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Local construction firms decry uneven playing ground

REAL ESTATE
By Awal Mohammed | May 27th 2021

Ongoing construction works on the JKIA-Westlands Expressway.[Wilberforce Okwiri,Standard]

Local construction firms continue to feel sidelined as major infrastructure projects are taken by foreign companies.

The firms have decried the stringent measures they have to follow before being awarded work while the same laws are not binding to foreign contractors. Institute of Quantity Surveyors of Kenya (IQSK) President James Munene said during a media briefing in Nairobi on Tuesday that the impact of foreign contractors in the country should be assessed.

He said even though the foreign firms have delivered on their construction timelines, local companies have been left on the periphery due to the uneven ground.

“We are calling on the Government to strongly consider putting in place measures to ensure that in as much as we are allowing foreign players to practice in the local scene, we are doing so in a manner that benefits the local construction industry and local practitioners as well,” Mr Munene said.

According to the National Construction Authority (NCA) 2014 regulations, certain work is exclusively reserved for local contractors as opposed to open bidding, which attracts all interested bidders.

Foreign contractors, according to the law, are only eligible to register for a NCA-1 contract (a building contract above Sh500 million) whereas local contractors can register for all categories of contracts.

Foreign firms are also required to make applications to NCA before undertaking works classified under category 1.

Such applications are to be accompanied by an undertaking in writing that they would adhere to sub-contract 30 per cent of the project value to local persons or firms and transfer technical skills not available locally to construction firms adhering to NCA guidelines.

IQSK, however, says subcontracting has seen local firms being sidelined in major infrastructure projects that are ongoing.

It argues that the even though the regulations are clear, their implementations has been left at the discretion of foreign firms who often ignore them.

“What is required is sustainable projects to necessitate active involvement of local contractors,” Munene said.

“Such developments would solve most of the problems; for instance, there would be reduced capital outflows, and local firms would be forced to improve their capacity.”

The argument by surveyors comes three years after a report commissioned by the Competition Authority of Kenya (CAK) showed that local construction firms are disadvantaged compared to foreign companies.

According to the report, most local firms constantly felt left out on bigger projects with foreign firms failing to sub-contract them, hence minimising the potential growth of local companies.

“The challenge with these regulations is that they are not binding on the part of the foreign firms. The foreign firms may win tenders individually and it is up to them to then seek a local partnering firm afterward,” said the report.

CAK also highlighted that even though the law was enacted to boost the capacity of local firms, they have nothing to show for it years after its passage.

“The local firms may not get their fair share of the agreement. Most local firms are assigned just segments of the project and hence may not really benefit from the skills transfer initiative,” said the report.

According to the 2020 Economic Survey, the construction sector registered a growth of 6.4 per cent in 2019 compared to growth of 6.9 per cent in 2018.

The number of people employed in private construction works increased from 1.6 million in 2018 to 1.7 million in 2019, the survey indicated.

However, the country saw a decline in cement consumption from 59.4 million tonnes in 2018 to 59.3 million in 2019, while loans advanced to the sector saw a jump from Sh1.4 billion in 2018 to Sh1.5 billion in 2019.

 Similarly, labour cost recorded an increase of 4.5 per cent in 2019 compared to 5.3 per cent in 2018.

In 2018, the government spent Sh154.5 billion but it increased its expenditure on roads by 10 per cent, translating to Sh 169.9 billion in 2019.

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