Press Center | Freight Shipping Logistics News
Dec 11, 2013
General
caxias
Kenya’s building and construction sector, key economic indicators, have recorded improved performance in the last five years thanks to the country’s improved economy, stable interest rates, increased remittances from abroad and spending on development projects.
Kenya’s building and construction sector, key economic indicators, have recorded improved performance in the last five years thanks to the country’s improved economy, stable interest rates, increased remittances from abroad and spending on development projects.
This has seen an improvement in the construction sector, with companies capable of handling multi-billion projects operating in the country.
However, Chinese firms have practically taken over the mega billion projects such as the construction of shopping malls, office blocks, residential estates and government contracts, leaving their Kenyan counterparts to provide auxiliary services such as plumbing and electrical works.
Yet there are many opportunities, particularly in the construction of middle- and low-income housing, manufacture and supply of building materials, renovation and rehabilitation of transport infrastructure.
As early as 2009, the Chinese company, China Wu Yi, had already branched out from road construction and was officially the contractor building Fourways Junction, off Kiambu Road.
Erdemann Ltd., another Chinese firm, was also building the Great Wall Apartments Phase I and has completed Phase III. Last month, Lands Cabinet Secretary Mrs Charity Ngilu launched Great Wall Apartments Phase II, another of the Chinese firm’s success stories.
In May this year, the University of Nairobi announced that China Wu Yi would built its proposed 22-storey complex valued at Sh2.3 billion at the Chancellor’s Court. The firm is also building the Sh2.1 billion Kenya Commercial Bank Plaza, a 21-storey office block in Upper Hill which will host the bank’s headquarters.
STADIUM FACELIFT
Shengli Construction Limited did the Sh1 billion Kasarani Stadium renovations a year ago, while other Chinese firms like China Gezhouba Group Corporation and China Road and Bridge Company have also got lucrative contracts.
So what is it that these firms have that the local contractor’s do not?
Stephen Oundo, Chairman of the National Construction Authority, says the Chinese firms’ easier access to financing back home, coupled with superior technology, is what gives them an edge over local contractors.
“The Chinese can bid for a project and get funding from their government, making the economies of scale very low. Their currency is also stronger, which makes it easier for them to import materials,” says Oundo.
“As the National Construction Authority, we are looking for a bank that can support and vouch for our local contractors. The fund can be used as security by local contractors to enable them to bid competitively for these projects,” he adds.
Oundo says that Chinese dominance of Kenya’s Construction sector is making local firms jittery because of the latter’s financial muscle and quality workmanship.
“What our contractors lack is government support, especially financing, to enable them to win tenders. As an authority, we are looking for a bank that can guarantee our registered contractors in the tendering process. That is how we can support our own,” says Oundo.
Meanwhile, Harun Nyamboki of Nesco Limited, a real estate firm, says that unlike Kenyan contractors, the Chinese have made a name for themselves with their quality work.
“Kenyan contractors earned the tag ‘cowboy’ for their shoddy work. This is where the Chinese came in. They are dedicated, have good workmanship and complete their projects within the stipulated time,” he says.
UNFAIR ADVANTAGE
In April, Kenyan road contractors and engineers moved to court seeking to have Chinese and other foreign contractors barred from handling government-funded road projects, saying they had an unfair advantage.
The contractors accused the government of setting a Sh500 million ceiling for tenders to be awarded exclusively to local firms, saying they had the capacity to handle projects exceeding Sh5 billion.
The case is yet to be determined, but according to the National Construction Authority (NCA) Chief Executive Officer, Daniel Manduku, it is Parliament that is delaying debate on the guidelines to effect minimum participation for local firms.
“At least 30 per cent of the monetary value of a project should go to local contractors. This will be through joint ventures or sub-contracting. That is the way we can support local contractors who are facing competition from the advantaged Chinese,” Manduku said.
But as the contractors wait for the court’s verdict, the Chinese are literally rewriting the rules of construction, completing even big projects on time.
According to a University of Nairobi School of Business study, Competitive strategies adopted by Chinese firms in the building and construction industry in Kenya’, the most practiced competitive strategies adopted by Chinese firms in the building and construction industry in Kenya were: targeting bulk customers, price wars, offering quantity discounts for bulk purchases by customers, using rent judiciously by ensuring that godowns are well organised to enable them to make maximum use of the space, offering cash discounts to customers, and offering credit facilities to repeat customers.
