MPs have rejected a proposed law that sought to bar foreign firms from bidding for government contracts below Sh20 billion, throwing a lifeline to Chinese contractors.
The National Assembly Finance and National Planning Committee vetoed the Public Procurement and Asset Disposal (Amendment) Bill, 2023, which sought to raise the limit for foreign firms bidding for taxpayer-backed contracts from Sh500 million to Sh20 billion to protect local contractors.
“The jump from Sh500 million to Sh20 billion is too big at 40 times more. Very few Kenyan contractors can handle Sh20 billion tenders. This will, therefore, mean that tenders worth this amount will be reserved for very few Kenyans who can afford it,” committee chairman Kuria Kimani said in a report.
“Having considered the Public Procurement and Asset Disposal (Amendment) Bill, 2023, the committee recommends that Clause 2 of the Bill be deleted in its entirety.”
Embakasi Central MP Benjamin Gathiru, who sponsored the bill, wanted to amend Section 157(8) of the Public Procurement and Asset Disposal Act, 2015 by deleting the figure Sh500 million and substituting it with Sh20 billion.
The dominance of Chinese firms has left a bitter taste in the mouths of local contractors, who are now losing out on county roads and housing projects.
State-owned Chinese firms are gaining ground partly because of Chinese government loans, which rose to $6.56 billion (Sh885.6 billion) in December as Beijing encourages overseas investment.
This is the second time MPs have rejected the bill after the Finance Committee in 2020 stopped a similar bill that sought to cap the value of public tenders available to foreigners at no less that Sh1 billion and only for jobs that Kenyans can do. The bill was then sponsored by then Mathira MP Rigathi Gachagua, who is now the Deputy President.
“A similar amendment was considered by the committee in the 12th Parliament. The committee then recommended to the House that the two clauses in the Bill be deleted in their entirety,” Mr Kimani said on the latest Bill. “This committee concurs with [those] recommendations.”
The National Treasury and the Institute of Certified Public Accounts of Kenya (ICPAK) had opposed the amendment, saying, the threshold set would discourage participation by private companies that normally contribute to the economy through public-private partnerships.
“The amendment implies that the National Treasury Cabinet Secretary will set the threshold above Sh20 billion for citizen contractors (companies wholly owned and controlled by Kenyans). This will exclude local contractors (companies registered in Kenya with more than 51 per cent Kenyan shareholding) and foreign contractors (companies owned by foreigners),” the Treasury said in a written memorandum to the Finance Committee.
The Treasury said the Bill will limit competition to local contractors, thereby losing the benefits of international competition, including higher prices for projects. It argued that citizen contractors lack the capacity to deliver complex, quality projects in a timely manner.
“If procurements worth Sh20 billion are reserved for local contractors, foreign bidders and local contractors will be excluded, leading to capital flight, decline in direct investment and relocation of businesses to other countries,” said Treasury Principal Secretary Chris Kiptoo.
ICPAK chief executive Grace Kamau said that, while the Sh20 billion threshold would increase the eligibility of local firms and contractors to boost small and medium-sized businesses, it risked completely excluding foreign firms from participating in procurement, thereby discouraging foreign investment in Kenya.
A handful of Chinese firms amassed a whopping Sh1 trillion worth of road and infrastructure contracts in the Uhuru administration.
Their speed, financial muscle and bargaining power have endeared them to almost all government departments, ministries and parastatals.
