Local suppliers eye Sh60bn tenders as Uhuru flags off SGR

Kenyan manufacturers were yesterday still waiting for a clear roadmap to their share of the multi-billion shilling tenders for second phase of the standard gauge railway project that President Uhuru Kenyatta is expected to launch this morning.

Kenya Association of Manufacturers chief executive Phyllis Wakiaga said local industrialists expect the government to enforce the law that reserves for them at least 40 per cent of the Sh153 billion SGR contracts.

That means local contractors are entitled to at least Sh62.1 billion of the total budget for Phase Two of the project that covers the Nairobi-Naivasha segment of the railway line.

“We expect that the government will, in addition to this, institute a thorough monitoring and evaluation process to ensure that the contractual obligation is actually met during this phase of the project,” Ms Wakiaga said.

The manufacturers have been unable to get their share of the first phase of the railway project priced at Sh327 billion despite numerous calls to the Chinese contractor to reserve 40 per cent of the supplies to locals — a quest that was made difficult by the fact that the policy had not been formalised into a legal obligation.

Transport secretary James Macharia said the government has contractually tied the Chinese contractor to procuring at least 40 per cent supplies from local manufacturers in the second phase of the project — a promise industrialists are hoping to mine throughout the construction period.

“This time we have put an addendum, which is part of the contract that the contractor must meet the 40 per cent threshold so it is a contractual obligation,” Mr Macharia said, adding that the requirement was in the past merely a gentleman’s agreement. 

Mr Kenyatta, who initiated the ‘buy Kenya build Kenya’ scheme that gives priority to locally manufactured goods, is expected to launch the Phase Two of the SGR project at Embulbul, Narok County after earlier plans to have the event in Nairobi aborted in the wake of intense opposition by activists who went to court blocking its passage through the Nairobi National Park.

The 120km stretch from Nairobi to Naivasha will consume large volumes of steel and other raw materials as it has 74 bridges and 7 tunnels passing through the rugged terrain of the Rift Valley.

Devki Group, the Kenyan conglomerate that makes steel, roofing sheets and cement, welcomed the minister’s revelation that the Chinese contractor is now legally required to buy a certain amount of inputs from local manufacturers.

The company’s founder, Narendra Raval, said the involvement of local manufacturers has been lacking in the first phase of the railway project, minimising the mega project’s contribution to the Kenyan economy.

“This is a rare opportunity for us to finally benefit from this project. If the 40 per cent rule is kept, we will be able to expand our production and employ more people and it is not that we cannot meet the standards or the quantity needed,” said Mr Raval, adding that all the manufacturers need is full disclosure of what is required to adequately prepare for it.

Ms Wakiaga asked for proper involvement of local industrialists in the preparations for the upcoming project in order to thrush out outstanding issues such as quality standards — a contentious loophole the Chinese contractor has used to deny locals supply tenders for the Sh327 billion first phase of the project.

“There is need for consultations among stakeholders to establish the quality and specifications of the products needed for this phase to make it a mutually beneficial arrangement,” she said.

In the first phase, the Chinese contractor dismissed the quality of materials sourced locally without proper briefing on the required standards causing an outcry from local manufacturers.

Some local industrialists also accused the contractor of colluding with locals to import materials from specific Chinese companies for the railway project.

Mr Macharia, while briefing the National Assembly’s Transport Committee on the railway project, revealed that Sh167 billion had been paid to foreign suppliers, suggesting exclusion of locals.

The amount represented 72 per cent of the total money that had been spent on the project by May this year when civil works were 80 per cent complete.

Construction work for Phase One of the railway line is nearing completion, with track laying expected to close by end of next month in readiness for testing in three months’ time.

Cement manufacturer ARM said it was looking forward taking up the new opportunities expected to come with contractual obligations that have been put on the Chinese company that is building the railway.

ARM Managing Director Pradeep Paunrana said the firm has the capacity to supply any amount of cement that the project may require.

“Rhino cement has the capacity to deliver up to 2,500 tonnes of cement per day from its Kenya operations only. We managed to successfully supply part of Phase One and hope to do so in Phase 2,” Mr Paunrana wrote in a text message response to queries on the matter.

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Mr Kenyatta last year faulted the Chinese firm China Road and Bridge Corporation (CRBC) for failing to honour an agreement that requires it to purchase up to 40 per cent of materials and services locally and it remains to be seen whether the contractor will heed his warning during the second phase of the project.

The President in a statement read by State House spokesperson Manoah Esipisu said local companies had not fully benefited from the provision of goods and services for the construction of the railway and demanded that the contractor keep its part of the bargain.

CRBC had at the time claimed that it had established materials procurement cooperation with 360 major local suppliers and more than 40 local sub-contractors, a claim local manufacturers dismissed as not true.

CRBC in its 2015 Social Responsibility Report on the Mombasa-Nairobi rail project, said contracts signed with local suppliers accounted for half the total contract amount by the end of 2015. The report said goods and materials purchased from local markets accounted for 63 per cent of the total goods bought the same year.

Efforts to get details of the latest share of local sourcing for the project that is nearing completion were futile as CRBC did not respond to email or phone calls.

Mr Macharia also confirmed that the foreign contractor is expected to run the railway transport network for five years once it begins operations next year to ensure accountability after proper testing of the facility.