A proposal by the Kenyan government to establish a State construction company to undertake infrastructure projects in the country has elicited disquiet among local contractors who are already struggling to survive in a market dominated by Chinese firms.
The planned National Construction Company, a commercially run subsidiary of the National Youth Service (NYS), is expected to use its low-cost model and State backing to deliver infrastructure projects cheaply while generating income for the youth service.
“The service [NYS] is aiming to become self-sustaining by establishing the National Construction Company that can deliver infrastructure projects in Kenya and beyond,” the National Treasury Secretary Henry Rotich said on Thursday while presenting the 2015/16 fiscal year Budget estimates.
“Through the firm, the cost of construction would go down between 30 per cent and 50 per cent due to reduction in the cost of labour and machinery.”
Some industry players have, however, criticised the government’s proposal – terming it as an attempt to create unhealthy competition in the sector.
“While NYS can lower costs due to cheap labour and government backing, we must pay our workers at market rates while servicing expensive bank loans. This is unfair competition,” a Nairobi-based contractor told Construction Kenya.
The NYS, which has been allocated Sh25 billion in the next fiscal year (up from Sh8.5 billion this year ) is easily the largest local construction firm based on equipment – having received Sh6 billion worth of equipment from China last year.
The service is already building police houses in Kiambu at 30 per cent of the funds allocated for the project and discussions are underway to award more projects to it.
Sources within the NYS say that the service is seeking to take advantage of the State directive for foreign contractors to cede at least 30 per cent of the value of State-controlled projects to local companies.