“The most adopted competitive strategy was targeting bulk customers while the least adopted one was advertising on radio, billboards and newspapers,” reads part of the study.
Late last year, the German Ambasador, Margit Hellwig-Botte, complained to key government officials about favouritism towards the Chinese at the expense of quality offered by German contractors.
“I know you won’t like what I’m saying, but there is preferential treatment given to Chinese companies without considering that Germans deliver quality work,” Ms Botte was quoted as saying.
She added that unlike Chinese firms which get support from their government, most German companies are usually on their own.
But as local and other foreign competitors complain, the Chinese continue to dominate the industry, and it will take a great deal of effort by the government to make local contractors compete favourably with them.
Another project undertaken by the Chinese is the Sh1.3 billion Institute of Certified Public Accountants of Kenya (ICPAK) Complex on the Thika Highway. The project is being managed by China Jiangxi.
Another Chinese firm, Fubeco Ltd, is building Our Lady of the Rosary Catholic Church in Kiambu County. The same firm had earlier built Luther Plaza on Nyerere Road, the headquarters of the Lutheran Church in Kenya.
Shengli Construction Limited did the Sh1 billion Kasarani Stadium renovations a year ago while other Chinese firms like China Gezhouba Group Corporation and China Road and Bridge Company have also got lucrative contracts.
Meanwhile, Zhongxing Construction Company is putting the final touches to the Cardinal Otunga Plaza, an 18-floor office block for the Catholic Church’s Nairobi Archdiocese. The company also built the Faith Evangelistic Ministries Church in Karen.
NEW BIDS
Then, in July, another Chinese firm, China Jiangxi International, was awarded the contract to build the 39-storey Hazina Trade Centre. The tower was to be built atop the building housing Nakumatt Lifestyle on the Junction of Mokhtar Daddah/Monrovia streets in Nairobi, which is owned by the National Social Security Fund (NSSF), at a cost of Sh6.7 billion.
The contract has since been suspended, with NSSF inviting new bidders.
Besides, he notes, the Chinese companies import quality materials from their home country and, given that they understand their markets well, they source for high-quality materials, which they buy in bulk and thereby get high discounts.
That government support for Chinese firms gives them an edge over local firms is evident, as happened during the bidding for the Sh55 billion expansion of the Jomo Kenyatta International Airport.
This has seen an improvement in the construction sector, with companies capable of handling multi-billion projects operating in the country.
However, Chinese firms have practically taken over the mega billion projects such as the construction of shopping malls, office blocks, residential estates and government contracts, leaving their Kenyan counterparts to provide auxiliary services such as plumbing and electrical works.
Yet there are many opportunities, particularly in the construction of middle- and low-income housing, manufacture and supply of building materials, renovation and rehabilitation of transport infrastructure.
As early as 2009, the Chinese company, China Wu Yi, had already branched out from road construction and was officially the contractor building Fourways Junction, off Kiambu Road.
Erdemann Ltd., another Chinese firm, was also building the Great Wall Apartments Phase I and has completed Phase III. Last month, Lands Cabinet Secretary Mrs Charity Ngilu launched Great Wall Apartments Phase II, another of the Chinese firm’s success stories.
In May this year, the University of Nairobi announced that China Wu Yi would built its proposed 22-storey complex valued at Sh2.3 billion at the Chancellor’s Court. The firm is also building the Sh2.1 billion Kenya Commercial Bank Plaza, a 21-storey office block in Upper Hill which will host the bank’s headquarters.
STADIUM FACELIFT
Shengli Construction Limited did the Sh1 billion Kasarani Stadium renovations a year ago, while other Chinese firms like China Gezhouba Group Corporation and China Road and Bridge Company have also got lucrative contracts.
So what is it that these firms have that the local contractor’s do not?
Stephen Oundo, Chairman of the National Construction Authority, says the Chinese firms’ easier access to financing back home, coupled with superior technology, is what gives them an edge over local contractors.
“The Chinese can bid for a project and get funding from their government, making the economies of scale very low. Their currency is also stronger, which makes it easier for them to import materials,” says Oundo.
“As the National Construction Authority, we are looking for a bank that can support and vouch for our local contractors. The fund can be used as security by local contractors to enable them to bid competitively for these projects,” he adds.
