THE AFRICAN BUSINESS FORTUNE MAGAZINE ISSUE #006 The African Business Fortune Magazine | Page 37

THE AFRICAN BUSINESS FORTUNE - CONSTRUCTION

National Construction Authority bets on
new policy to tame Chinese supremacy
…in winning lucrative projects over local contractors
By Steve Umidha

N

ational Construction Authority (NCA) is betting on a new policy
aimed at supporting local contractors in challenging for tenders
with foreign firms.
The Contractor Development Fund Policy and Guarantee Scheme which
has been formulated by the authority in the 2016/17 financial budget are
expected to provide access to cheap financing for Kenyan contractors.
“Other than the contractor development fund policy, the authority has
also developed a model for acquisition, operationalization and management of construction equipment for training and hire to local contractors,” said David Mathu, manager Research and Business Development
at the authority.
NCA said recently at a construction industry seminar that the new plan
will also seek to defuse competition from Chinese companies that continue to dominate the long list of firms lining up for government tenders.
State’s partiality in awarding lucrative bids to foreign corporations
continue to be an issue of concern for local contractors – who are agitated by the high number of pre-qualified Chinese firms and are accusing
the government for discriminating against them.
Unlike the Kenyan government, China provides their companies with
operating capital; credit guarantees and at times negotiates at a government to government level on behalf of their firms for contracts – initiatives Mathu says have seen them contest for multibillion projects over
local companies.
According to him, the new plan will ‘bring rationality’ in the construction industry and provide similar incentives and competitive advantage
for local contractors.
Available statistics show that Chinese firms hold technical and financial edge over the local contractors. Their costs to finance a project are
much lower at between 3 to 4 per cent compared to Kenya’s 17 to 18 per
cent.
“At least 30 per cent of the monitory value of any project awarded to
a foreign contractor should go to locals – this is not happening, but we
hope to achieve this through joint ventures or sub-contracting,” he said.
Chinese companies have scooped more than half of lucrative tenders
for the fiscal year running to June, 2016 which includes construction of
roads and bridges and building structures.
Some of the mega projects being managed by Chinese contractors include Thika Superhighway (completed), The Standard Gauge Railway
project currently under construction at a cost of Sh327billion.
China Wu Yi was in May unveiled as the lead contractor for the construction of University of Nairobi’s 22-storey complex valued at Sh2.3billion.
The firm also built Sh2.1billion KCB Plaza which houses NCA headquarters.
China Jiangxi International won in July last year a contract to Hazina
Centre- touted to be the tallest building in Nairobi – the company is also
responsible for the Sh1.3billion ICPAK Complex along Thika road.
Another Chinese firm is building a 39-storey building in Nairobi at a
whopping cost of Sh6.7billion.
NCA has however questioned local contractors’ dedication to work,
coupled with unskilled workmanship compared to Chinese projects that
are completed a head of schedule and are competitively priced.
According a recent research conducted by the construction authority,
at least 80 per cent of projects procured by local contractors fall below
the authority’s potentials.

THE AFRICAN BUSINESS FORTUNE MAY - JUNE 2016 37