DEALING

Kenyans selling multi-billion contracts to Chinese – PDU

According to the President’s Delivery Unit, majority of tenders are won by Kenyan contractors who then offload them to the Chinese.

In Summary

•The clandestine move by Kenyans has seen Chinese firms dominate key state tenders, sending a wrong signal that China is bulldozing local contractors.

•About 50 Chinese companies have been behind energy, roads, water, real estate, and transport contracts in recent times, valued in excess of $2 billion (Sh202.7 billion).

Kenha director general Peter Mundinia, chairman Erastus Mwongera with a Chinese contractor after they signed a deal for the construction of Kisii- Ahero-Isebania road
GREEN LIGHT: Kenha director general Peter Mundinia, chairman Erastus Mwongera with a Chinese contractor after they signed a deal for the construction of Kisii- Ahero-Isebania road
Image: LEWIS NYAUNDI

Local contractors are in the business of bidding and selling multi-billion infrastructure and development projects, the government has said, with Chinese companies being among the biggest beneficiaries.

This is in the wake of a high debt stock owed to the Chinese, which stood at $6.46 billion (about Sh654.7 billion-current exchange rate) as of June, majority which has gone into infrastructure funding and development.

The clandestine move by Kenyans has seen Chinese firms dominate key state tenders, the President’s Delivery Unit (PDU) has noted, sending a wrong signal that China is bulldozing local contractors in local development projects.

 

According to PDU, the majority of these tenders are won by Kenyan contractors who then offload them to the Chinese.

“You know Kenyans are unique. These Chinese you see around no longer participate in tenders, I don’t know if you are aware of that,” PDU Delivery Expert-Polycarp Onyango noted, “Immediately a Kenyan wins that contract, the Chinese comes.”

“I will use an example, a contract worth Sh10 billion, Chinese will come and buy that thing for Sh8 billion, the Kenyan keeps Sh2 billion, starts chasing the second contract. So these contracts are actually won by locals. It’s just that our Kenyan locals are unique and peculiar,” Onyango said.

He spoke at the Kenya Association of Manufacturers’ headquarters, Nairobi, on Thursday evening, during a panel discussion on Sustainable Development Goal 12- Sustainable consumption and production, where issues around local content arose.

China is estimated to have funded more than 70 development projects in Kenya in the past 14 years which includes the $108 million (Sh10.9 billion) grant to build the North and East Ring Road sections in Nairobi, save for the Sh320 billion Mombasa-Nairobi SGR which required expertise.

In April this year, Kenya signed two project delivery agreements totaling Sh67 billion through concessional financing and Public-Private Partnership.

The projects include the Konza Data Centre and Smart Cities Project to be undertaken by Chinese telecommunications giant Huawei at a cost of Sh17.5 billion and the recently launched Sh62.1 billion JKIA-James Gichuru expressway being developed on a PPP arrangement by China Road and Bridge Corporation.

 

About 50 Chinese companies have been behind energy, roads, water, real estate, and transport contracts in recent times, valued in excess of $2 billion (Sh202.7 billion).

A notable project in the city is the $26 million (Sh2.6 billion) University of Nairobi Towers. The 22-story building was constructed by China Wuyi Co., Ltd. There is numerous roads and buildings in the capital and across the country being developed by the Chinese.

Among entities using Chinese contractors to build magnificent office blocks and shopping complexes include National Social Security Fund, Kenya Commercial Bank and UAP Insurance, projects that could have possibly been developed by locals.

Two Chinese firms-China Henan International Corporation Group and the Third Engineering Bureau of China City Construction is rehabilitating the 206 km Isebania-Kisii-Ahero Road in a Sh18 billion contract.

Infrastructure PS Paul Maringa yesterday affirmed the government’s commitment to ensuring procurement processes are above board.

“The tendering and procurement processes have always been open and competitive,” Maringa said on telephone.

The Chinese Embassy(Nairobi) yesterday said Chinese companies do not go for tenders set aside for local contractors, but admitted the existence of partnerships where locals have failed to fund the projects.

"We(Chinese) do not go for these projects but it is possible some local contractors could give their contracts to other companies," the Embassy's communication department told the Star.

Local contractors have previously decried lack of funds to executive mega projects which have seen them opt for sub-contracting and partnerships, something Chinese companies have been taking up.

 Latest Treasury data shows interest payments to Chinese State-owned banks, the majority being infrastructure loans, accounted for Sh29.21 billion.

This is out of the Sh33.54 billion total interest spend on bilateral loans in the year to June, with President Uhuru Kenyatta’s administration contracting debt from China, since 2014, mainly to develop roads, railway, and bridges.

Report-Africa Construction Trends (2018) by consultancy firm- Deloitte, shows Kenya has the largest number of Chinese projects in East Africa, with 41 projects valued at $38.2 million (Sh3.9 billion).