(NAIROBI, KENYA) – Local contractors and truck owners have sued the Kenyan government to force it to publish tax and duty concessions granted to Chinese contractors on infrastructure projects.
The petitioners say the unpublished exemptions give foreign firms an unfair edge, creating a 25% to 35% cost gap in their favour and pushing local businesses into financial trouble.
They want the court to rule that the continued use of tax and duty concessions embedded in contracts for Chinese financed projects is unconstitutional without published legal authority.
The petitioners are the African Centre for Corrective and Preventive Action (ACCPA), Swan Movers Lifters Limited, the Association of Micro and Small Enterprises Association of Kenya and Universal Lifters Limited.
Contractors say some members face insolvency and statutory winding up demands after losing contracts and defaulting on loans used to buy trucks and heavy machinery.
“While such exemptions are lawful in principle, their implementation has been fundamentally flawed due to the absence of re-exportation requirements, the absence of tracking and audit mechanisms, and the absence of usage restrictions post project completion,” ACCPA executive director John Maingi Macharia said.
Mr Macharia said foreign contractors import large fleets of trucks and heavy machinery duty free for specific projects but keep the equipment after completion and deploy it in the local market.
He said the machines are neither re-exported nor properly audited by the relevant authorities.
The petitioners say they provide haulage and lifting services in construction but are disadvantaged by the tax and duty exemptions given to foreigners.
They say local firms buying similar equipment must pay import duty, an import declaration fee and the railway development levy, plus the full cost of bank financing.
The cumulative cost of acquiring a truck for a local operator is at least 51% higher than for a foreign competitor benefiting from duty free importation, the petitioners say.
They say the cost gap lets foreign contractors underbid Kenyan firms consistently, leading to lost contracts, loan defaults and distressed auctions of locally owned fleets.
The organisations say they filed the case after complaints from local contractors, truck owners, transporters and suppliers since 2016.
They said many affected businesses were reluctant to seek legal redress for fear of being blacklisted from government tenders, commercial retaliation and ongoing insolvency proceedings.
The petitioners say the government facilitated infrastructure projects through bilateral agreements that let foreign contractors import project equipment duty free and enjoy other tax and procurement exemptions.
They cite Auditor General reports showing revenue foregone through tax exemptions stood at KES 38.6 billion ($298.24 million / GBP 224.70 million) in the 2022/2023 financial year and KES 41.2 billion ($318.33 million / GBP 239.83 million) in 2023/2024.
Mr Macharia said Japanese contractors received exemptions through a Gazette notice issued in 2021, unlike Chinese contractors working on projects such as the standard gauge railway, Nairobi Expressway, Thika Superhighway and Lamu Port.
The petitioners want the court to compel the government to publish the legal notices, Gazette notices, administrative directives or executive instruments used to grant tax exemptions, customs duty remissions or other fiscal concessions on such projects since January 2008.
The Attorney General has opposed the petition, saying it raises no constitutional issue and was filed in the wrong forum.
“The matter is purely commercial in nature and should be entertained in another forum other than the Constitutional and Human Rights Court,” the Attorney General said.
The case will be mentioned on 6th October.