Building a Strong “National” Foundation: Local Content in Kenya’s Construction Industry

Posted on September 12th, 2018

By Walter Amoko | Cindy Oraro

Co-authored by Loise Machira.

Background to the legislation

The construction industry in Kenya is regulated by the National Construction Authority Act (No. 14 of 2011) (the Act). Though the Act does not expressly make reference to the term “local content” it does have provisions that provide for both local and foreign contractors.

Categories of registration of contractors

National Construction Authority Regulations of 2011 (the Construction Regulations) provides for different categories of registration. Registration of contractors under NCA-1 category is open to both local and foreign contractors. On the other hand, any registrations that fall between NCA-2 to NCA-8 are restricted to local contractors only. This provision has the effect of restricting the type of work that a foreign contractor may undertake.

Registration of foreign contractors

The Construction Regulations define a “foreign contractor” as:

  • a firm incorporated outside Kenya; or
  • a firm incorporated in Kenya in which 51% of the shares are held by a non-Kenyan.

A foreign firm is required to make an application to the National Construction Authority before undertaking work under category NCA-1. The application must be accompanied by an undertaking in writing that the foreign contractor shall:

  • subcontract or enter into a joint venture with a local person or firm for not less than 30% of the value of the contract work for which temporary registration is sought; and
  • transfer technical skills not available locally to a local person or firm in such manner as the National Construction Authority may determine from time to time;

The National Construction Authority may register such joint ventures that a foreign contractor enters into with a local firm or person.  The Construction Regulations further require that the employees of such a joint venture be competitively recruited from the local labour market. Recruitment or employment of foreign technical or skilled workers on such contract shall only be done with the approval of the National Construction Authority where such skills are not available locally. It is important to note though that contractors may be exempted from this provision by the National Construction Authority.

Conclusion

Although the Act does not make express reference to “local content”, restrictions contained in the Act regarding local and foreign contractors could be argued to be an adaptation of local content policies because they give local contractors an opportunity to maximize on specific projects.

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Delving Deeper: A Closer Look at Local Content in Kenya’s Growing Mining Sector

Posted on August 13th, 2018

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Background to the legislation

Kenya intends to overhaul its mining laws currently contained in the Mining Act (Cap 306 of the Laws of Kenya) by passing the Mining Bill, 2014 that is currently being debated in Parliament. The Mining Bill, if passed in its current form, will introduce a range of new provisions among them being those on local content.

Principal objectives of local content regulations in the mining sector

Currently, the Mining Act does not make provision for local content. The rationale behind local content in the proposed Mining Bill lies in the need to develop the economy of a host nation and its surrounding region through mining activities.

(a) Local Equity Participation
The Mining Bill states that where a company whose planned capital expenditure is over the prescribed limit it shall, within 4 years after obtaining a mining licence, offload at least 20% of its equity at a local stock exchange. It should be noted, however, the Cabinet Secretary may extend the required period if he deems it fit after consulting with the National Treasury.

(b) Preference for Local Product
The Mining Bill requires for mineral right holders who are in the conduct of prospecting, mining, processing, refining and treatment operations, or any other dealings in minerals, to give preference to the maximum extent possible to:

  • materials and products made in Kenya;
  • services offered by Kenyan citizens; and
  • companies or businesses owned by Kenyan citizens.

(c) Employment
As a general requirement, mineral right holders will be under an obligation to give preference to Kenyan citizens when it comes to employment. The Mining Bill provides that before one is granted mineral rights in Kenya, one will be required submit for approval to the Cabinet Secretary responsible for mining a detailed programme for the recruitment and training of citizens of Kenya. This is aimed at ensuring skills transfer to and capacity building for the citizens.

The Cabinet Secretary will be required to make regulations to provide for:

  • the replacement of expatriates;
  • the number of years such expatriates shall serve;
  • the number of expatriates per capital investment; and
  • the collaboration and linkage with universities and research institutions to train citizens.

It is important to note that the Bill has categorized mining activities into large scale operations and small scale operations. Mineral rights for small scale operations will only be granted or be entitled to Kenyan citizens or a body corporate wholly owned by Kenyan citizens. On the other hand, when it comes to large scale operations, a holder of a mineral right will be required to:

  • only engage non-citizen technical experts in accordance with such local standards for registration as may be prescribed in the relevant law;
  • work at replacing technical non-citizen employees with Kenyans, within such reasonable period as may be prescribed by the Cabinet Secretary in charge of mining;
  • provide a linkage with the universities for purposes of research and environmental management;
  • where applicable and necessary facilitate and carry out social responsibility to the local communities; and implement a community development agreement

It is important therefore that interested parties confirm from the outset whether their mining activities would fall under large scale of small scale operations in order to be in a position to ensure compliance as the requirements for approvals in each of these operations are different.

“Bidding” System Changes Ahead: The New Public Procurement and Disposal Act, 2015

Posted on August 13th, 2018

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Background to the legislation

The construction industry in Kenya is regulated by the National Construction Authority Act (No. 14 of 2011) (the Act). Though the Act does not expressly make reference to the term “local content” it does have provisions that provide for both local and foreign contractors.

Categories of registration of contractors

National Construction Authority Regulations of 2011 (the Construction Regulations) provides for different categories of registration. Registration of contractors under NCA-1 category is open to both local and foreign contractors. On the other hand, any registrations that fall between NCA-2 to NCA-8 are restricted to local contractors only. This provision has the effect of restricting the type of work that a foreign contractor may undertake.

Registration of foreign contractors

The Construction Regulations define a “foreign contractor” as:

  • a firm incorporated outside Kenya; or
  • a firm incorporated in Kenya in which 51% of the shares are held by a non-Kenyan.

A foreign firm is required to make an application to the National Construction Authority before undertaking work under category NCA-1. The application must be accompanied by an undertaking in writing that the foreign contractor shall:

  • subcontract or enter into a joint venture with a local person or firm for not less than 30% of the value of the contract work for which temporary registration is sought; and
  • transfer technical skills not available locally to a local person or firm in such manner as the National Construction Authority may determine from time to time;

The National Construction Authority may register such joint ventures that a foreign contractor enters into with a local firm or person.  The Construction Regulations further require that the employees of such a joint venture be competitively recruited from the local labour market. Recruitment or employment of foreign technical or skilled workers on such contract shall only be done with the approval of the National Construction Authority where such skills are not available locally. It is important to note though that contractors may be exempted from this provision by the National Construction Authority.

Conclusion

Although the Act does not make express reference to “local content”, restrictions contained in the Act regarding local and foreign contractors could be argued to be an adaptation of local content policies because they give local contractors an opportunity to maximize on specific projects.

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