How new tender law would help spur youth-owned businesses

Thursday July 11 2013


By CHARLES WOKABI [email protected]

You have a reason to smile if you run a small business as the government moves to bring “Buy Kenya –Build Kenya” policy into effect.

The policy envisages a raft of changes in the current public procurement law in an attempt to make it easier for local firms owned by the youth, women and persons living with disabilities do business with the State.

Living up to one of the promises President Kenyatta’s government made to the private sector, the National Treasury has, through a Kenya Gazette of June 18, made key changes in the public procurement law with a view to make it easier for the youth, women and people with disabilities to participate in government tenders.

The new rules will help the government institutions comply with the presidential directive requiring at least 30 per cent of all public tenders be set apart for the youth, women and disabled members of the society.

“A procuring entity shall allocate at least 30 per cent of its procurement spend for the purposes procuring goods, works and services from micro and small enterprises owned by youth, women and persons with disability,” National Treasury Cabinet Secretary Henry Rotich noted in the gazetted regulations.

Under the new rules, any small and micro enterprise or a disadvantaged group wishing to participate in public procurement is required register with the National Treasury or the respective county treasury with which it operates. (READ: Youth to get more State contracts)

A registered enterprises from both national and county levels shall then be submitted to the Procurement Authority for consolidation and publication. Public procuring entities are required to abide by the 30 per cent rule and file quarterly reports with the procurement authority.

The new law notes that a small business shall enjoy preferential treatment if it is registered with the relevant government bodies and has at least 70 per cent of its members as youth, women or persons with disabilities. The leadership of such an organisation must also be 100 per cent youth, women and persons with disability respectively.

Overall, preference will be given to Kenyan firms offering motor vehicles or equipment that are assembled locally, construction material and other hardware used in the transmission and conduction of electricity of which such material is made locally. Dealers in furniture, textiles, food and other goods made or locally available would also enjoy preference.

It is one of the strategies the government hopes will work to support local enterprises and ultimately create job opportunities for the youth.

While meeting members of the private sector in their first week of office, President Kenyatta and his deputy William Ruto promised to remove the bottlenecks in the procurement law which had for long kept local startups from the party that is State spending.

And in an attempt to part with the past, public institutions will be required to adopt speedy processing of payment to enable local firms deliver the services or goods on time.

“A procuring entity shall facilitate financing of enterprises owned by youth, women or persons with disabilities that have been awarded contracts, by authenticating their notifications of tender awards and local purchase or service orders and subsequently entering into an agreement with the relevant financing institution with conditions that shall include paying the contracted enterprise through their account opened with the financier,” the new rules state.

Youth-owned firms would get prompt payments for all performed contracts through electronic media where possible within a month. Public procuring entities that are unable to make full payments must pay at least half the amount and submit a written explanation to the supplier.

Even though experts have warned that the government is exposing itself to more expensive spending and the possibility of procuring inferior goods, the new approach has opened floodgate of opportunities that smart entrepreneurs will be looking to exploit.

Value of contracts

Those poised to benefit most from the regulation review are traders in construction materials such as cement, metal works, and electric cables, agriculture, textiles and food.

Dealers in furniture, including screens, fixed bench couches, garden furniture, wardrobes and light furniture have also been listed among those that will get preferential treatment.

What is more exciting for entrepreneurs is the increase in the value of contracts reserved for local companies from a maximum of Sh500 million to Sh1 billion. This means that locals can now do more business with the government.

Global tenderers are set to source supplies from Kenyan contractors.

“For the purpose of ensuring sustainable promotion of local industry, a procuring entity shall have in its tender documents a mandatory requirement as a preliminary evaluation criteria for all foreign tenderers participating in international tenders to source at least 40 per cent of their supplies from citizen contractors prior to submitting a tender,” the new regulations stipulate.

For instance, an international contractor tendering for the construction will be required to source 40 per cent of the building materials such as cement locally. This gives Kenyan firms a chance to enjoy a piece of the cake that goes to multinationals.