Push to pay subcontractors directly

KAM chief executive Phyllis Wakiaga during the launching of its 2020 agenda last week. PHOTO | SALATON NJAU 

By JAMES KARIUKI
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Summary

• The deal will see main contractors who win public contracts compelled to disclose the total project cost of subcontractors, who will be recognised and paid directly by public entities.
• Currently, private and public entities only recognise main contractors and disregard the subcontractors who execute the bulk of the works.

Manufacturers are pushing for a subcontracting law to facilitate establishment of beneficial relationships between small and medium enterprises (SMEs) with large contractors.

The deal will see main contractors who win public contracts compelled to disclose the total project cost of subcontractors, who will be recognised and paid directly by public entities.

In its latest Manufacturing Priority Agenda (MPA2020), Kenya Association of Manufacturers (KAM) said the law will also create openness in payments with the government treating contractors and subcontractors equally and payments made within 60 days.

Currently, private and public entities only recognise main contractors and disregard the subcontractors who execute the bulk of the works.

KAM wants public and private entities to prop up subcontractors with skills and capacity to execute big ticket projects instead of contracting foreign firms which use subcontractors before shipping out all profits.

“Where SMEs (subcontractors) have comparative advantage to main foreign contractors, import substitution strategies must be introduced to the benefit of local SMEs,” it said.

To build local capacity, KAM urges formation of county-based incubation centres to promote growth of local SMEs.

The report said family-owned SMEs should also be supported to corporatise their businesses thereby promoting ethical business practices, cash-flow management, marketing, intellectual property management. among others.

KAM said Kenya Industrial Research and Development Institute and Kenya Industrial Estates budgets should be enhanced to enable them support industrial research and establishment of incubation centres.

Regulatory agencies must also be instructed to support SMEs’ in meeting required standards for local and export certification, KAM said, noting that this will see more small firms venture in mass production of various products.

Subcontractors have been pushing for a Central Bank of Kenya-backed unsecured loan facility, set at between Sh30,000 to a maximum of Sh250,000 offered via mobile apps by five Kenyan banks, to be raised to about Sh1 million to enable them utilise the loans to fulfil small-ticket contracts.

“Even a classroom or a public toilet block costs more than this and for such a facility to make sense, it should be increased to meaningful amounts to enable us meet implementation costs for projects given to us,” Kenya Federation of Master Builders (KFMB) secretary Thiaka Muchai said.