sub-Saharan Africa is the poorest and least developed region in the world today. It is also the most rapidly urbanizing, with the greatest need for investment in new infrastructure and buildings. In Kenya, as well as in a number of other countries, the adoption of economic adjustment programmes has led to a sharp decline in publicly funded construction projects. What activity there is takes place in the private sector. The shift from public to private investment has been accompanied by a noticeable fall in the volume of work passing through the more formally organized construction system and an increase in activity in the 'informal' system. The informal construction system is characterized by a much closer relationship between building owners and building labour, with owners purchasing materials as and when they have the funds and engaging directly the services of small enterprises and self-employed workers. In Nairobi (Kenya) substantial multi-storey projects are now being implemented in this way by a myriad of small firms. This paper examines these developments and assesses their implications for our understanding of 'the construction industry' and the process of capital formation.