AN OUTLINE OF CONSTRUCTION LAW IN KENYA
1.0
INTRODUCTION
The project construction regulatory regime in Kenya is not clearly defined and boasts of a wide
range of laws, policies and institutions. This outline discusses the legal, regulatory, policy and
institutional framework that guides the construction industry in Kenya. The Construction sector
is a major contributor to the Gross Domestic Product (GDP) of many countries around the world
and therefore its close regulation cannot be gainsaid.1 Globally, about one-tenth of the global
economy is dedicated to the construction industry.2 Construction provides infrastructure
necessary for other industries to grow and provide employment opportunities for both skilled and
unskilled labour. Some of the infrastructures that construction provides include roads, bridges,
houses, power plants, telecommunications, airports and rail. The quality of infrastructure affects
the cost of production, employment creation, access to markets, and investment.
In Kenya, during the 2009/2010 financial year, the construction industry contributed 17.5 per
Cent of her Gross Domestic Product.3 This industry continues to grow to meet the raising
demands for housing, industrial development, infrastructure etc. The importance of the
construction industry in the economy has been reflected in various government policies. Vision
2030 is such government policy where the Kenyan government recognizes infrastructure
construction as one of the foundations upon which she will achieve her social, political and
economic pursuits.4 The vision identifies some of the infrastructure projects that Kenya should
1
Mitullah W.V. and Wachira I.N. 2003. Informal labour in the construction industry in Kenya: A case study of
Nairobi, (Working Paper May 2003-204) Geneva, International Labour Office.
2
UNEP, 1996. Industry and Environment vol. 19, No.2, April/June.
3
Republic of Kenya (Ministry of Finance, 2010, Budget Speech. For the. Fiscal Year 2010/2011. (1st July – 30th
June), Nairobi, Public Relations Office.
4
Republic of Kenya, 2007. Kenya Vision 2030, A Globally Competitive and Prosperous Kenya, Government Press.
The Kenya Vision 2030 is a country‟s new development blueprint covering the period 2008 to 2030 and it is a
vehicle for accelerating transformation of our country into a rapidly industrializing middle-income nation by the
year 2030. The Vision is based on three “pillars”: the economic, the social and the political. The economic pillar
1
Electronic copy available at: http://ssrn.com/abstract=1787820
be dedicated to as; (a) heavy/civil constructions which deals with the design, construction and
maintenance of the physical and naturally built environment, including works such as bridges,
roads, canals, dams and buildings, airports and seaports, telecommunications systems etc. (b)
industrial construction which deals with sectors like medicine, petroleum, chemical, power
generation, manufacturing, dams, portable water schemes, sewage schemes, irrigation systems,
power stations, power transmission lines, renewable energy schemes etc. and, (c) buildings
Construction comprising of residential buildings and estates, slums redevelopment, hospitals,
schools and other educational facilities, hotels and tourist sites, factories, shops and other
commercial and industrial facilities.
Construction activities involve project conception, design and planning, project procurement,
project finance, project implementation and operation and maintenance. Each one of these
activities is critical in achieving an end product that is of good quality. The quality and quantity
of a construction activity affects many other sectors of the economy and even the ultimate
wellbeing of society.5 In order to ensure minimum standards of, among others, structural
soundness, effective protection against fire, use of construction materials that do not cause
diseases, proper accessibility and environmental protection; the government and stakeholders
should regulate activities of building and construction industry.
Besides ensuring minimum standards in the construction industry, some level of regulation seeks
to allocate and distribute risks amongst the various stakeholders. To mitigate the risks in
aims to improve the prosperity of all Kenyans through an economic development programme, covering all the
regions of Kenya, and aiming to achieve an average Gross Domestic Product (GDP) growth rate of 10% per annum
beginning in 2012. The social pillar seeks to build a just and cohesive society with social equity in a clean and
secure environment. The political pillar aims to realize a democratic political system founded on issue-based politics
that respects the rule of law, and protects the rights and freedoms of every individual in Kenyan society.
5
Commission, Productivity, Reform of Building Regulation (November 2004). Productivity Commission Working
Paper on Reform of Building Regulation, Available at SSRN: http://ssrn.com/abstract=650483. Accessed on 31
December 2010.
2
Electronic copy available at: http://ssrn.com/abstract=1787820
construction and the many players involved, a proper regulatory framework must be in place to
ensure adherence to safety, healthy and commercially sound standards.6
2.0
FORMS OF REGULATION
Regulation of the construction industry can be done through various regulatory forms namely;
statutory regulation, government policies, contract law, tort law and principles of equity. These
regulatory forms target various activities of construction which include materials resources,
product standards, human and professional resources.7 These regulatory forms are discussed in
detail below.
2.1
Government Policies
Government policies guide decision making towards achieving a rational outcome in matters of
public interest. A strategic and broad based approach to formulating construction policies should
be based on the certain fundamental criteria namely; equitable national integration, accessibility
to public and private construction products; healthy and safety, economic viability, technical
viability, political and administrative considerations, environmental soundness and addressing
the basic need.8
Over the years the government of Kenya has developed policies that in one way or the other
affects the construction industry. Historically, the construction of Mombasa–Kisumu and
Kampala Railway was the trigger for planning policy efforts in Kenya. Markets and towns as
well as local authorities were established in the highlands as administrative units and trading
6
Risk management may be described as a systematic way of looking at areas of risk and consciously determining
how each should be treated. A systematic process of risk management involves; risk identification, risk
classification, risk analysis, risk attitude and risk response.
7
Grosso M. G., Jankowska A. and Gonzales F, 2008, Trade and regulation: the case of construction services, OECD
Trade and Agriculture Directorate.
8
Wasike W.S.K, (April 2004), Road Infrastructure Policies in Kenya:
Historical Trends and Current Challenges, Working paper No. 1, Kenya Institute for Public Policy Research and
Analysis.
3
centers to support the settler economy. Various planning initiatives during this period were
institutionalized through the 1931 Town and County Ordinance.
Some of the plans that were developed during the period include;
a. The 1926 Mombasa Municipal Council Plan which was later replaced by the 1962
Mombasa Municipal Council Plan.
b. The 1948 Nairobi Master Plan-this plan followed the 1947 Town and Country Planning
Act of Britain. It incorporated the racial segregation zoning and was linked to the overall
budget planning.
c. The Swynerton Report of 1954: this was a plan to intensify the development of African
agriculture in Kenya. The plan was geared to expanding native Kenyan's cash-crop
production through improved markets and infrastructure, the distribution of appropriate
inputs, and the gradual consolidation and enclosure of land holdings.9
Before independence master planning was the standard planning method in major townships and
municipal. At independence it was found to be rigid, time consuming and lacked an
implementation framework. Several initiatives were developed to address the problems caused
by master plans through sessional papers, strategic plans programmes etc. Some of these
initiatives include;
a. The Sessional Paper No. 10 of 1965 on African Socialism and its Application to Planning
in Kenya. The paper provided the main policy framework for development in all sectors
of the economy in the country. The paper recognized the role of urban, regional, local and
rural levels of development in the national economy and decentralized and redistributed
development and planning. It was based on principles of political equality, social justice,
human dignity and equal opportunities.
b. The Human Settlement Strategy for Urban and Rural Development was developed and it
provided for overall framework for the management of future urban growth as well as the
9
Swynnerton, R.J.M. (1955). The Swynnerton Report: A plan to intensify the development of African agriculture in
Kenya. Nairobi: Government Printer.
