Meet the man at the helm of the NCA and learn what his plans are
[pull_quote_center]How do you streamline a multi billion shilling industry that thrives on chaos? In Kenya they have established an authority and given it the powers to clean the rot. John Njiraini met up with the Executive Director of the National Construction Authority(NCA) to determine the success they have had in regulating an industry that has been freewheeling for a long time.[/pull_quote_center][vc_button title=”View Issue” target=”_blank” color=”default” size=”size_large2″ href=”http://constructionreviewonline.com/magazines/crapril%202014/”]
The construction sector in Kenya had for years been one of the most chaotic, amorphous and one that anyone could claim a stake in from the mason who has never seen the inside of a classroom to the retired bureaucrat with a few contacts in government. In fact today being a contractor is seen as one of the most attractive businesses to venture into in Kenya given the explosion in the demand for housing and infrastructure as the central government devolves and establishes county offices in the various regions and financial institutions adopt a more positive monitary regime towards mortgages and housing development. The establishment of the NCA therefore couldn’t have come at a better time to help streamline a free wheeling industry.
The construction sector is indisputably among the key pillars of the Kenyan economy. According to the Economic Survey 2013, the sector is one of the fastest growing having recorded a growth of 4.8 percent in 2012 compared to 4.3 percent in 2011. The sector accounts for five percent of the gross domestic product (GDP) and employs about 13 percent of the country’s total workforce. The level of the sector’s importance to the economy is well demonstrated by the amount of money being pumped into it. In 2012, loans and advances to the sector increased by 36.2 percent from Sh50.8 billion in 2011 to Sh69.2 billion in 2012. Overall expenditure for the Ministry of Roads in 2011/2012 financial year stood at Sh91.5 billion and rose to Sh117.6 billion in 2012/13.
The reality that the sector was insane is something the National Construction Authority (NCA) board admitted when it embarked on a process to recruit an Executive Director to run the NCA sometime in 2012. In the advertisement, the NCA board was categorical it was looking for someone capable of ‘restoring sanity in the construction industry.’
“The sector is a critical player in the economy. It is one of the sectors’ expected to play a crucial role in driving the country’s Vision 2030,” says Daniel Manduku, the man whom the NCA board settled on to clean the filth infecting the construction sector and bring back sanity. He adds that the government appreciates the importance of the sector and that is why it decided to establish the NCA to streamline, overhaul and regulate the construction sector in Kenya. “There was consensus between the government, and all stakeholders that it cannot be business as usual. There is need for order in the sector.”
Mr Manduku holds an MBA from the United States International University. He attended Alliance High School before joining Jomo Kenyatta University of Agriculture and technology to study architecture. After graduation he worked for a consulting firm before setting up his own practice, Cadplan Architects Ltd, in 2001. Cadplan has designed and supervised construction projects for a wide range of clients within the East African region. He was appointed the Executive Director of NCA in 2012.
Bringing order
The need to instill order in the construction sector had become inevitable. Since the collapse of the National Construction Corporation (NCC) in the mid 1980s, the industry has largely operated without any form of supervision.
Though there are professional bodies with regulations on how members should operate, their mandates are mainly limited to its members. However, the fact that the construction sector is broad with numerous classifications it has created a scenario in which the sector operates at the whims of players.
Thus while the upper cadre of the sector that include professional engineers, architects, quantity surveyors among others conduct themselves with a sense of decorum and professionalism, the lower cadre is outrightly unstructured and barely pays lip service to professionalism and quality.
Lack of strict regulation has opened the sector to quacks with dire consequences. Cases of buildings under construction collapsing, shoddy jobs being done in critical projects like roads, dams among others and use of sub-standard materials are rampant. In fact, industry experts contend that six out of ten buildings in the capital Nairobi are a disaster waiting to happen because they were either never approved, some got approval due to city council officials being compromised while others are structurally defective due to the manner in which they were constructed. “We want to reform how the industry operates,” states Manduku.
Enactment
The enactment of the National Construction Authority Act, 2011, and its coming into effect the following year effectively marked the turning point for the sector. The act establishes the NCA with the overall mandate of overseeing the construction industry and coordinating its development. “Though the mandates are broad, NCA is specifically supposed to advice the government on policy issues aimed at developing the sector, regulate the industry and build the capacity of local contractors”. Mr Manduku says.
Registering all contractors
According to Manduku, the only guarantee to ensure quality in construction projects is ensuring contractors adhere to set rules and regulations. Thus in accordance with the law, NCA is determined to make it difficult for quacks and crooks by ensuring only registered contractors operate in the industry.
