Foreigners to share projects with locals under proposed lawWednesday April 09 2014
Foreign companies that handle mega-construction projects negotiated between governments will reserve 30 per cent of their work to local firms under new regulations being prepared by the National Construction Authority (NCA).
The proposed regulations also seek to restrict State-funded construction projects of below Sh1 billion to Kenyan contractors, who will be free to offer a minority stake to foreign investors.
The international firms in deals negotiated by States had been shielded from the 2012 proposal that foreign-owned firms doing construction in Kenya be 30 per cent locally-owned, giving them full control of the funded construction projects.
Steven Oundo, the NCA chairman, said on Wednesday that new regulations will require that the firms set to be shielded from the local ownership cap offer at least 30 per cent of the contracts to Kenyan firms.
The adoption of the new regulations will mostly affect China whose State corporations have been undertaking projects funded by Beijing and negotiated under government-to-government pact.
“Foreign firms which are awarded tenders through government-to-government agreements will have to sub-contract 30 per cent of the work to local contractors,” said Mr Oundo.
“This will help in technology transfer that will give capacity to local firms after a couple of years. We are trying to avoid being dependent on foreigners.”
Chinese firms have dominated Kenya’s construction sector in the last 10 years in what has been seen as an eastward shift in commercial and diplomatic relations.
Unlike their Western counterparts who are known for stringent financing conditions, China has used its soft loans to charm its way into the hearts of most governments in Africa.
No room to question
The terms and conditions of engaging Chinese firms are usually negotiated between the heads of state.
A case in point is the tender for a multibillion-dollar railway project that was won by a Chinese company and sparked widespread criticism over the transparency of the process.
China Road and Bridge Corporation was appointed to build a new railway from Mombasa to Nairobi at a cost Sh447.5 billion.
READ: MPs approve award of rail contract to Chinese firm
The tender had no public bidding, which they say was a condition of Chinese loans to help to fund construction, and some MPs complained that the contract was overpriced.
The government agreements in Beijing- funded construction projects had cushioned Chinese companies from the 2012 regulations that required they cede part of their stakes to locals.