The government of Kenya, through the Ministry of Transport and Infrastructure deserves all the accolades it has been getting for initiating the KES327 billion standard gauge railway project.
Conceptualizing and actualizing a mega project on this scale requires more than courage. It takes a firm belief in the future of this country and a willingness to invest a personal stake in that future today. This is undoubtedly one of the biggest projects ever undertaken not just in the history of Kenya, but the region as a whole. It is telling that in the last 110 years, no government or leader has been able to do this, which puts President Kenyatta in an elevated place in the country’s history.
The SGR is a big deal. And it matters, for it will certainly be a game changer. Once commissioned, it promises the realization of certain advantages that Kenya, and indeed the rest of the region have been yearning for, for a long time, with no resolution in proximate sight. A faster railway transport system will not only reduce transport costs and improve safety on our roads; it will, most importantly, make our goods more competitive in the region, and beyond.
This project could not have taken off without the support of the Chinese government. The KES 327 billion total cost of the project is 90 per cent financed through a facility from the Chinese Exim Bank, with the rest expected to come from local resources in the form of the Railway Development Fund (RDF), which is being financed through a 1.5 per cent levy on all imports. We must therefore thank the government and the people of China for the confidence they have shown in us, and most importantly, our ability to repay the loans that have been extended to us.
One of the most potentially transformative policies being pursued by the Ministry of Transport and Infrastructure on the SGR project is the 40 per cent local content rule. Simply put, this means that of all the materials that are going to be required in the construction of the SGR, at least four out of every 10 (by value of input), will have to come from Kenyan sources. This is a major departure from the norm and a whiff of fresh air in the staid and predictable world of public procurement.
True, in most projects financed in a similar manner, those who control the purse strings always insist that businesses and contractors from their countries be given exclusive access to any resultant businesses. This offer to local businesses will no doubt put a lot of money in the pockets of thousands of Kenyans, thereby uplifting their standards of living. The multiplier effect in the economy is likely to be felt through the trickledown effect.
Besides, the 40 per cent local content rule will be a boon for enhancing local capacity, apart from building skill-sets for building and maintaining such projects in the future. Local industries, especially those that manufacture materials for similar projects, will be born and existing ones given a new lease of life and reason to live.
We have been strident in our advocacy that the government sets aside local content in all government projects, to ensure that Kenya builds its own capacity to deliver on mega projects, something we have not done in the last 50 years. True, the National Treasury recently issued a circular to that effect recently, putting the threshold for local content at 40 per cent, few projects have complied. To improve adoption rates, we need to negotiate with multilateral agencies to ensure all contracts come with a requirement for capacity building for Kenyans.
Going forward, we propose that the local content rule be embedded in procurement law, to enforce compliance. On current form, Kenyan firms can compete only for jobs whose value is less than KES1 billion. This is quite limiting, considering that the National Construction Authority has registered over 19,000 contractors with capacity to handle small, medium and large contracts.
The onus is now on manufacturers to up their game to ensure their products comply with the standards and specifications of the project. Those contracted must also deliver on time. We appeal for the highest levels of fairness, competitiveness and inclusion. The contractor should also consider women, youth and people with disabilities.
The challenge is on the private sector to operate on the highest standards of integrity. The preponderance of cartels and brokers must be brought to an end. In the same vein, we must avoid the creeping culture of frivolous and baseless appeals against winning contractors, as this only serves to delay implementation, while giving Kenya a bad name as an investment destination.
The author, Eng. Matu is the Convenor, Infrastructure at the Kenya Private Sector Alliance (KEPSA)