4
location of physical developments in urban and rural areas in order to develop a coherent
system of human developments.
c. In 1986 the Rural Trade and Promotion Centers (RTPCs) Programme was initiated in
Kenya to create centres that would act as both growth poles for the regions (to catalyse
the hinterland of their locations) and as dispersion mechanisms (to de-concentrate
development from the main towns).10
d. District Focus for Rural Development (DFRD) Programme-intended to broaden the base
for rural development and encourage local initiative to complement the ministries‟ role in
order
to
improve
problem
identification,
resource
mobilization
and
project
implementation at the local level.
e. Sessional Paper No. 2 of 1996 on „Industrial Transformation to the Year 2020: this policy
recognized that insufficient accessibility to infrastructure was a major disincentive to
potential investors in most sectors of the economy and a threat to the realization of the
goal of industrialization. The sessional paper introduced public private partnership
arrangements.
f. Sessional Paper No. 1 of 1986 on Economic Management for Renewed Growth: The
policy saw the introduction of structural adjustment programmes in Kenya. The policy
focus was on cost sharing, retrenchment, sale of parastatals, privatization of some
government functions, price and import decontrol, removal of government subsidies, and
budget rationalization away from social programmes.
g. Sessional paper No. 6 of 1999 on Environment and Development: It integrates
environmental aspects to the national development planning process emphasizing on
sustainable development.
h. In 2002 Kenya developed the Economic Recovery Strategy for Wealth and Employment
Creation Policy document which was published in 2003. The strategy identified the key
10
Samuel K. Gitau and Thomas N. Kibua (2005): The Rural Trade and Production Centres Programme in Kenya:
Experience and Prospects, Institute of Policy Analysis and Research Discussion Paper Series.
5
role policy actions including rehabilitation and expansion of physical infrastructure in
particular roads, railways and telecommunications.11
i. Sessional paper no. 3 of 2004 on the National Housing Policy: it provides for land
administration for sustainable housing development.
j. With the expiry of the Economic Recovery Strategy for Wealth and Employment
Creation Policy the Vision 2030 was developed which is the current blue print for
Kenya‟s long term national development. Kenya lacks a spatial framework for
implementation of the Vision 2030.12
k. Sessional Paper no. 3 of 2009 on National Land Policy: the policy guides the country
towards efficient, sustainable and equitable use of land for prosperity and posterity. It
provides for land administration, land use planning, environmental degradation etc.
l. National Land Policy 2007 which guides the country towards efficient, sustainable and
equitable use of land for prosperity and posterity.
m. Sessional Paper of 2010 on Integrated National Transport Policy: The policy aims to
integrate investment and location of transport infrastructure and services to other public
policies. It provides government and the private sector with a systematic decision making
tool for investment in transport infrastructure over the next fifty (50) years.
2.2
Statutory regulation
Statutory regulation of the construction industry may be traced back to Hammurabi‟s Code of
1760 BC.13 The Hammurabi Code specified the standards required to be achieved in a building
contract and prescribed penalties for those who had the misfortune not to comply with it. The
severe penalty imposed by the Hammurabi Code ensured that building and construction work
achieved the required quality standards and safety.
11
Government of the Republic of Kenya (2002): Economic Recovery Strategy for Wealth and Employment Creation
2003-2007. Government Printers.
12
Government of the Republic of Kenya (2007): Kenya Vision 2030: A Globally Competitive and Prosperous
Kenya. Government Printers.
6
Today, the construction industry is subject to a diverse range of statutes formulated by various
government bodies and agencies. The main objective of statutory regulation is to protect and
preserve public interest and the interest of the various players in the industry. In addition to
regulations specific to construction services, several measures applicable to all sectors of the
economy are also relevant for the construction industry. The construction regulation targets
among others the following thematic areas;14
a. Health, safety, environmental and land planning regulations-these regulations ensures the
safety of the objects constructed, implementing urban and land use planning and
preserving the environment. Contractors and proprietors typically have to comply with
multiple authorization requirements and procedures prior to service provision or prequalification requirements. Some of these authorizations shall be outlined later.
b. Commercial presence and the movement of people regulations-some regulations deal
with trade in construction services and products especially on foreign direct investment.
Foreign contractors may be required to source personnel and products locally. Visas and
entry permits, as well as related administrative procedures can affect the movement of
natural persons. Employment regulations may extend minimum wages, rules on working
hours of foreign workers employed temporarily at construction sites, and requirements on
foreigners to participate in social security systems etc.
c. Government procurement regulations-procurement laws in Kenya guide the process of
selecting a service provider for construction services in Kenya, especially in the public
sector.
Statutory regulation is effected through approvals, setting standards and accreditation
mechanisms, inspections, audits, licensing, and introduction of penalties, introducing incentives
etc.
14
Grosso M.G., Jankowska A. and Gonzales F, 2008, Trade and regulation: the case of construction services, OECD
Trade and Agriculture Directorate.
7
2.2.1 Procurement of Construction Projects in Kenya
Project procurement may be described as an organizational structure needed to design and build
construction projects for a specific client.15 Procurement in Kenya by the public sector is
regulated by the Public Procurement and Disposal Act, 2005, Public Procurement and Disposal
Regulations, 2006 and Public Private Partnership Regulations, 2009. The private sector
procurement is not necessarily subject to the stated procurement law unless the private entity
chooses to observe them.
The Public Procurement and Disposal Act, 2005 (PPDA) is the principal legislation governing
public procurement in Kenya. The Act, which came into operation in 2007 by enacting Public
Procurement and Disposal regulations 2006, was enacted mainly to establish procedures for
procurement and the disposal of unserviceable, obsolete or surplus stores and equipment by
public entities.16 The Act contemplates a public procurement system that, inter alia, maximizes
economy and efficiency, promotes competition and ensures fair treatment of competitors and
promotes the integrity and fairness of the public procurement in Kenya. In addition, public
procurement systems adopted under the Act must yield increased transparency and
accountability, increase public confidence and facilitate the promotion of local industry and
economic development.17
15
Rashid R. A et al, 2006, Effects of Procurement Systems on the Performance of Construction Projects,
Department of Quantity Surveying, Universiti of Teknologi Malaysia.
16
Under the Act, Public entities are those that procure goods, services or works utilising public funds. As such,
public entities include the central and local governments, courts, commissions, state corporations, cooperatives, and
educational institutions such as colleges, schools and universities.
17
Section 2 of the Public Procurement and Disposal Act, 2005.
8
2.2.2 Regulating Construction Stake Holders
There are numerous parties who are involved in the construction industry in Kenya, either
directly or indirectly. Some of these parties are not necessarily professionals like the clients,
manual laborers or suppliers while others are professionals like engineers, architects, quantity
Surveyors, environmentalists or environment expert, land surveyors, social scientist, funding
agencies, material suppliers, procurement experts and lawyers. The main players in the
construction industry are discussed below.
Clients/Employer
The client is the project proponent; he normally initiates the project and provides the design team
with a project brief based on his needs and budget. In certain circumstances the client is the
owner of the project but in other cases especially involving an incorporated body the client may
be the company itself and the owners could be the shareholders. Without the client no single
construction project may be initiated. The client determines other players to be involved in the
project and the conditions applicable from planning stage to completion and even operation. To
succeed in his construction tasks, the client should have basic knowledge in areas of technology,
architecture, economics, social sciences and law. If he lacks the knowledge then it is important
that he incorporates experts who would advise him on various issues.
The client in the construction industry may be a government or government related agencies,
private institutions or private individuals. In Kenya, the government and government related
agencies are mainly focused on construction of infrastructure projects while the private
institutions and individuals focus on building industry.18 The role of the client depends on the
various terms and conditions of the construction contracts. The main roles attributed to the client
include;19
a. Defining the project and obtaining the necessary permits and ensuring that the resources
are available.
18
Kenya Economic Report 2009.
19
Sandesten S. and Bergdahl M. 2006, The Role and Mission of the Construction Client, ByggherreForum‟s
Working Group, Stockholm.
9
b. Determining and engaging the construction players like the consultants and contractors
for design and construction.
c. Ensure that contractual terms and conditions are observed and proper documentation is
done.
d. Client must maintain a good relationship and fulfill any expectation by the project owner,
customers, the community and the construction industry. The client must understand the
business concept of the owner regarding its core business and significant financial
requirements. All value-generating processes start with the customer‟s requirements and
different types of customers have different ways of expressing their requirements. The
client should identify these requirements and provide solutions. Since the lifetime of a
construction project is normally long, the perspective of future customers must also be
taken into consideration bearing in mind the flexibility for technological developments
and alternative uses in the future. Most community desires are expressed in an established
regulatory framework like laws, standards, rules etc. The client should comply with these
regulations and address any other desires of the community especially concerning the
environment and general societal politics. From a construction industry perspective, the
client should be able to work with different parties in the industry, conduct the necessary
procurement process, manage and monitor the implementation of the project. He should
also understand and evaluate technical solutions from a whole life perspective when
choosing between different alternatives, taking into account among other things; costs
quality, time, risks and environmental aspects.
