New levy should be a give and take

For the two years it has been around, the National Construction Authority (NCA) has enjoyed a lot of goodwill from players in the building and construction industry as well as other players in the sector.

The authority’s general mandate is to regulate and bring order to the sector. It started its work in earnest early last year by focusing on registering all contractors afresh in a move that was aimed at bringing sanity in the building and construction industry.

Since then, it has been vetting contractors and evaluating their capacities before issuing them with new operation licences.

The registration resulted in a new, clean register of contractors. This was necessary because registration of contractors had been fragmented, with each government agency maintaining its own register.

This lack of centralised registration created a situation where non-performing contractors and those barred in one ministry or institution, could migrate and actively tender for projects in other ministries and institutions on account of multiple registrations or change of legal status.

Regulation

Lack of a centralised regulation and registration mechanism for contractors had also seen the proliferation of contractors with little or no capacity to undertake construction works.

The activities of non-performing contractors, popularly referred to as cowboy contractors, had for years resulted in collapsing buildings due to poor workmanship and non-compliance with specifications.

This often causes loss of life, poorly constructed infrastructure and delayed completion of works, leading to project cost overruns and stalled projections, often referred to as white elephants.

Mandate

The body is also mandated to monitor the construction process, and coming up with a code of conduct for the industry.

But the goodwill that the NCA has enjoyed since it became operational is likely to wane if it implements a new levy that will require developers whose projects are worth Sh5 million and above.

According to the National Construction Authority Act, 2014, Legal notice no 74, such developers will pay a construction levy of 0.5 per cent of the value of the contract before they can start work.

Authority

The law also gives the authority the power to consider the final value of the completed work and assess the amount of levy afresh, meaning that owners who understate the value of a contract will be subjected to more charges.

Like any new levy, this will obviously increase the cost of construction, thus push up the cost of housing at a time when the country is facing severe housing shortage.

Already, Nairobi Governor Evans Kidero has opposed the move, saying it will discourage developers.

Dr Kidero, whose county recently increased property-related taxes, says that “there are already numerous levies and charges imposed on the housing and construction sectors and this latest move will only serve to discourage investment in the sector”.

Interestingly, the levy is not a new idea. The National Construction Authority CEO/Executive Director Daniel Manduku has been talking about plans to start charging fees on new construction projects.

What he has not been clear about was the rate at which the fees would be levied.

But I think it is inevitable for NCA to levy fees on new projects so as to effectively discharge its mandate.

However, the authority should not charge a lot of money. Instead of levying 0.5 per cent of the total cost of project, why not charge 0.1 per cent?

— fayieko@standardmedia.co.ke