Yes, there’s need to limit competition by Chinese

Last week the MP for Mathira, Rigathi Gachagua, sought regulatory protection for local construction contractors from what he says is unfair competition from foreign contractors, especially those from China.

Specifically, he seeks to have all public construction tenders of up to Sh1 billion (about $10 million) ring-fenced for Kenyan contractors. He is calling for affirmative action to permit development of local contractor capacity.

To understand the entrenched presence of Chinese contractors in Kenya, one needs to revisit the history of public projects construction in Kenya. When President Kibaki took over from the KANU regime in 2003, public projects construction was irredeemably tarnished with corruption.

Local contractors and their foreign associates were linked to massive theft of public finance, which left Kenya a broke nation. President Kibaki started off by blacklisting and purging most of the local contractors, and the public saluted the action.

This coincided with the time when China was scouting Africa for raw materials and energy to feed their already overheating industrial economy. It was also the time when multilateral and bilateral agencies were overly stringent on project funding for developing countries.

A quid pro quo arrangement between China and African nations emerged, granting preferential access to natural resources for China, in exchange for packaged funding and construction of infrastructure projects for African nations.

This is how the Chinese contractors entered Kenya, and to Kenyans’ delight they have performed fairly well, delivering projects on schedule, on specification, and on budget. If ever there was any corruption, it was not that obvious.

Fifteen years on, the Chinese appear to have assumed the status of preferred contractors for most public projects irrespective of size. This has led to crowding out and weakening of local contractors capacity. Reversal of this situation is what the Mathira Legislator is pushing for, through regulatory enhancements of the procurement laws.

Indeed, nearly all other economic sectors in Kenya are introducing local content provisions in their regulations to empower Kenyan participation. There is nothing to prevent mega projects having provisions for genuine partnerships with local contractors to permit technology transfer.

Simultaneously we need to introduce reasonable prequalification criteria for all bidding local contractors to ensure that quality, standards, and governance are adopted and practiced. This is essential to ensure value for money and to gain public trust and support. This will also improve credit financing confidence with the banks.

However, it is in the area of trade that our government has a lot to answer. The MP for Kiharu, Ndindi Nyoro, recently complained about the Chinese having become importers, wholesalers and retailers of basic consumer merchandise.

He says that the Chinese are competing with locals on the floors of Gikomba business hub. If verified as correct, this is quite embarrassing for a government that has been pronouncing “intentions” to empower Kenyan enterprises and create jobs.

The third area of focus should be the trade imbalance between Kenya and China. Although Kenya is to blame for its slow pace in creating sufficient manufacturing and processing capacity to create exports and to substitute imports, we still do have a lot that China can buy from Kenya to redress the huge trade imbalance.

In our diplomatic engagements with China we should be talking “tonnes and dollars” of exports and imports. China should not take the Kenyan consumer market for granted. It should be earned with reciprocal exports to China.

Yes China has helped Kenya at its hour of need to kick-start infrastructure development which is still ongoing. China has also been a major investor in Kenya especially in real estate.

We now need to interrogate all aspects of our economic engagements with China, and keep those with genuine socio-economic value addition, while curtailing areas that are pushing Kenya back.

Simultaneously, we should open up our economic engagements with the other global economies.

Finally, the Chinese debate should be escalated from murmurs to a policy and strategy level. In the meantime let us undertake the quick correctional fixes proposed by the Mathira and Kiharu MPs.