Economy

Construction regulator backs return of building levy

akech

NCA executive director Maurice Akech. FILE PHOTO | NMG

The National Construction Authority (NCA) has backed the return of a construction levy it previously charged developers, at a time the national environment watchdog has also seen similar fees reinstated, a move that could increase the costs of regulatory fees for builders if effected.

NCA argues its fees - charged at the rate of 0.5 percent of the contract value - will boost its ability to enhance enforcement and compliance with standards at a time the agency has been on the spot amid the rise of rogue contractors and fraudsters in the sector.

“It will help in enhancing our regulatory capacity,” NCA executive director Maurice Akech told Business Daily in an interview. “The NCA levy has not been reinstated.”

The regulations providing for the imposition of the construction levy at the rate of 0.5 percent of the contract value by the NCA came into force in July 2014 before they were scrapped.

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The government removed the fees imposed by the NCA and other agencies such as the National Environment Management Authority in 2017, arguing that they have been a barrier to investments.

But the State last week reintroduced construction levies paid to National Environment Management Authority (Nema) effective this month.

The NCA had spoken against the scrapping of its own levies, arguing that the fees account for more than 70 percent of the authority’s revenue, hence its removal would hurt its operations.

Activities that the NCA levy was supporting include the authority’s strategic objectives such as training, research, and sustainability.

Property developers have protested the move by the State to return Nema fees saying it will lead to higher construction costs and hurt the affordable housing drive.

“The authority notifies the public of the government’s decision to reinstate the EIA processing and monitoring fees, strategic environmental assessment process and monitoring fees and environmental assessment experts registration and licensing fees with effect from 1 June 2022,” said Nema early this month.

The Kenya Property Developers Association (KPDA) last week urged the government to rescind the decision, which they said, would worsen the already unsustainable cost of construction.

The lobby said the fees, which were reintroduced effective June 1, would impact the ongoing State-backed development of affordable housing by making construction costly.

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“Considering that affordable housing is part of the Kenyan government’s Big Four agenda, the re-introduction of these fees will make it difficult for developers to deliver on the housing agenda,” said KPDA chairman Ken Luusa.

The Nema fees will see contractors pay between Sh10,000 and Sh40 million for environmental audits, depending on the risk levels of their projects.

President Uhuru Kenyatta, in October 2016, directed the scrapping of the fees paid by property developers as a percentage of the value of projects is punitive.

The removal of the EIA fees was meant to lower project costs and sharpen Kenya’s competitive edge. But Environment Cabinet secretary Keriako Tobiko said, in 2020, the scrapping of the fees paid to the Nema has had an unintended negative impact on the agency’s activities by choking its income and burdening taxpayers.

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