State’s preference for Chinese firms killing local contractors

In a recent interview, Cabinet Secretary for Transport, Infrastructure, Housing and Urban Development James Macharia, disclosed that the Nairobi Expressway idea was born in a dinner meeting.

The dinner meeting, he said, was attended by Cabinet secretaries and officials of a Chinese company. The CS explained how the problem of traffic jam had been converted into an opportunity.

In another report, the Business Daily captured how a handful of Chinese firms have been awarded road and infrastructure projects worth Sh1 trillion under the Jubilee administration.

This is attributed to their speed, financing muscle and negotiation power.

This development has literally pushed local companies to the periphery, leaving bitter taste among local contractors as reported by the newspaper.

CS Macharia praised Chinese companies for bringing skilled people and working 24 hours as part of the advantages they bring on board and that is why they are preferred contractors by the government.  

If the trend continues, it has the potential to completely kill the local contractors by locking them out of business.

As the Chinese contractors dominate the industry, we will have created opportunities for the Chinese citizens in our own country, while killing opportunities for our own engineers.

The financing model adopted by China is such that they will advance a loan to Kenya to carry out a project but the project must be done by a Chinese contractor, who will directly be paid by Chinese’s EXIM Bank.

This means on the financing model alone, the local contractors who cannot enjoy a similar financial muscle cannot be able to compete with their Chinese counterparts.

While the Chinese government advances the interests of their own companies, it seems authorities in Kenya are keen to embrace the Chinese firms without developing the local capacity. The Public Procurement and Disposal Act provides for the basis on which local firms can be given preference.

One is where firms have 51 per cent and above shareholding which is Kenyan. Even in instances where successful bidders are not Kenyan or local firms, technological transfer or creation of employment opportunities for Kenyans is anticipated.

In addition to technology transfer, skills and knowledge are supposed to be passed on through training, mentoring and participation of Kenyan citizens.

The act also provides the basis for reservation of 30 per cent procurement budget to groups previously disadvantaged and 500 million as the prescribed threshold for exclusive preference.

In situations where foreign tenderers participate and win government tenders, the law provides that 40 per cent of their supplies shall be sourced from citizen contractors and this is prior to submitting a tender.

Seventy five per cent employment opportunities should also be reserved for Kenyan citizens for works and consultancy services.

At management level, 20 per cent employment opportunities are reserved for Kenyan citizens. The law is quite detailed on who is a local contractor or a citizen contractor.

These requirements of the law are supposed to be met by way of ensuring mandatory requirements in tenders include a local content plan for the transfer of technology.

On the issue of delayed payments, which local contractors have complained is driving them to the brink of collapse, the law requires that payment of invoices is done within 60 days.

These provisions are supposed to be reported to Parliament every six months by Public Procurement Regulatory Authority for monitoring and compliance.

The reality on the ground is however different. The State clearly prefers foreign firms as opposed to local firms and citizen firms.

The damage done by this policy of preferring Chinese contractors to local ones is unquantifiable.

Local contractors are collapsing, they are running out of business and laying staff off. Families are losing livelihoods and the unemployment rate continues to skyrocket.

Engineers are particularly affected severely. The Chinese firms bring their nationals, everyone from site foremen to engineers, jobs that should have been done by Kenyans.

Local engineers are being outdone by foreign nationals in their own country as they watch. Many engineering firms have similarly retrenched engineers in droves because of lack of business.

This is a serious matter and we are witnessing a generation of engineers who graduate and cannot find opportunities to gain experience that would lead them to progress in their career.

Kenya is losing big and the policy of denying its citizens opportunities in preference to foreigners must be rescinded.

The next government must institute ways of ensuring Kenyan enterprises benefit from all the money going to infrastructure development.

There must be a process of ensuring compliance with the law so that we build the local capacity instead of killing the huge potential that our people have.