New Ngilu rules to deal Chinese contractors blow

Politics and policy

Lands Cabinet Secretary Charity Ngilu. Photo/FILE 

By GERALD ANDAE and LYNET IGADWAH

In Summary

• The rules will mostly affect China whose State corporations have been undertaking projects funded by Beijing and negotiated under government-to-government pacts.

Lands Cabinet Secretary Charity Ngilu has published regulations that will require foreign contractors to reserve 30 per cent of their work or stake to local firms. The shift is expected to hit Chinese firms the hardest.

 

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Mrs Ngilu gazetted the regulations two weeks ago, paving way for the National Construction Authority (NCA) to register and regulate contractors.

The restriction will boost Kenyan firms and help in transferring skills. The regulations also require contractors to seek approval from NCA before employing expatriates, which will be done only when the skills are not available locally.

The rules will mostly affect China whose State corporations have been undertaking projects funded by Beijing and negotiated under government-to-government pacts.

“A foreign person or firm shall subcontract or enter into a joint venture with a local person or local firm for not less than 30 per cent of the value of the contract work for which registration is sought,” the regulations say.

“The ratio of ownership of a joint venture for construction work between a local firm and a foreign firm shall be at least 30 per cent for the local firm.”

The government in 2012 issued proposals seeking to restrict foreign-owned firms to 70 per cent of State-funded contracts, but shielded international companies in deals negotiated between States.

But the new regulations will apply to both government and private sector works, which must be registered by the NCA.

“All construction works, contracts or projects either in the public or private sector shall be registered with the authority in accordance with the Act,” read the regulation.

Kenya has embarked on major infrastructure projects to make up for decades of under-investment which stunted economic growth. This includes roads, expansion of Jomo Kenyatta International Airport at Sh57 billion and construction of the Mombasa-Nairobi oil pipeline for Sh53 billion.

Construction of a new railway from Mombasa to Nairobi at Sh447.5 billion will start in September. It will be built by China Road and Bridge Corporation.

Chinese firms have dominated Kenya’s construction sector in the past 10 years in what has been aided by Nairobi’s eastward shift in commercial and diplomatic relations.

gandae@ke.nationmedia.com