16 April 2014
The head of Kenya’s National Construction Authority (NCA) has denied reports in the Kenyan press that draconian restrictions were about to be placed on Chinese firms bidding for public sector contracts.
The Kenyan government is planning new legislation to restrict the number of projects non-Kenyan firms can bid for, to require them to enter into a joint venture with a local firm, and to subcontract more work to local firms.
In the Kenyan press the move has been characterised as a response to the domination of Chinese construction firms there.
But Daniel Manduku, executive director of the NCA, told GCR that the new rules were not intended to drive Chinese firms away.
"The reporting was not correct," he said. "We’re not asking anybody to go away or to pack. We are asking foreign companies to share their knowledge through subcontract works, joint ventures or partnerships. We are not restricting contracts. What we are saying is that when they get a contract, they have to give at least 30% of the work to local firms."
Manduku claimed that most Chinese firms met the 30% requirement anyway.
"It’s already happening-most of the Chinese firms, when they get contracts, source local labour and source local material," he said. "What we want to do is make this a law. It will become law by way of regulation; we have already consulted the stakeholders and it is now awaiting parliamentary approval. We expect this to happen by July, and it will only affect new contracts."
Nairobi commercial district (Orrling/Wikimedia Commons)
He added that Chinese firms supported the move. "The three that I’ve talked to personally have no problem. Their only concerns is that there is fair play, and that they get the skills they are looking for. It’s not something negative. It’s partnerships. We want to bring partnerships in everything we do and we are going to make sure it happens in this sector."
The case against Chinese contractors
Kenyan firms complain about their Chinese rivals’ competitive advantage both in large public infrastructure contracts and smaller-scale private sector work.
David Gaitho, director of Nairobi-based QS Amazon Consultants, told GCR that there were two kinds of Chinese contractors.
The first were large firms such as the China Road & Bridge Corporation that came in for individual projects where capacity was lacking, such as the Standard Gauge Railway between Mombasa and Nairobi.
He said the main concern in these cases was "strings attached" loans and the lack of knowledge transfer. He said: "Some efforts have been made by procuring entities to provide for 30% local component but only in a few contracts."
Gaitho said the greater concern was with smaller, non-state-owned contractors that had opened permanent offices. He said these firms were "killing our industries" by undercutting local firms, the "minimal creation of employment" and the importation of locally available materials such as cement and reinforcement bars.
He added that Chinese contractors were able to obtain credit at a 6% whereas local contractors had to pay between 18% and 20%, and in some cases used "cheap imported labour and supervisors who live in labour camps on site working an average of 12 hours a day".
The Kibera slum of Nairobi, one of Africa’s largest. Kenya’s development policy relies on investment in transport, ports and new urban quarters (Trocaire/Wikimedia Commons)
Despite these grievances, a recent report by a South African think tank found that Chinese firms were more popular in Kenya than they were in either Nigeria or South Africa.
The question of capacity building in the domestic Kenyan construction industry has become an important issue for economic planners.
The government’s development policy is relying on a programme of investment in transport, ports and new urban quarters – all of which are desperately needed in a country that does not provide basic public services to most of its people – it has been estimated that 60% of Nairobi’s population live in slums.
Vision 2030 is divided into a series of five-year plans aimed at creating economic growth of 10% a year over the next 20 years, partly by means of public-private partnerships.
The NCA’s new rules are aimed at creating the capacity to allow Kenyan firms to wring the greatest benefit from the increase in investment.
The NCA is also proposing to create a National Construction Institute. Manduku told a conference of Kenyan contractors last month that this would be in business before the end of 2015, and it would aim to train, accredit and register one million skilled workers.
The NCA was formed in July 2012 to take over responsibility for regulating the Kenyan construction industry from the Ministry of Public Works.