Why the Chinese are edging out local construction firms

Real Estate
By James Wanzala | Apr 28, 2016
Engineers lay a section of the Standard Gauge Railway. Local construction firms are losing to foreign contractors due to quality of work, keeping to agreed timelines and financial muscle. (PHOTO: FILE / STANDARD)

The impact of Chinese contractors are starting to be felt as many local contractors miss out on mega projects. According to the World Bank, about 400 Chinese firms operate in Kenya ranging from manufacturing (automotive), food, building and construction, consumer electronics and communication equipment among other sectors.

But it is their entrance into the construction industry that has left Kenyan contractors a worried lot.

According to David Mathu, a quantity surveyor and research and business development manager with the National Construction Authority(NCA), there are conflicting perspectives on the increase of the Chinese construction business in Africa and in particular, Kenya.

But why are Chinese winning most of these mega contracts like the ongoing Standard Gauge Railway, the completed Thika Superhighway, University of Nairobi’s 22-storey complex valued at Sh2.3 billion and the Sh2.1 billion KCB Plaza, which hosts the NCA Headquarters among many others?

“The undisputed fact that most projects run by their firms are done well ahead of schedule is the first reason,” said Mathu. Mathu was presenting a paper on the ‘Impact of the Influx of Chinese in the Construction Industry’ on behalf of NCA Managing Director Daniel Manduku during a quantity surveyors Continuous Professional Development (CPD) organised by the Institute of Quantity Surveyors of Kenya a few weeks ago.

Confidence in their work is another factor.  “This has been spurred by their firms providing high quality and competitively priced work in the construction sector,” added Mathu. Add to this financial muscle and local contractors do not stand a chance.

However, the government through the NCA has come up with measures to ensure that local contractors benefit from contracts won by Chinese firms. Under the new law foreign firms would be required to ensure that a minimum of 30 per cent shareholding of their local operations go to local contractors.

At least 30 per cent of the monitory value of any project awarded to a foreign contractor should also go to locals. 

“For foreign contractors, registration is up to the expiry of the defect liability- a period for the project at hand, but for the local contractors, the registration is renewed annually,” said Mathu.

According to Principal Secretary in the Ministry of Land, Housing and Urban Development, State Department of Public Works Paul Maringa, the proposed Contractors Development Fund will also protect local contractors from high interest rates charged by commercial banks.

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