Engineers
Engineering as a profession has been described as the creative application of scientific principles
to design or develop structures, machines, apparatus, or manufacturing processes, or works
utilizing them singly or in combination; or to construct or operate the same with full cognizance
of their design; or to forecast their behavior under specific operating conditions; all as respects
an intended function, economics of operation and safety to life and property. 20 The person who
practices engineering is called the engineer.
20
The Engineers' Council for Professional Development, Science, Volume 94, Issue 2446, pp. 456.
10
The professional status and the actual practice of professional engineering in Kenya is defined by
the Engineers Registration Act, Cap 530 Laws of Kenya. Section 3 of the Act establishes the
Engineers Registration Board which is responsible for regulating the activities and conduct of
registered engineers. The Board maintains a register in which every qualified engineer is listed.
Only registered or licensed engineers are permitted to use the title „registered engineer‟
„engineer‟ or practice as such. To beef up the regulation of engineers in Kenya, the Engineers
Bill, 2009 has been drafted and it awaiting enactment by Parliament.
Engineers in Kenya have formed the Institution of Engineers of Kenya, a society which cooperates with national and international institutions in development and application of the
engineering profession.21 Further, consulting engineers have formed the Association of
Consulting Engineers of Kenya (ACEK). ACEK was formed in 1968 with the aim of promoting
the advancement of the professionalism of consulting engineers. Their scope involves all
engineering roles and providing facilities for Government, Public Bodies, and Associations. The
Association is a member of the International Federation of Consulting Engineers (FIDIC), and
the Group of African Member Associations of FIDIC.
A construction project engineer has his duties specified under the consultancy agreement. The
primary responsibility is to produce a complete, accurate, biddable and buildable set of plans for
all the structures in a project.
Architects and Quantity Surveyors
An architect is a professional involved in the planning, design and oversight of the construction
of buildings while a quantity surveyor is a professional responsible for estimating building costs.
In Kenya the Architects and Quantity Surveyors Act Cap 525 Laws of provide for the
registration and governance of architects and quantity surveyors. The Act establishes the Board
of Registration of Architects and Quantity Surveyors whose main duty is to register Architects
21
The Institute of Engineers of Kenya: Available at: http://www.iekenya.org/. Accessed on the 5 November 2010.
11
and Quantity Surveyors and make by-laws that govern various issues.22 The Act restrict the use
of the words or phrases, “architect", "architecture", "architectural", "quantity surveyor" or
"quantity surveying” unless the user is registered as an architect or quantity surveyor.23
Architectural Association of Kenya is a professional body for architects in Kenya charged with
the responsibility of representing member‟s interests.
The quantity surveyor provides financial advice on construction and contract management. The
Institute of Quantity Surveyors of Kenya (IQSK) is an organization specifically charged with
promoting and safeguarding the interests of the Kenyan Quantity Surveyor. The primary
objective of IQSK is to promote the advancement of the practice of Quantity Surveying and its
application in Kenya.24
Efforts are underway to separate the regulation of architects from those of the quantity surveyor.
The Quantity Surveyors Bill has already been drafted and is now awaiting enactment into law.
Property Developers
Property Developers buy land, finance real estate deals, build or have builders build projects,
create, imagine, control and orchestrate the process of development from the beginning to end.
Typically, developers purchase a tract of land, determine the marketing of the property, develop
the building program and design, obtain the necessary public approval and financing, build the
structure, and lease, manage, and ultimately sell it.25 Developers work with many different
counterparts along each step of this process, including architects, city planners, engineers,
surveyors, inspectors, contractors, leasing agents etc.
22
The Board of Architects and Quantity Surveyors is a body cooperates composed of eight members.
23
Section 3 of the Architects and Quantity Surveyors Cap 525 laws of Kenya.
24
Institute of Quantity Surveyors of Kenya website: Available at: http://iqskenya.org/. Accessed on the 6th
November 2010.
25
Frej, Anne B & Peiser, Richard B. Professional Real Estate Development, Second Edition: The ULI Guide to the
Business. Urban Land Institute, 2003. p. 3.
12
In Kenya, property developers formed the Kenya Property Developers Association (KPDA) in
2006 as the representative body of the residential, commercial and industrial property
development sector in Kenya.26 The association work in proactive partnership with policymakers, financiers and citizens to:
a. Provide efficient and progressive solutions to the shortage of affordable housing in the
country.
b. Promote home ownership for all Kenyans.
c. Help resolve pressing challenges such as building deterioration, fire safety,
environmental degradation and the proliferation of informal housing.
d. Ensure that the property development sector develops rapidly but in an organized,
efficient, economical and ethical manner.
Insurance Companies
Insurance plays a major role in construction risk management. It may be defined as the equitable
financial contribution of many for the benefit of an individual who has suffered loss. Various
parties involved in the construction will wish to manage risks through various ways. In so far as
insurance is concerned, parties aim to obtain the broadest insurance coverage at the lowest cost
while ensuring minimum risks during the construction work.
Construction insurance consists of all contracts of indemnity within the activities of the
construction project and industry where insurance is chosen as the medium through which risks
and liabilities are shifted. Construction involves several activities that fall in different
professions, employment of various technologies and construction materials.27 A construction
insurer is therefore expected to understand the various activities to be able to analyze and risk
that is being transferred.
26
The Kenya Property Development Association website available at: http://www.kpda.or.ke/. Accessed on 22nd
December 2010.
27
Bunni G. Nael, 2003)Risk and Insurance in Construction (2 nd ed.) London, Spon Press.
13
The type of insurance required for construction industry may be classified as property, liability
and in international construction, marine insurance. Property insurance provides for the
protection of works and any material, equipment and machinery connected with it. It is
contracted through an insurance policy known as Contractor‟s All Risk Insurance policy. The
policy excludes a number of risks and imposes a number of conditions that must be met. In
general, however, unless a risk is specifically excluded from the policy, it is considered to be
included in the all risks cover.
Liability insurance provide protection to the insured against specifically legal liabilities to which
he may become exposed as a result of activities culminating in bodily injury or property damage.
The legal liabilities may be towards employees, in which case Employers‟ Liability Insurance
would apply, or towards third parties who are not party to the insurance contract, in which case
Public Liability Insurance would apply. In the case of the design professional, legal liabilities
incurred in the course of his professional work is covered under Professional Indemnity
Insurance. In Kenya,
The insurance market is represented in three laws which involve handling and placement of
insurance(like brokers and agents), the acceptance and underwriting of contract of insurance
(like insurance companies) and re-insurance (re-insurance companies).
Estate Agents
The Estate Agent Act regulates the professional of estate agents conduct of persons who deal
with the selling, purchasing or letting of land and buildings. Section 3 of the Act establishes the
Estate Agent Registration Board which is responsible for registration of estate agents and of
ensuring that the competence and conduct of practicing estate agents are of a standard
sufficiently high to ensure the protection of the public. Any person who is registered by the
Board and who wishes to practice must obtain a licence from the Board.
14
Geologists
The Geologists Registration Act deals with the registration of Geologists in Kenya. The Act
establishes the Geologists Registration Board which maintains a register for of Geologists.
Kenyan Geologists formed the Geological Society of Kenya (GSK) in 1974 to cater for their
needs and encourage geo-scientific education, collaboration and cooperation in Kenya and across
the continent.
Project Financiers
Project finance is finance for a particular project, such as a mine, toll road, railway, pipeline,
power station, ship, hospital or prison, which is repaid from the cash-flow of that project.28
Project finance is different from traditional forms of finance because the financier principally
looks to the assets and revenue of the project in order to secure and service the loan. In contrast
to an ordinary borrowing situation, in a project financing the financier usually has little or no
recourse to the non-project assets of the borrower or the sponsors of the project.
