China Wu Yi, China Roads and Bridges Corporation, Sheng Li. What do these have in common? They are all Chinese-owned foreign contractors operating in Kenya. They are behind the largest contracts in Kenya: roads, buildings and energy contracts. Did we leave out the standard gauge railway?But then, what do the phrases “joint ventures”, “partnerships”, “technology or knowledge transfer/exchange” and “subcontracting” have to do with Kenya’s National Construction Authority, foreign contracting companies and local contractors?
Previously we introduced the National Construction Authority (NCA) in Kenya. In April 2014, the NCA proposed changes to the National Construction Authority Act that will alter how foreign contractors operate in Kenya. [Download it here]
The proposal recommends that foreign contractors have to enter into a joint venture with a locally registered contracting company as it bids for jobs. This is to ensure that local contractors build on their expertise, technology and exposure through a technology exchange and transfer program. This is to ensure that the capacity of local contractors is improved through demonstration of greater efficiency in handling projects.
The proposal also tackles the use of foreign skills. The NCA has to approve the use of foreign labour after it has been confirmed that the skills sought are unavailable locally. The NCA also recommends that the foreign contracting companies should have limited projects. Besides entering into a joint venture, they are required to sub-contract to local contracting companies.
However, it should be noted that these proposals are not targeted specifically at the Chinese contractors. Whereas the local media reported [Read: The Star & The Standard] that local companies have to “cede 30% to local contractors”, the NCA disregards this reporting and clarifies that foreign contracting companies should allocate 30% of the works to the local contracting companies. The 30% allocation may be in the form of labour or use of local materials. The NCA seeks to entrench this requirement in the regulations.
What have the Chinese done?
The Chinese contracting firms mentioned at the beginning of this post are engaged heavily in projects that run on bilateral agreements between the Kenyan and Chinese governments. There are, however, smaller Chinese firms that operate locally. These are accused of almost sabotaging the construction industry as they hardly use local labour and materials.
Did you know that Chinese firms can access financing at almost a third of local interest rates? While local contractors have to grapple with interest rates of at least 17%, the Chinese counterparts can access funds from their economy at almost 6%.
Source (African Perception Survey of Chinese Business in Africa, 2014) Link (www.ethicsa.co.za)