Though NCA has been in operation for less than two years, it has already managed to register about 25,000 contractors classified in various categories. The authority has segmented the players in the industry in eight categories with category one being for foreign companies and local contractors capable of handling large projects while the rest are reserved for indigenous contractors. “We want to ensure the public gets quality construction projects,” he avers, adding the NCA wants to create a database of skilled construction workers as well countrywide. This will ensure the authority becomes the reference point for all matters related to construction including anybody seeking to inquire or authenticate the legality of any contractor.
Building local capacity
Registration of all contractors will have far reaching implications in the sector. Apart from weeding out quacks, the move will make it easy to monitor implementation of projects and take action against contractors who fail to ensure quality.
More importantly, registration offers the lower cadre of contractors who constitute 80 percent of players in the industry an opportunity to access training and opportunities to enable them grow. According to the law, no contractor whether foreign or local will be awarded two concurrent government jobs.
This opens up opportunities particularly for registered local contractors. Besides, foreign firms bidding for local jobs will be required to form consortiums with local companies.
It is interesting to note that in recent years, foreign firms particularly from China are dominating major contracts in the country in areas like roads, airports, railways and energy. Though some are government to government arranged, the fact that local companies have largely been locked out of mega projects has raised concerns about the capacity and capabilities of local firms. NCA has drafted a proposal that is before Parliament aimed at ensuring that local firms get a 30 percent participation in any project when it is government to government. “We are saying that even materials should be sourced locally,” notes Manduku, adding that foreign firms undertaking projects locally will only be allowed to import skills that cannot be found locally.
As the institution mandated to police the industry, NCA understands that one of the best strategies to streamline the sector is through building capacity, particularly among the lower cadre contractors. While big firms are generally run professionally and adhere to set rules and procedures, the situation is quite the opposite in small firms.
In order to ensure quality becomes the common denominator in the construction industry, NCA is working on a capacity building strategy that will involve working with local universities, polytechnics (both national and village) and Technical, Industrial, Vocational and Entrepreneurship Training (Tivet) institutions to offer the necessary training and skills to contractors. NCA also intends to establish a National Construction Institute that will act as the benchmark for the industry.
Paradigm shift
By adopting a soft approach in pushing for a paradigm shift in the industry’s modus operandi, NCA hopes all contractors will easily be assimilated into the new system of a construction industry that operates professionally and is committed to quality projects. The authority, however, is cognizant of the fact that some contractors will be resistant to change.
“We know there will be some resistance to change but we are coming up with strategies to counter,” explains Manduku. He adds that the NCA has developed a code of conduct that outlines how contractors should operate. The code of conduct also contains penalties in case any contractor breaches the laid out procedures.
“So far we are seeing 100 percent compliance from the registered firms,” he notes.
While the large number of contractors that NCA has so far registered is evident contractors are willing to be policed, the fact that the sector has operated for about three decades without supervision raises the question of whether the authority will be able to enforce law and order in an insane industry? According to Manduku, failure on the part of NCA is not an option.
Though references have been made to the defunct NCC and its failures, Manduku says NCA is determined to be a strong authority that is committed to implement its mandates effectively. “You cannot compare NCC with NCA because the mandates are quite different,” he observes, adding the mandates of NCC was to Africanize the construction industry through training, financial assistance and sourcing for jobs for its members. Though it succeeded in the mission of Africanizing the sector, weak management and political interference led to its demise.
NCA, however, is unlikely to walk down the same path. First, the authority not only enjoys the goodwill of the public but also receives unlimited government support. This is critical because the authority has been depending on the exchequer for financing. Receiving money from the Treasury is however a temporary arrangement because the law has established a registration fee and construction levy.
Effectively, it means that contractors will be required to pay between Shs5,000 and Sh50,000 (about US$60 to US$600) to be registered by NCA. The construction levy, on its part, is pegged at 0.5 percent of the value of construction projects. “Money is never enough but we intend to be self sufficient,” explains Manduku, adding that NCA will engage the Kenya Revenue Authority to collect the levy on its behalf.
Mr Manduku projects that they will have an annual budget of Ksh4 Billion (US$46,500,000). Financial independence will enable NCA to hire the best brains to effectively police the sector. It will also enable the authority to have a presence in all the 47 counties, something that means no construction will occur in the country without its knowledge and approval. More importantly, the authority intends to deploy ICT in monitoring projects. “Our intention is not to reinvent the wheel but we want to stream the industry,” says Manduku.
The NCA to date has focused its attention on setting up systems and processes before it fully embarks on is arduous task of streamlining the industry. Being a new authority, NCA is starting from scratch and it has been challenging putting up the systems and recruiting qualified staff whilst operating on a tight budget. It will be worth watching keenly how it fairs and it will offer many lessons to other African countries facing the same problems.