Oundo says that Chinese dominance of Kenya’s Construction sector is making local firms jittery because of the latter’s financial muscle and quality workmanship.
“What our contractors lack is government support, especially financing, to enable them to win tenders. As an authority, we are looking for a bank that can guarantee our registered contractors in the tendering process. That is how we can support our own,” says Oundo.
Meanwhile, Harun Nyamboki of Nesco Limited, a real estate firm, says that unlike Kenyan contractors, the Chinese have made a name for themselves with their quality work.
“Kenyan contractors earned the tag ‘cowboy’ for their shoddy work. This is where the Chinese came in. They are dedicated, have good workmanship and complete their projects within the stipulated time,” he says.
UNFAIR ADVANTAGE
In April, Kenyan road contractors and engineers moved to court seeking to have Chinese and other foreign contractors barred from handling government-funded road projects, saying they had an unfair advantage.
The contractors accused the government of setting a Sh500 million ceiling for tenders to be awarded exclusively to local firms, saying they had the capacity to handle projects exceeding Sh5 billion.
The case is yet to be determined, but according to the National Construction Authority (NCA) Chief Executive Officer, Daniel Manduku, it is Parliament that is delaying debate on the guidelines to effect minimum participation for local firms.
“At least 30 per cent of the monetary value of a project should go to local contractors. This will be through joint ventures or sub-contracting. That is the way we can support local contractors who are facing competition from the advantaged Chinese,” Manduku said.
But as the contractors wait for the court’s verdict, the Chinese are literally rewriting the rules of construction, completing even big projects on time.
According to a University of Nairobi School of Business study, Competitive strategies adopted by Chinese firms in the building and construction industry in Kenya’, the most practiced competitive strategies adopted by Chinese firms in the building and construction industry in Kenya were: targeting bulk customers, price wars, offering quantity discounts for bulk purchases by customers, using rent judiciously by ensuring that godowns are well organised to enable them to make maximum use of the space, offering cash discounts to customers, and offering credit facilities to repeat customers.
“The most adopted competitive strategy was targeting bulk customers while the least adopted one was advertising on radio, billboards and newspapers,” reads part of the study.
Late last year, the German Ambasador, Margit Hellwig-Botte, complained to key government officials about favouritism towards the Chinese at the expense of quality offered by German contractors.
“I know you won’t like what I’m saying, but there is preferential treatment given to Chinese companies without considering that Germans deliver quality work,” Ms Botte was quoted as saying.
She added that unlike Chinese firms which get support from their government, most German companies are usually on their own.
But as local and other foreign competitors complain, the Chinese continue to dominate the industry, and it will take a great deal of effort by the government to make local contractors compete favourably with them.
Another project undertaken by the Chinese is the Sh1.3 billion Institute of Certified Public Accountants of Kenya (ICPAK) Complex on the Thika Highway. The project is being managed by China Jiangxi.
Another Chinese firm, Fubeco Ltd, is building Our Lady of the Rosary Catholic Church in Kiambu County. The same firm had earlier built Luther Plaza on Nyerere Road, the headquarters of the Lutheran Church in Kenya.
Shengli Construction Limited did the Sh1 billion Kasarani Stadium renovations a year ago while other Chinese firms like China Gezhouba Group Corporation and China Road and Bridge Company have also got lucrative contracts.
Meanwhile, Zhongxing Construction Company is putting the final touches to the Cardinal Otunga Plaza, an 18-floor office block for the Catholic Church’s Nairobi Archdiocese. The company also built the Faith Evangelistic Ministries Church in Karen.
NEW BIDS
Then, in July, another Chinese firm, China Jiangxi International, was awarded the contract to build the 39-storey Hazina Trade Centre. The tower was to be built atop the building housing Nakumatt Lifestyle on the Junction of Mokhtar Daddah/Monrovia streets in Nairobi, which is owned by the National Social Security Fund (NSSF), at a cost of Sh6.7 billion.
The contract has since been suspended, with NSSF inviting new bidders.
Besides, he notes, the Chinese companies import quality materials from their home country and, given that they understand their markets well, they source for high-quality materials, which they buy in bulk and thereby get high discounts.
That government support for Chinese firms gives them an edge over local firms is evident, as happened during the bidding for the Sh55 billion expansion of the Jomo Kenyatta International Airport.
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