Financing high-profile infrastructure projects not only requires lenders to commit for long
maturity periods but also make them exposed to the risks of political interference by
governments. Kenya has a relatively stable government and the government has been offering
political guarantees to financiers.29
28
29
Andrew fight, (2006) Introducing to Project Finance, Butterworth-Heinemann.
Recently, the Kenyan Treasury withdrew sovereign guarantees for power sector investors. Zeddy Sambu,
Treasury Withdraws Backing for Power Sector Investors, Business Daily, 3 rd November 2010.
15
2.2.3 Regulators and Statutory Approvals in the Construction Sector
There are several government authorities that are responsible regulating construction in various
sectors. Some of these authorities are outlined in the table below.
Regulator
Mandate
Authorization/approvals
required
Communication
Commission
Kenya.
Section 3 establishes the Communication Communication licences
of Commission
of
Kenya
(CCK)
which
facilitates the development of information
and communications sector. Approval must
be sought from CCK for the construction of
information
and
communication
related
infrastructure.
County
Articles 185 (2), 186(1), 187(2) and the Building
and
Governments
Fourth Schedule of the Constitution of Construction approvals
Kenya empowers the county government to
make laws and regulate county planning and
development in land survey and mapping,
housing, electricity and gas reticulation. The
county authority will play the role that is
currently
being
played
by
the
local
authorities. They will approve development
plans on the basis of sound county planning,
health and safety.
Section 163 (A) of Local Government Act
provides for the issuance of business permit
by a Local Authority to allow the conduct of
a business, trade, profession or occupation.
16
Local Authorities
Section 163 (A) provides for the issuance of Single Business Permits
business permit by a Local Authority to
allow the conduct of a business, trade,
profession or occupation.
Physical Planning Act, Cap 6: Section 29, Development Permission
30, 31, 32 & 33 of the Act empowers Local and approvals
Authorities to approve all development
projects as per their by-laws. Various
government officers are consulted e.g.
Director of Survey, Chief Public Health
Officer etc.
Energy Regulatory Section 27 and 80 of the Energy Act, No 12 
License for generation
Commission
of 2006 empowers Energy Regulatory
&
Commission to licence projects relating to
electricity.
electrical energy generation and exploration, 
License
refining, transportation, storage and sale of
importation,
petroleum. Any construction involving the
and transportation of
energy sector must receive approval from
petroleum.
supply
of
for
storage
Energy Regulatory Commission.
Government
In Kenya various ministries are concerned
Ministries
with policy formulation and overseeing
activities in various sectors. Some of the
main ministries in construction industry
include Ministry concerned with roads,
housing, public works, energy, environment,
industry, information technology, lands and
labour.
Kenya
Authority
Airports The Kenya Airports Authority is established Consent in relation to
under Kenya Airports Authority Act, Cap Heights of Stacks
395 of the Laws of Kenya, to facilitate
17
infrastructure for aviation services between
Kenya and the outside world. It is mandated
to, inter alia, construct, operate and maintain
airports in Kenya.
Sec 8 of the KAA Act
Kenya
Civil The Kenya Civil Aviation Authority is
Aviation Authority
established under section 3 of the Civil
Aviation (Amendment) Act, Cap 394 Laws
of Kenya to, inter alia, regulate safety and
technical regulation.
Kenya
Forest Some construction activities are done within
Services and Kenya forest or wildlife boundaries and there is
Wildlife Service
need to acquire relevant permits before
proceeding with such constructions. Some of
the main projects that are done within forests
or
wildlife
areas
development,
include
housing
geothermal
(hotels),
piping,
railway line construction, roads etc.
Kenya
National Section 3 of the Kenya Roads Act, No. 2 of
Highways
2007
establishes
the
Kenya
National
Authority
Highways Authority which is responsible in
managing, developing, rehabilitating and
maintaining national roads and international
trunk roads linking centres of international
importance
and
crossing
international
boundaries or terminating at international
ports,
national
trunk
internationally important
primarily
roads
roads
linking
centres
, and
linking
provincially
important centres to each other or two
18
higher-class roads.
Kenya
Ports The Kenya Ports Authority is established
Authority
under section 3 of the Kenya Ports Authority
Act Cap 391 Laws of Kenya. The Authority
has powers to, inter alia, construct, operate
and maintain ports.
Kenya
Roads Public Roads and Access Act
Permits for transportation
Authority
of oversize loads
Kenya Roads Board Kenya Roads Board is established under
section 4 of the Kenya Roads Board Act,
Cap 408 Laws of Kenya to oversee the road
network in Kenya by coordinating its
development,
rehabilitation
and
maintenance.
Kenya Rural Roads Section 6 of the Kenya Roads Act, No. 2 of
Authority
2007 establishes the Kenya Rural Roads
Authority which is responsible for the
guidance in the construction, maintenance
and management of the rural road network in
the country.
Kenya
Urban Section 9 of the Kenya Roads Act, No. 2 of
Roads Authority
2007 establishes the Kenya Urban Roads
Authority
which
management,
is
responsible
development,
for
rehabilitation
and maintenance of all public roads in the
cities and municipalities in Kenya.
National
Section 58 and 63 of the Environmental Environmental
Impact
Environmental and Management and Coordination Act No. 8 of Assessment License
Management
1999 requires any proponent of a project to
Authority
conduct and Environmental Social Impact
19
Assessment before financing, commencing,
proceeding with, carrying out, and executing
any project specified under the Act. National
Environmental and Management Authority
issues an Environmental Impact Assessment
Licence upon satisfaction that the proponent
shall
take
measures
environment.
Most
construction
to
conserve
projects
sector
in
requires
the
the
the
Environmental Impact Assessment Licence.
Some of them include roads, buildings,
dams, water projects, electricity generation
etc.
Section 68 of the Act. Owner of premises or Environmental Audits
operator
of
a
project
for
which
an
environmental Impact Assessment Study
Report has been made shall keep accurate
records and make annual reports to NEMA
confirming its compliance to the EIA Study
report.
Section 75 of the Act
License
to
Discharge
Effluents
Section 80 of the Act
License for emmissions
Section 87 of the Act: to dispose of any Waste disposal
waste one must obtain a licence.
Section 90 provides for issuance of a permit Permit
to
transport
to transport Hazardous materials outside Hazardous waste
Kenya.
Regulation
16
of
the
Environmental Noise Permit
Management and Coordination (Noise and
20
Excessive Vibration Pollution) (Control)
Regulations, 2009.
National
The Government has drafted the National Certificate of registration.
Construction
Construction Authority Bill, 2011 which
Authority
seeks to establish the National Construction
Authority which shall be charged with
various responsibilities inter alia registration
of contractors, issuance of proficiency
certificate
to
contractors
workers
and
supervisors.
Public Procurement Procurement plays a major role in the
Oversight Authority construction industry since virtually all
construction materials are sourced from
different suppliers. In the public sector
procurement of construction materials is
highly regulated unlike in private sector.
Section 8 of the Public Procurement and
Disposal Act, no 3 of 2005 establishes the
Public procurement Oversight Authority
which is charged with the duty of overseeing
public procurements to ensure competition,
fairness, transparency and accountability
while
contributing
to
National
Socio-
economic development.
Water
Resources Water
Management
Authority,
Services
a
key ingredient
in
every Water extraction licence
construction. The extraction of water is
Water regulated by the Water Services Regulatory
Services Regulatory Board,
Board,
is
Water
Resources
Management
Water Authority and Water Services boards.
Boards
21
and National Water Section 56 of the Act requires one to obtain a
Conservation
Pipeline
and license to extract more than 100, 000 litres in
a day.
Corporation
There are also a lot of constructions in the
water sector which include construction of
dams, pipelines, hydropower projects, ports
etc. These constructions require approvals
from the Water Resources Management
Authority, Water Services Regulatory Board,
Water Services Boards and National Water
Conservation and Pipeline Corporation.
Kenya
Revenue Income Tax Act, Stamp Duty Act, Value Tax
Authority
Added Tax Act etc
Compliance
Certificates
Transport Licensing Transport Licensing Act, Cap 404: Section 4 Transport Licence
Board
requires every person who intends to use a
motor vehicle on a road for carriage of
goods, for hire or reward convey more than
four persons or in inland waters convey by
means of a ship to acquire a transport
license.
