Kenyan contractors are crying foul after most of them lost out to Chinese firms in tendering for the construction of 10,000 kilometres of roads across the country through annuity financing.

When the $11 billion road construction programme was launched in July, President Uhuru Kenyatta and his deputy William Ruto promised that Kenyan companies — including those run by youth, women and people living with disability — would be given priority in the tender awarding.

The National Economic and Social Council (NESC) had also drawn up a Bill and a policy for setting up a credit guarantee scheme for local small and medium enterprises to access funding to undertake the projects.

The Ministry of Transport and Infrastructure said the local contractors did not meet the requirements for prequalification.

“We regret that your application did not meet the requirements for prequalification and was therefore unsuccessful,” P C Kilimo, writing on behalf of the Principal Secretary, said in a letter seen by The EastAfrican to one of the contractors.

President Kenyatta directed that 30 per cent of the contracts be reserved for disadvantaged groups — youth, women and persons living with disability.

Seven local consortia comprising 26 road construction firms had expressed interest in the prequalification and established a savings and credit society — Master Builders Sacco — to mobilise resources. They now accuse the ministry of discriminating against them.

“We will lobby top government officials, including the president and parliamentarians, to be given the opportunity to construct some of the roads,” Kenya Federation of Master Builders (KFMB) chairman Moses Muihia said.

Mr Muihia said the lobbying would include asking the Transport and Infrastructure Committee of Parliament to stop the award of contracts.

KFMB, the umbrella body of local road construction companies, argues that involving its members in actual road construction would be one way of transferring technology to Kenyans.

In an October 7 letter, the ministry said the consortia in the federation did not meet the financial threshold set by the government.

“The consortia failed to demonstrate participation by any consortium member in any contract with a value of Ksh500 million ($5.6 million) over the past five years,” the letter reads, adding that the bidders did not have the average cashflow of Ksh400 million ($4.4 million) in the past five years and turnover of Ksh1 billion ($11.2 million) required.

KFMB is however aggrieved.

“The condition was put there to specifically disqualify local contractors,” said KFMB secretary-general Thiaka Muchai. “We had gone round it by getting a letter from a leading local bank indicating it would finance the works if we won the tenders.”

Constructing roads through annuity financing is a new approach to delivering motorable and all-weather roads and could pose a challenge to contractors, financiers and supervisors.

The government hopes that the public-private partnership approach will help to deliver about 10,000km of tarmac roads by the next General Election in 2017.

The annuity scheme requires contractors to seek financing for road construction and maintenance from banks and other financial institutions.

READ: New finance model to spur road building

Under the scheme, the government pays the banks each time supervision engineers issue a certificate of completion for a section of the road to specifications, helping overcome the resource and technical bottlenecks plaguing the sector. It could also help alleviate corruption, which often leads to poor workmanship and bad maintenance of roads.

The cost of a tarmac road ranges between $460,000 and $1.1 million per kilometre, depending on design standards, financing and management costs, contract duration and compensation of displaced people and businesses.

It is estimated that financiers would earn at least Ksh9 billion ($100 million) in interest from the scheme.

If implemented, the model will see a major leap in infrastructure development in Kenya, which has only been able to construct about 14,000km of tarmac roads over the past 50 years.

READ: Africa needs to make roads, not war

The government pledged to help local firms to secure funds.

“The government will negotiate for loans from banks and other finance institutions and contractors will access these funds through the support of the state and build and maintain the roads while guaranteeing quality and completion and maintenance timelines,” Principal Secretary John Musonik said.

“Master Builders Sacco Limited has already negotiated with an underwriting and financing bank,” said Mr Muihia in a letter to the director-general of the Kenya Rural Roads Authority (KeRRA) on September 11.

“We are also exploring other possible financiers.”