We have been locked out of energy sector deals, local firms cry

Local contractors have cried foul over multi-billion tenders in the energy sector that they claim are skewed to favour foreigners.

Under the Kenya Energy Sector Citizen Contractors Association (KESCCA), the contractors have petitioned President Uhuru Kenyatta to intervene and address the issue.

They claim that parastatals under the ministry of energy introduce stringent conditions that cannot be met be locals in tendering processes.

Whilst the government of Kenya has in place a policy on procurement that require 40% local content in all public projects, the investors argue enforcement is virtually non-existent.

“Tender document commercial conditions are deliberately designed to lock out local companies. We feel an opportunity is being missed to grow the economy and skill level that the consequences will not be corrected in our generation,” KESCCA says in a letter dated 23rd May 2018.

The letter signed by Chairman Steven Kigera and Secretary Mercy Michere is copied to DP William Ruto, Energy and Treasury Cabinet Secretaries and Principal Secretaries, all parastatals under the ministry of energy, the World Bank, African Development bank (AfDB) and Public Procurement Oversight Authority (PPOA).

Yesterday Energy PS Joseph Njoroge refuted claims that locals were being discriminated saying on the contrary the state was trying its best to secure the contracts for the firms.

Eng. Njoroge explained that some of the big projects were funded by donors who have set certain conditions but the ministry has been talking to the financials to relax the terms.

“Some of these projects are funded by AfDB and World Bank with their own conditions. There has been a lot of goodwill to make local investors participate in this tenders as we are negotiating with AfDB and World Bank to relax the terms,” he said.

The PS, added that alternatively local firms should accept to form joint ventures (JV) with international firms that have capacity to undertake the huge projects such as power plants.

However, in their letter, the firms claimed there there is no international company that can accept a local company as a JV Partner because of their Internal Conditions for JVs risk.

“There is no way Siemens, ABB, Alstom, GE, KEC, Kolpataru, Angelique can for a JV with a Local Company. In the first place, why would they require a JV? They do not need it. And there is no incentive to make them need a local company. Local companies are only left to go as Subcontractors. It will never be possible to generate the turnover required annually as a subcontractor to qualify for the main works forever,” the letter adds.

According to the association, there are more than 1200 graduate engineers and half that number graduating from tertiary institutions enter the job market every year.

“The mainstream formal sectors e.g. KPLC, KenGen, KETRACO, REA and KPC can only absorb a tiny fraction. The situation can only be helped by growing local companies which will train these graduates. They can then market themselves anywhere outside our borders.”

The group that is seeking to meet CS Charles Keter proposes that all projects below Sh3 billion to given to local companies as a preference where they can have JV with foreigners for any specialized works not existing in the project.