Department
Immigration
of Immigration Act, Cap 172: Section 5 of the Work Permits
Act required issuance of work permits for
foreigners coming to work in Kenya.
Directorate
of Occupational Health and Safety Act, Cap 15: Registration Certificate
Occupational health Section 44 of the Act requires registration of
and safety and
premises.
The Work Injury Benefits Act, No 13 of Approved insurer
2007: Section 7 requires employers to
maintain an insurance policy with an
22
approved insurer in respect of any liability he
may incur.
Section 96 obligates an employer to issue a Permit to Work
permit to work to any employee, likely to be
exposed to hazardous work processes or
hazardous working environment.
National
Social National Social Security Fund Act, Cap Registration of Employer
Security Fund
258:Section 5 of the Act requires for and employees
registration of employees under the Fund.
The National Social Security Fund (Reg)
Order: Every employer to be registered with
National Social Security Fund
National
Insurance
Hospital National Hospital Insurance Fund Act, Cap Registration
Fund 9:
Board
Section
19
requires
of
employees‟ Employees
contributions to the insurance fund.
2.2.4 Employment Requirements in the Construction Industry
Stakeholders in the construction industry are bound by employment laws the same way players
in other industries are bound. Labour regulation in Kenya is grounded in the Constitution of
Kenya. Article 41 of the Constitution recognizes various rights of workers and employers. Some
of the rights include a right to fair remuneration, fair labour practices, right to form, join or
participate in union activities etc. In 2007, Kenya enacted five new labour laws which include
Employment Act no 11 of 2007, the Labour Institutions Act No 12 of 2007, the Work Injuries
Act No 13 of 2007, the Labour Relations Act No 14 of 2007 and the Occupational Health and
Safety Act no. 15 of 2007. Besides the five labour laws, there are also labour related laws like
the National Social Security Fund Act Cap 258 laws of Kenya, National Hospital Insurance Fund
Act no 9 of 1998.
The Employment Act declares and defines the fundamental rights of employees. The Act
prohibits forced labour, discrimination and sexual harassment at work place. It provides for the
23
protection of wages, rights and duties concerning employment. In employing foreigners the
contract of service should be a prescribed form signed by both parties and attested by a labour
officer.30 Before attestation the labour officer should satisfy himself that the consent of the
foreign employee is obtained and that there is no fraud, coercion or undue influence, mistake of
fact and misrepresentation which might induce the employee to enter into the contract.
Labour Relations Act provide for the registration, regulation, management and democratization
of trade unions and employers organizations or federations. It also promotes sound labour
relations through the protection and promotion of freedom of association, the encouragement of
effective collective bargaining and promotion of orderly and expeditions dispute settlement,
conducive to social justice and economic development.
Employees Safety
Safety is an ongoing concern at a construction site because construction by its own nature is
inherently dangerous with a high degree of hazard and risk. Construction accidents add up the
cost of construction since relevant insurance policies have to be taken out to protect the
contractor against certain direct expenses.31 Besides insurance construction accidents may
increase medical costs, time lost from work by the injured party and delays, cost of replacement
of the injured staff, loss of efficiency in the team where the injured party was working for,
administrative costs associated with investigation and reports, bad publicity etc.
To address safety issues Parliament has enacted the Occupational Safety and Health Act (OSHA)
No 15 of 2007. This Act provides for the safety, health and welfare of workers and all persons
lawfully present at workplaces.
The construction industry has a lot of physical and health risks ranging from physical injuries,
poisonous substances deaths etc. To mitigate against these risks the requires stakeholders to
observe minimum safety and health standards. Work Injuries Benefits Act provides for
30
Section 83 of Employment Act.
31
Muir B. (2005). Challenges Facing Today‟s Construction Manager, University of Delaware.
24
compensation to employees for work related injuries and diseases contracted in the course of
their employment. Labour Institutions Act establishes labour institutions, to provide for their
functions, powers and duties.
National Social Security Fund Act
Contributions are set at 10% of monthly income up to a maximum of Kshs. 400 per month; half
paid by employer and half by employee. In case of casual employees only the employer pays 5%
of gross wages.
National Hospital Insurance Fund
National Hospital Insurance Fund is a State Parastatal that was established in 1966 as a
department under the Ministry of Health. NHIF registers all eligible members from both the
formal and informal sector. For those in the formal sector, it is compulsory to be a member. For
those in the informal sector and retirees, membership is open and voluntary. Formal sector
employees' contributions are deducted and remitted to the Fund by their employers. The
employer gets a Certificate of Contributions Paid (CCP) book and official receipt from NHIF.
For members under the voluntary category, they pay Kshs.160 per month (Kshs.1920) per
annum. For those in formal employment, contributions are made as per their income.
Training Levy
Training levy is introduced under section 5B of the Industrial Training Act, Cap 237 Laws of
Kenya. It empowers the Minister concerned with labour issues to make a training levy order. The
Minister by Kenya Gazette Supplement No. 64, made a New Training Levy Order. The Order
requires employers to be registered with Directorate of Industrial Training. The Directorate of
industrial training is a department in the Ministry of Labour which acts as the Secretariat to the
National Industrial Training Council established under section 4 of the Act. Contributing
employers qualify for reimbursement of approved training expenses
25
On or before the last working day of each month, an employer is required to pay to the Director a
levy of fifty shillings32 per employee. Payment of the levy due shall be accompanied by a
monthly return in the prescribed form. It is an offence under the Act for an employer to fail to
register or to pay the levy. Players in the Construction industry are employers in the terms of the
Industrial Training Act and require to be registered and pay the prescribed training levy. Training
needs in the construction industry remain high.
2.2.5 Land and Environmental Regulation in the Construction Industry
The construction industry plays a key role in every phase of development from investment,
financing, site planning, engineering and architecture; through project execution and facilities
management. The industry activities range from massive projects, including petrochemicals and
industrial plants, airports, skyscrapers, highways, power plants, bridges and dams to smaller
projects such as office and apartments buildings or single-family homes.33 Virtually all these
constructions take place on land and they cause major alterations to the natural environment.
Most of these alterations are adverse and permanent to the environment. To mitigate against
these adverse alterations against the environment and foster sustainable development, several
regulatory strategies have been put in place. Every phase of construction, ranging from
transactions on land & property, producing building materials to dealing with the wastes created
during and after construction is amenable to environmental and land regulation.
It is noteworthy that compliance with environmental and land regulations typically increases the
costs of construction, not just for construction but for many related activities, such as waste
disposal and material costs. Players in the construction industry must therefore be aware of the
land and environment regulations while making their decisions. What follows is an outline of the
environmental & land policies and regulations applicable to the construction industry in Kenya.
32
The training levy of 50 Shillings per employee may be revised from time to time.
33
Moavenzadeh F. (1994) Global Construction and the Environment Strategies & Opportunities, New York, John
Wiley & Sons Ltd
26
The Constitution of Kenya, 2010
The newly promulgated Constitution in Kenya provides for several provisions on environmental
conservation and sound land use. Nearly all constructions projects are done on land and within
an environment. These provisions are therefore important and must be understood by any players
in the construction industry. Article 42 of the Constitution guarantees every Kenyan a right to
clean and health environment. This right may be enforced by any person, without having to
demonstrate that he/she has sustained any injuries, against any person or entity that violates,
infringes or threaten to infringe or violate it.34
Non-citizens who wish to own land in Kenya for whatever kind of construction project can only
do so by obtaining a leasehold tenure of not more than ninety-nine years.35 This restriction of
land use by foreigners is critical to foreign investors in the construction industry because most
construction investments are long term. Nearly all construction projects are done on land and if
foreigners can only have property rights of a leasehold for ninety-nine years, then such a right
may not be sufficient for investment in certain construction projects like power stations, airports
etc.
Article 66 of the Constitution gives leeway to the State to regulate the use of any land, or any
interest in or right over any land in the interest of defence, public safety, public order, public
morality, public health and land use planning. Pursuant to this provision Parliament has enacted
the various laws that will be reviewed later and Parliament may make extra legislations
regulating land use.
