Treasury admits 40pc local-supply rule failing, blames dishonest contractors


The National Treasury building in Nairobi. PHOTO | DENNIS ONSONGO | NMG

The Treasury has admitted that crafty domestic suppliers are frustrating a government directive that public agencies procure at least 40 percent of their consumable products locally, hurting the creation of fresh employment opportunities for a growing skilled youthful population.

In the latest disclosure, the Treasury admitted that the ‘Buy Kenya, Build Kenya’ initiative, which was put in place nearly a decade ago, has failed to hit the targeted levels in public procurement.

“The challenge [to achieving 40 percent local content quota in government procurement] is local merchants are providing imported products once given contracts to procure for the government,” it said in its 2024 Budget Policy Statement.

Under the policy, which followed a presidential directive in June 2015, at least 40 percent of supplies to State ministries, departments, and agencies should be sourced from local companies.

Manufacturers have, however, cried foul play over the years, claiming that domestic suppliers usually present samples of local products during the tendering process, only to jump onto a flight to India and China to source for the same when they land fatty State deals.

The government remains the biggest buyer of goods and services from the private sector.

Imports classified as government supplies last year amounted to Sh62.08 billion last year, according to provisional trade data by the Central Bank of Kenya (CBK).

This was a 19.19 percent fall from Sh76.83 billion in 2022 when the bill went up on increased supplies towards the usually high-stakes presidential and general elections.

The CBK data does not usually give particulars of the imports, but the items commonly ordered by state departments and agencies include furniture, textiles, paper products, food, motor vehicles, arms, and machinery.

Kenya remains a net import country, with a merchandise trade deficit hitting $9.85 billion (about Sh1.42 trillion under prevailing conversion rates) in 2023 despite narrowing from $11.72 billion on reduction production of products such as assembled vehicles, soft drinks, and sugar.

Successive governments have failed to adequately address the competitiveness of Kenya’s manufacturing sector, with the situation worsening in the aftermath of the World Bank and International Monetary Fund-led market liberalisation policies of the 1990s through structural adjustment programmes.

The low competitiveness of the Kenyan industries has been partly blamed for the proliferation of basic products such as toothpicks from other countries, taking away jobs that could be supporting local households.

“State Department for MSME (micro small and medium enterprises) Development is tasked with the enforcement of the preferential treatment of Buy Kenya Build Kenya policy where 40 percent of procurement is preserved for goods manufactured locally,” the Treasury states in the BPS, which provides expenditure ceilings and policy actions for the financial year starting July.

“The State Department has also adopted the value chain approach where products that can be best manufactured locally are produced such as edible oils, and the State Department is in the process of developing financial products that can boost production of these value chains.”

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