13 September 2012 | Elaine Porteous

The Kenyan economy relies on aid, higher education, agriculture, infrastructure, tourism and telecoms. Elaine Porteous takes a look at purchasing activity in the country.

Although Kenya is the largest and most advanced economy in east and central Africa, around half of the population lives below the poverty line and most employment is in agriculture and small-scale manufacturing. It also relies on tourism, telecoms and infrastructure work.

Years of poor governance, internal ethnic divisions, frequent droughts and a high incidence of malaria have hampered economic progress. As a result, a large proportion of the country’s economy is in the third sector, supporting development aid groups such as the World Bank, United Nations (UN), the US Agency for International Development (USAID) and the African Development Bank. Millions of dollars are injected into the nation every year and this is where much procurement activity lies.

These organisations have robust purchasing policies and procedures, which helps them attract good procurement professionals. They also offer training and personal development opportunities for those with ambition and dedication.     

UN agencies are expected to award US$233 million in contracts this year. Fouzia Abass, regional chief procurement officer, says more than $91 million of business was placed with Kenyan suppliers in 2011. This has been increasing since 2007, when $27.6 million of deals were awarded. “Each of the UN agencies has specific supplies needed that local producers can provide,” she says. Common contracts include catering services, freight forwarding and janitorial services.

A large category of spend by the third sector in Kenya is consultancy services, as aid agencies seek advice on how to spend their money in the most effective way. Procurement, logistics and warehousing expertise is particularly in demand.

Crown Agents, an international development specialist with expertise in procurement and logistics, fulfils a large proportion of the roll-out and distribution of goods and services in Kenya on behalf of international development agencies. 

Many foreign firms, including GM, Coca-Cola, P&G and Colgate-Palmolive, are involved in funding corporate social responsibility projects, working with the World Bank, the UN and other groups.

Elsewhere, USAID is working to strengthen the country’s health system by improving procurement and logistics in the supply of medicines. Vehicles and basic foodstuffs are shipped into rural areas to assist with poverty relief and drought, with global food producers increasing the volumes they send to east Africa too. Telecoms providers are active across Kenya, supporting infrastructure development.

There is some discontent among local suppliers who don’t think they get a big enough slice of all types of contracts and complain that many high-value deals are awarded to global companies. But it has been argued that some local suppliers lack knowledge about procurement procedures, or simply flout the rules.

Most development agencies publish details of tender opportunities and support governance and public sector reforms that aim to achieve transparency in procurement. But that’s not the case everywhere. Transparency International’s 2011 Corruption Perceptions Index (which ranks countries on how corrupt their public sector is perceived to be) gave Kenya a score of 2.2 out of 10 – with 0 meaning highly corrupt. The country ranked 154th out of 183 nations.

High-profile problems

The public sector has certainly experienced some high-profile problems when it comes to purchasing. One notable case is the procurement of banknotes. Last month, a report issued by the Kenyan Public Accounts Committee (PAC) called for the resignation of transport minister Amos Kimunya and the governor of the Central Bank of Kenya, Njuguna Ndung’u, for “failing to protect the bank and taxpayers’ interest”.

There has also been a problem with the tender for biometric voter registration (BVR) kits, which the government hoped to have in place ahead of national elections next year. The Independent Electoral and Boundaries Commission (IEBC) had pledged to use biometric technology to make the voting process more secure and boost confidence in the results, with the hopes of avoiding the violent clashes that have occurred in the past.

At the start of August, Ahmed Issack Hassan, chairman of the IEBC, said: “We assure Kenyans the commission will deliver on BVR registration, as part of its commitment to deliver transparent, credible, free and fair general elections.” However, less than a fortnight later the IEBC said it had terminated the process of acquiring BVR kits and, because time was short, it would use a different type of voter registration process instead.

In 2007, the Public Procurement Oversight Authority (PPOA) was created to ensure that procedures established under the Public Procurement and Disposal Act were complied with. Since the roll-out of the public procurement law, there have been questions over its effectiveness. Felix Muema, chairman of the Kenya CIPS branch and a procurement consultant, tells SM there is a lack of political will to implement reforms. “Not engaging procurement specialists is contributing a lot to the problems,” he says. Delays in the procurement process have been noted and a paper issued by the Office of the Deputy Prime Minister & Ministry of Finance in June said a study was required to identify the causes. “This will be an important assignment for PPOA,” it said. It also accepted that its monitoring and evaluation system, which ensures public sector procurement bodies use public resources efficiently and in compliance with the law, needs strengthening.

There is some good news. The World Bank’s economic update on Kenya forecasts growth of 5 per cent this year and the expansion of the East African Community region – which covers Kenya, Uganda, Tanzania, Rwanda and Burundi – will help Nairobi establish itself as the hub of east Africa.