The Constitution establishes a National Land Commission which is charged with various duties,
inter alia, to assess tax on land and premiums on immovable property in any area designated by
law and to monitor and have oversight responsibilities over land use planning throughout the
Kenya.36
34
Article 22 and article 70 of the Constitution of Kenya, 2010.
35
Article 65 of the Constitution of Kenya, 2010.
36
Article 68 of the Constitution of Kenya, 2010.
27
Any transaction involving grant of a right or concession by or on behalf of any person, including
government to another person for exploitation of any natural resources of Kenya should be
ratified by Parliament.37
Article 40 of the Constitution provides for the right to property which allows every person to
own or acquire property of any description in any part of Kenya. Non-citizens, however, can
only own leasehold of not more than ninety nine years. This right to property can only be limited
by the state exercising its powers as provided by Parliament through compulsory acquisition. The
Land Acquisition Act Cap 295 Laws of Kenya provides the procedures for compulsory
acquisition.
The Environment Management and Co-ordination Act, 1999
Environment Management and Co-ordination Act, 1999 is the main legislation dealing with
environmental conservation in Kenya. The Act establishes the National Environmental
Management Authority (NEMA) which is the main regulatory bodies.38 NEMA exercises general
supervision, co-ordinate over all matters relating to environment and it is the principal instrument
of the government in implementation of all policies relating to the environment. It carries out its
mandate through different committees as discussed below;
a. Provincial and District Environment Committee- these committees are appointed at the
provincial and district level.39 They are responsible for the proper management of the
environment within the Province and District in respect of which they are appointed.
With the newly devolved government in Kenya, the Provincial and District Environment
Committees may change to reflect the devolution to the county level.40
37
Article 71 of the Constitution of Kenya, 2010.
38
Section 7 of the Environment Management and Co-ordination Act, No. 8 of 1999
39
Section 29 of the Environment Management and Co-ordination Act, No. 8 of 1999
40
Chapter 11 of the Constitution of Kenya, 2010 provides for the devolved government at the national and county
levels.
28
b. Public Complaints Committee (PCC)-the PCC Investigate any allegations or complaints
against any person or against the authority in relation to the condition of the environment
in Kenya and on its own motion, any suspected case of environmental degradation and to
make a report of its findings together with its recommendations thereon to the Council.41
c. National Environment Action Plan Committee- This Committee is responsible for; inter
alia, the development of a 5-year Environment Action Plan. The Environment Action
Plan provide for an analysis of natural resources, operational guidelines for the planning
and management of the environment and natural resources, integration of standards of
environmental protection into development planning and management etc.42
d. Standards and Enforcement Review Committee-This is a technical committee responsible
for environmental standards formulation, methods of analysis, inspection, monitoring and
technical advice on necessary mitigation measures.43
e. National Environment Tribunal- This tribunal guides the handling of cases related to
environmental offences in the Republic of Kenya.44
f. National Environment Council (NEC)- NEC is responsible for policy formulation and
directions for purposes of EMCA; set national goals and objectives and determines
policies and priorities for the protection of the environment and promote co-operation
among public departments, local authorities, private sector, non-governmental
organizations and such other organizations engaged in environmental protection
programmes.45
Part II of the Environment Management & Coordination Act, 1999 states that every person in
Kenya is entitled to a clean and healthy environment and has the duty to safeguard and enhance
41
Section 31 of the Environment Management and Co-ordination Act, No. 8 of 1999
42
Section 37 of the Environment Management and Co-ordination Act, No. 8 of 1999
43
Section 70 of the Environment Management and Co-ordination Act, No. 8 of 1999
44
Section 125 of the Environment Management and Co-ordination Act, No. 8 of 1999
45
Section 4 of the Environment Management and Co-ordination Act, No. 8 of 1999
29
the environment. In order to partly ensure this is achieved, Part VI of the Act directs that any
new programme, activity or operation should undergo environmental impact assessment and a
report prepared for submission to the National Environmental Management Authority (NEMA),
who in turn may issue a license as appropriate.
Section 147 empowers the Minister to make regulations on various aspects of the environment.
So far the Minister has made some regulations pursuant to the Act.
a. The Environmental Management Coordination (Waste Management) Regulations) These regulations provide that a waste generator shall use cleaner production methods,
segregate waste generated and the waste transporter should be licensed. The notice
further states no person shall engage in any activity likely to generate any hazardous
waste without a valid Environmental Impact Assessment license issued by the National
Environment Management Authority.
b. The Environmental Management Coordination (Water Quality) Regulations-These
regulations provide that anyone who discharges effluent into the environment or public
sewer shall be required to apply for Effluent Discharge License.
c. Environmental Management and Coordination (Noise and Excessive vibration pollution)
(Control) Regulations, 2009 - These regulations prohibits any person to cause
unreasonable, unnecessary or unusual noise which annoys, disturbs, injures or endangers
the comfort, repose, health or safety of others and the environment. Part 11 section 6(1)
provides that no person is shall cause noise from any source which exceeds any sound
level as set out in the First Schedule of the regulations.
d. The Environmental (Impact Assessment and Audit) Regulations, 2003- these regulations
provides for requirement in preparation of project reports, conducting an Environmental
Impact Assessment Study and conducting an environmental audit and monitoring.
e. The
Environmental
Management
and
Co-Ordination
(Controlled
Substances)
Regulations, 2007- these regulations provide for the classifications of controlled
substances, packaging and labeling of controlled substances, Storage, distribution,
transportation or handling and Disposal of controlled substance. Further, the regulations
30
provide for licensing and permit to conduct various transactions involving controlled
substances.
Physical Planning Act, 1996
The Local Authorities are empowered under section 29 of the Act to reserve and maintain all
land planned for open spaces, parks, urban forests and green belts. The same section, therefore
allows for the prohibition or control of the use and development of land and buildings in the
interest of proper and orderly development of an area.
Section 24 of the Physical Planning Act gives provision for the development of local physical
development plan for guiding and coordinating development of infrastructure facilities and
services within the area of authority of County, municipal and town council and for specific
control of the use and development of land. The plan shows the manner in which the land in the
area may be used.
Section 36 states that if in connection with development application a local authority is of the
opinion that, the proposed activity will have injurious impact on the environment, the applicant
shall be required to submit together with the application an Environmental Impact Assessment
report. The environmental impact assessment report must be approved by the National
Environmental Management Authority (NEMA) and followed by annual environmental audits as
spelled out by EMCA 1999. Section 38 states that if the local authority finds out that the
development activity is not complying to all laid down regulations, the local authority may serve
an enforcement notice specifying the conditions of the development permissions alleged to have
been contravened and compel the developer to restore the land to it's original conditions.
Land Planning Act (Cap. 303)
Section 9 of the subsidiary legislation (The Development and Use of Land Regulations, 1961)
under this Act requires that before the local authorities submit any plans to then Minister for
approval, steps should be taken as may be necessary to acquire the owners of any land affected
by such plans.
31
Water Act, 2002
The Water Act Cap 372 vests the rights of all water to the state, and the power for the control of
all body of water with the Minister, the powers is exercised through the Minister and the Director
of water resources in consultation with the water catchments boards, it aims at provision of
conservation of water and appointment and use of water resources. Part II Section 18 provides
for national monitoring and information systems on water resources. Following on this, Subsection 3 allows the Water Resources Management Authority to demand from any person,
specified information, documents, samples or materials on water resources. Under these rules,
specific records may be required to be kept and the information thereof furnished to the authority
on demand.
Section 76 states that no person shall discharge any trade effluent from any trade premises into
sewers of a licensee without the consent of the licensee upon application indicating the nature
and composition of the effluent, maximum quantity anticipated, flow rate of the effluent and any
other information deemed necessary. The consent shall be issued on conditions including the
payment rates for the discharge as may be provided under section 77 of the same Act.
Common law also has a role to play in regulation of water by its protection of riparian rights,
Riparian rights are rights of those who own land abutting a waterfront to use the water without
prejudicing the equal rights of other riparian owners. The riparian land owner has three basic
rights namely, a right to the natural quantity of water, a right to the natural quality of water and a
right to access and navigation.46
46
J.M. Migai Akech, 2006, Land, The Environment and the Courts in Kenya, Department for International
Development and Kenya Law reports and Torori, C.O., Mumma, A.O., and Field-Juma, A., 1996, Land Tenure and
Water Resources, in C. Juma and J.B. Ojwang (eds), In Land We trust - Environment, Private Property and
Constitutional Change, London, Zed Books, pp. 143-174.
