Bill blocks Chinese contractors from projects below Sh20bn
Wednesday April 19 2023
Foreign firms will be locked out of government contracts below Sh20 billion if Parliament approves changes to the law that will hit Chinese contractors hard.
The Bill seeks to raise the limit for foreign firms bidding for taxpayer-backed contracts from Sh500 million to Sh20 billion to protect local contractors.
The dominance of Chinese companies has left a bitter taste in the mouth of local contractors who are now losing out even on county roads and real estate projects.
Read: Chinese firms at risk of breaking local contractors rule
China’s State-linked firms are getting ahead partly due to Chinese government loans, which have increased to $6.56 billion (Sh885.6 billion) in December as Beijing promotes investments abroad.
“The Bill seeks to amend section 157(8) of the Public Procurement and Asset Disposal Act, 2015 by deleting the word Sh500 million and substituting thereof Sh20 billion,” said Embakasi Central MP Benjamin Gathiru, who is behind the latest Bill.
“This is to protect local contractors from competition from international contractors. Kenyan contractors have the capacity to undertake government tenders of Sh20 billion.”
The Finance Committee in 2020 rejected a Bill that sought to stop foreign firms from taking part in public tenders below Sh1 billion and for jobs Kenyans can handle.
The National Assembly Finance and National Planning Committee blocked the Bill then sponsored by then Mathira MP Rigathi Gachagua, who is now Deputy President.
A few Chinese companies have amassed road and infrastructure contracts worth Sh1 trillion under the Jubilee administration, leaving Kenyan contractors to fight for small roads and sub-contracts.
Their speed, financing muscle and negotiation power have endeared them to almost all government departments, ministries and parastatals, which have seen them eat the local companies’ lunch.
China Communications Construction Co (CCCC) and its subsidiary China Road and Bridges Corporation (CRBC) hold the bulk of the road and railway contracts, worth about Sh777.1 billion.
China Wu Yi, Synohydro, Jiangxi Engineering, China Railways 21 Bureau Group and Third Engineering Bureau of China City Construction Group have also earned hundreds of billions for projects across the country.
Local companies such as S.S Mehta, H. Young, and Seco have been pushed to the periphery as Chinese firms secure lucrative road, rail, and electricity contracts.
“The main objective is to raise the threshold that local firms can be granted exclusive access to government tenders not less than Sh20 billion,” said Mr Gathiru.
“By passing this Bill, we will unlock hundreds of billions of shillings for local firms who would bid for mega projects without competing with foreign firms. This is in line with the Kenya Kwanza agenda to offer more tenders to Kenyan young entrepreneurs,” he told the Finance committee.
He estimated that foreign contractors’ share of state projects at 86 percent amid concerns that local firms would have the capacity to execute mega projects.
China’s influence on Kenya’s mega infrastructure development started gathering steam with the construction of the Thika Superhighway between January 2009 and November 2012 at a cost of nearly Sh32 billion in the last term of President Mwai Kibaki.
CRBC and CCCC have since bagged the lion’s share of Kenya’s mega projects — at least two railways, two ports and 23 road projects.
They include the $3.5 billion (Sh472.5 billion) standard gauge railway (SGR), a $398 million (Sh53.7 billion) oil terminal at the Mombasa port and road projects such as Southern, Western, and Eastern Bypass in Nairobi and the A109 National Highway Project.
The Chinese contractors are expanding the Eastern Bypass, Nairobi Expressway, Nairobi Inland Container Depot, Nairobi South Railway Station, Valley Road/Ngong Road/ Nyerere Road Interchange & Upper Hill/ Haile Selassie Overpass as well as the Naivasha Inland Container Depot, first three berths at Lamu Port and the Likoni Floating Bridge.
Read: World Bank hands Chinese contractors Sh71bn road projects
The government earlier said they preferred Chinese firms due to their speed of delivery and costs while accusing local companies of shoddy jobs and uncompetitive bids.
Bu local contractors attribute the swift completion of work by the Chinese to timely payments while Kenyan companies have to wait for years, accumulating pending bills.