It is immoral for public to continue funding Nema, NCA
In the 2016/17 budget, the Treasury Cabinet Secretary scrapped the National Environment Management Authority (Nema) and National Construction Authority (NCA) construction levies. This was to supposedly lower building cost and foster development of affordable housing, ultimately reducing our housing deficit. As is custom of such public showbiz moves, no data was tabled as to how these levies had contributed to the high building cost and hence their removal would significantly make housing affordable.
It is close to two years now and as before I still dearly hold that this was a wrong move by the government. Considering other factors, not for this discussion, the move to scrap these levies is at the bottom of the list if meaningful reduction of building cost is to be realised. If anything the cost of construction and by extent houses has continued to soar in the last two years. Taxpayers, however continue to painfully fund these two bodies through the exchequer at the expense of more profits for developers. The intended goal has not been met; therefore the levies should return.
Levies to Nema and NCA were 0.1 per cent and 0.05 per cent ad valorem, respectively. On Sh1 billion, for example, these levies would translate to Sh1 million and Sh500,000 for Nema and NCA, respectively. This developer would have cumulative savings of Sh1.5 million due to scrapping of these construction levies. Considering the overall project cost, most developers would view this saving as insignificant to alter the project financial feasibility. Put differently, this saving would only be beneficial to the developer. How this was considered an incentive to developers to construct affordable housing I leave for your good judgment. But as posited, if this saving is spread across houses for sale on such a project, the cost reduction would be negligible.
Without contradiction, we can say the government intention that such a saving would reduce the cost of houses, as you see, was a fallacy. On the other hand, taxpayers have now the burden of funding these two institutions by approximately Sh1.3 billion. How many cancer machines can such amount purchase for the country? The effective public use areas of this money that taxpayers continue to pay is infinite.
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Not to take anything away, the scrapping of these levies indeed reduced the building cost though too insignificantly to spur any meaningful growth. The high cost of building has and still is a concern for many industry players. The government intervention to see that this cost is reduced was of great relief. However, it is now even clearer that such interventions must be realistic and delve into the real contributors to this high cost in order to have any meaningful growth impact in the country – This one didn’t, let’s swallow that.
It is also silently being mooted that the scrapping of these levies have greatly affected the operations of these institutions. Could this be the reason of the recent lapse in effective project monitoring due to inadequate personnel? I don’t know. But it is publicknowledge that the government has been cash crunched and stingy with money. Most public bodies have been struggling to fund their expenditure due to slashed budgetary allocation.
I still hold that these levies should not have been scrapped, maybe save for such developments that demonstrate contribution to affordable housing for low income earners. Criteria for exemption of such developments should be introduced such that applications are made and only those that clearly show how they would lower their building and house costs by wavering of these levies are granted. And in the wake of agenda on affordable housing, identifying such projects would be no brainer. Face it, the intended purpose of scrapping these levies have not been achieved. It is immoralfor taxpayers to continue funding these institutions at the expense of returns flowing into pockets of a few people. Only a fool does not change his/her mind, swallow it and do the obvious; return the levies.
- The writer is chairman of Association of Construction Managers of Kenya. ([email protected])
National Construction AuthorityNational Environment Management AuthorityNemaTreasury