32
Energy Act of 2006
The Energy Act of 2006, replaced the Electric Power Act of 1997 and The Petroleum Act, Cap
116. The Energy Act, amongst other issues, deals with all matters relating to all forms of energy
including the generation, transmission, distribution, supply and use of electrical energy as well as
the legal basis for establishing the systems associated with these purposes.
The Energy Act, 2006, also established the Energy Regulatory Commission (ERC) whose
mandate is to regulate all functions and players in the Energy sector. One of the duties of the
ERC is to ensure compliance with Environmental, Health and Safety Standards in the Energy
Sector, as empowered by Section 98 of the Energy Act, 2006.
In this respect, the following environmental issues will be considered before approval is granted:
a. The need to protect and manage the environment, and conserve natural resources;
b. The ability to operate in a manner designated to protect the health and safety of the
project employees; the local and other potentially affected communities.
Licensing and authorization to generate and transmit electrical power must be supported by an
Environmental Impact Assessment Report (EIA) approved by NEMA. Part IV Section 80(1)
provides that a person shall not conduct a business of importation, refining, exportation, whole
sale, retail, storage or transportation of petroleum, except under and in accordance with the terms
and conditions of a valid licence.
Part IV Section 90 (1) stipulates that a person intending to construct a pipeline, refinery, bulk
storage facility or retail dispensing site shall before commencing such construction, apply in
writing to the Energy Regulatory commission for a permit to do so. The application shall: specify
the name and address of the proposed owner; be accompanied by three (3) copies of plans and
specifications and be accompanied by an Environmental Impact Assessment (EIA) Report.
Part IV section 91(1) stipulates that the Energy Regulatory Commission shall, before issuing a
permit under section 90, take into account all relevant factors including the relevant government
33
policies and compliance with Environment Management and Coordination Act, 1999 and in
particular EIA report as per Impact Assessment and Audit Regulations 2003, the Physical
Planning Act, 1996 and the Local Government Act.
Part iv section 100 (1) provides that it is an offence if a person being the owner or operator of a
refinery, pipeline, bulk liquefied Petroleum gas or natural gas facility, service station, filling
station or storage depot, fails to institute appropriate environmental, health or safety control
measures. The offence if convicted, he/she shall be liable to a fine not exceeding two million
shillings or to a maximum term of imprisonment of two years, or to both.
Penal Code Act (Cap.63)
Section 191 of the penal code states that if any person or institution that voluntarily corrupts or
foils water for public springs or reservoirs, rendering it less fit for its ordinary use is guilty of an
offence. Section 192 of the same Act says a person who makes or vitiates the atmosphere in any
place to make it noxious to health of persons /institution, dwelling or business premises in the
neighborhood or those passing along public way, commit an offence.
The Wildlife Conservation and Management Act, Cap 376
This Act provides for the protection, conservation and management of wildlife in Kenya. The
provisions of this Act should be applied in the management of the project. Part III Section 13
subsection (I) stipulates that any person who not being an officer of Kenya Wildlife Service
hunts any animal in a National Park shall be guilty of a forfeiture offence and liable to a fine or
imprisonment. Subsection 2 of the Act likewise provides that any person who, without
authorization conveys into a National Park, or being within the area thereof, in possession of, any
weapon, ammunition, explosive, trap or poison, shall be guilty of a forfeiture offence The Act
provides that no person is allowed to use any aircraft, motor vehicle or mechanically propelled
vessel to manage a drive, stampede or unduly disturb any protected animal or game animal.
Therefore it will be prudent that the construction workforce is conversant with the provisions of
this Act.
34
The Lakes and Rivers Act Chapter 409 Laws of Kenya:
This Act provides for protection of rivers, lakes and associated flora and fauna. The provisions of
this Act may be applied in the management of the project.
The Forestry Services Act, 2005
The Act led to the establishment of Kenya Forest Service which is charged with management of
forests in consultation with the forest owners. The body enforces the conditions and regulations
pertaining to logging, charcoal making and other forest utilization activities.
To ensure community participation in forest management, the service collaborates with other
organizations and communities in the management and conservation of forests and for the
utilization of the biodiversity. Section 43 subsection 1 provides that if mining, quarrying or any
other activity carried out in the forest, shall, where activity concerned is likely to result in forest
cover depletion, the person responsible shall undertake compulsory re-vegetation immediately
upon the completion of the activity.
Occupational Safety and Health Act, 2007
Before any premises are occupied, or used a certificate of registration must be obtained from the
Director of Occupational Safety and Health Services. The Act provides for the health, safety and
welfare for employees at workplaces. This shall be considered at the construction,
implementation and decommissioning phases of the project.
The Traffic Act Chapter 295 Laws of Kenya
This Act consolidates the law relating to traffic on all public roads. The Act also prohibits
encroachment on and damage to roads including land reserved for roads.
Agriculture Act Cap 318 Laws of Kenya
The Agriculture Act promotes and maintains a stable agriculture, to provide for the conservation
of the soil and its fertility and to stimulate the development of agricultural land in accordance
with the accepted practices of good land management and good husbandry.
35
Part VI provides guidelines for the construction of schemes for land preservation and land
development. Every draft scheme prepared shall consist the area of the land to be affected by the
scheme, description of the works proposed to be executed in pursuant to the scheme and the
estimated cost of preparing and carrying out the scheme.47 The National Assembly must approve
every scheme and the Minister for Agriculture publishes it on the Kenya Gazette. Persons
affected by the scheme may be compensated.
The Timber Act, Cap 386 Laws of Kenya
The Timber Act provide for, inter alia, effective control of the sale and export of timber, grading
inspection and marking of timber; and control of the handling of timber in transit. The Chief
Conservator of Forests may authorize any person to be a grader and issue timber export permit.
Such authorizations shall last a period of not more than three years; however, the Chief
Conservator may revoke or suspend any authorizations. The role of the grader is to receive any
application for grading of any timber. The Grader shall mark the timber with a prescribed mark.
Building Code 196848
The Building Code sets out building By-Laws which any municipal or county council may adopt
in regulating building activities within the municipal or county council. Any person who wishes
to erect a building or develop land or changes the use of a building or land must comply with the
By-laws. The By-laws requires that any developer must apply and obtain approval of his/her
building plans before continuing with the construction. Before the approvals are issued the
relevant local authority should consider several things including accessibility, safety, proper
planning, sanitation and hygiene.
The Code stipulates the standard specification of buildings and the quality of building materials
to be used in different stages of construction. It provides guidelines on how to connect to
common facilities like sewer, electricity, water etc. For example, section 194 requires that where
47
Section 76 of the Agriculture Act.
48
The Local Government (Adoptive By-Laws) (Building) Order 1968.
36
sewer exists, the occupants of the nearby premises shall apply to the local authority for a permit
to connect to the sewer line and all the waste water must be discharged into sewers. The code
also guides on advertisements.
The Way Leaves Act Cap 292 Law of Kenya
According to the Way leaves Act cap 292, section 2, Private land does not include any land sold
or leased under any Act dealing with Government lands. Section 3 of the Act states that the
Government may carry any sewer, drain or pipeline into, through, over or under any lands
whatsoever, but may not in so doing interfere with any existing building. Section 8 further states
that any person who, without the consent of the Permanent Secretary to the Ministry responsible
for works (which consent shall not be unreasonably withheld), causes any building to be newly
erected over any sewer, drain or pipeline the property of the Government shall be guilty of an
offence and liable to a fine of one hundred and fifty shillings, and a further fine of sixty shillings
for every day during which the offence is continued after written notice in that behalf from the
Permanent Secretary; and the Permanent Secretary may cause any building erected in
contravention of this section to be altered, demolished or otherwise dealt with as he may think
fit, and may recover any expense incurred by the Government in so doing from the offender.
The Land Acquisition Act Chapter 295 Laws of Kenya
The Act provides for the compulsory acquisition of land from private ownership for the benefit
of the general public. Section 3 states that when the Minister is satisfied on the need for
acquisition, notice will be issued through the Kenya Gazette and copies delivered to all the
persons affected. Full compensation for any damage resulting from the entry onto land to do
things such as survey upon necessary authorization will be undertaken in accordance with
section 5 of the Act. Likewise where land is acquired compulsorily, full compensation shall be
paid promptly to all persons affected in accordance to sections 8 and 10 along the following
parameters:
a. Area of land acquired
b. The value of the property in the opinion of the Commissioner of land ( after valuation),
c. Amount of the compensation payable,
37
d. Market value of the property,
e. Damages sustained from the severance of the land parcel from the land,
f. Damages to other property in the process of acquiring the said land parcel,
g. Consequences of changing residence or place of business by the land owners,
h. Damages from diminution of profits of the land acquired.
Part II of the Act allows for the temporary acquisition of the land for utilization in promotion of
the public good for periods not exceeding 5 years. At the expiry of the period, the Commissioner
of Land shall vacate the land and undertake to restore the land to the conditions it was before.
Any damages or reduction of value shall be compensated to the landowners.
Government Lands Act, Cap 280 Laws of Kenya
The Government Lands Act provide for regulation of the leasing and other disposal of
government lands. All leases should be sold through public auction and shall not exceed 100
years. The President may, however, order for the land to be sold by other means like grant.
All grants issued by government land and transactions relating thereto are required to be
registered under the Act.
Land Control Act Cap 302 Laws of Kenya
Land Control Act provides for the control of transactions in agricultural land. The Minister for
lands is mandated to establish land control boards for every area designated as land control area.
One must obtain a land Control Consent in for every transaction involving sale, transfer, lease,
mortgage, exchange, division, partition or disposal of agricultural land or share of a private
company or co-operative society dealing in agricultural land. The Act also establishes the
Provincial Land Control Appeals Board to hear appeals emanating from land control boards and
Central Land Control Appeals Boards to hear appeals from the Provincial Land control Appeals
Boards.
38
Registered Land Act, Cap 300 laws of Kenya
The Registered land Act provides for the registration of title to land and for the regulation of
dealings in land so registered. The minister for lands may designate certain areas as registration
districts. Each district shall maintain a land registry. The Act introduces not only a land
registration system per se but also a code of substantive law which regulates all matters relating
to land ownership.
The Act introduces the highly advanced system of indexing of property showing all the
registered land within a particular area and all the information including size, title numbers, any
claims, encumbrances or burdens which may affect such land. The registration system under the
Registered Land Act is regarded as conclusively and final authority on the issue of ownership of
land.
Registration of Titles Act, Cap 281 Laws of Kenya
The Registration of Titles Act provides for the transfer of land by registration of titles. This
registration system recognizes and records a fact that is borne out on the ground and guarantees a
title as incapable of being defeated once duly granted.
Sectional properties Act of no 21 of 1987
The Sectional Properties Act provides for the division of buildings into units to be owned by
individual proprietors and common property to be owned by proprietors of the units as tenants in
common and to provide for the use and management of the units and common property. The
registration system introduced under the Act is not a distinct and independent registration system
because it is clear that any registration carried out under this regime should be deemed to be
carried out under the Registered Land Act registration system. It introduces a vertical dimension
to the issue of property issue. It makes it possible for an owner to own a property on a floor
without owning the ground on which the property stands.
Registration of Documents Act, Cap 285 Laws of Kenya
This particular piece of legislation was enacted in 1901 although its history dates way back to
1896 when the colonial administration then in place felt the need for a simple registration system
to be put in place for this country. Registration of documents systems was recommended in
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Kenya based on experiences that the British had had with it in Zanzibar. What the system
creates is a simple registration of deeds system which is reflected in the register of documents so
created. Under the system, any document can in fact be registered but especially those relating
to transactions in land such as government grants of land but otherwise there is no prohibition
against other documents not touching on land not being registered under it. The Act provides for
both an optional and obligatory registration regime. Section 4 of the Act provides that all
documents conferring or purporting to confer, declare, limit or extinguish any right, title or
interest in land must be registered.
Such registration must occur within one month after
execution, failure of which the same cannot be called in evidence or adduced in court without
first seeking and obtaining a leave of court to do so. Documents of a testamentary nature must
also be registered under the Act. Optional registration is addressed under section 5 which
provides for a non-compulsory registration so that it remains to be done at the instance of the
person seeking to register such documents. Examples of documents whose registration is not
compulsory but which may be registered and the insistence of the owner include Wills, Power of
Attorney, Building Plans etc. The most significant feature of this registration feature is the fact
that the records kept thereunder serves merely to show that the transaction in question took place
but it do not say anything about the validity or legitimacy of the transaction itself.
Land Titles Act, Cap 282 Laws of Kenya
The background to this particular registration regime lies in the doubts and the uncertainties that
shrouded the question of individual property ownership within the Coastal Region. The Land
Titles Act was enacted to remove doubts that had arisen in regard to titles to land by giving
recognition to any long established claims of ownership and adjudicate them so that claimants
would get recognition under the Act.
The Act was introduced with a view to creating a
registration system that would be applicable only to the coastal region.
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2.2.6 Taxation of Construction Industry
Transportation Taxes
The transit Toll Levy and the Road Maintenance Levy are the two main taxes collected by Kenya
Revenue Authority on the transport sector in Kenya. Both tolls comprise the Road Maintenance
Levy Fund which is administered by the Kenya Roads Board for the maintenance of public
roads. 49
Section 3 of the Road Maintenance Levy Act Cap 3 of 1993 empowers the Minister for
Transport, by Order published in the Gazette, to impose a Road Maintenance Levy on any or all
petroleum fuels consumed in Kenya. In 2006 by Legal Notice No. 46 of 2006, the Minister
published the Order. This levy constitutes the main source of revenue for the Kenya Road Board.
The main source of fuel in the construction industry in Kenya and indeed throughout the World
is fossil fuels.50 In Kenya, petroleum accounts for 22% of the total primary energy supply, 67%
of which is consumed in the transport sector while the rest is consumed mainly in industrial
processing and power generation.51 Most of the petroleum is used in the transport of construction
materials and general transport of labour and other transport needs. In order to limit the
environmental damage caused by fuel wastes, as well as generate income to state budgets, fuel
taxation is a widely used measure.
The Public Roads Toll act, Cap 407 Laws of Kenya also provides for the imposition transit toll
levies. The Minister may declare any public road or a portion, including any bridge or tunnel on
a public road, as a toll road and toll amount specified under part 1 of the 2nd schedule of the Act
shall be applicable.
49
Cyril J. Batalia , 2001,Enforcement of Laws and Regulations that Govern the Road Transport Industry in East
Africa, USAID/REDSO/ESA.
50
IEA (2006), World Energy Outlook 2006. International Energy Agency/OECD, Paris.
51
Aligula, E. M (2006) Policy Options for Reducing the Impact of Energy Tariffs in Kenya, National Economic and
Social Council, Final Draft.
41
Value Added Tax and Excise Duty
A value added tax (VAT) is a form of consumption tax. It is a tax on the estimated market value
added to a product or material at each stage of its manufacture or distribution, and ultimately
passed on to the consumer. VAT is levied on consumption of taxable goods and services
supplied or imported into Kenya and are collected by registered persons at designated points who
then remit it to the Commissioner. Registered persons only act as VAT agents in collecting and
paying the tax since the tax is borne by the final consumer of goods and services. 52 VAT was
introduced in Kenya in 1990 to replace sales tax by the Value Added Tax Act, Cap 476 Laws of
Kenya and the various regulations. The tax applies to among others construction materials/goods
and construction services. Goods and services may be taxed at an established rate mainly 16% in
Kenya, or zero rated or exempt.
Excise duty is an inland tax on the production for sale or sale of specific goods. In Kenya excise
duty is applicable to goods like Petroleum, beer, vehicles etc. Excises are typically imposed in
addition to another indirect tax like VAT. An excise duty is distinguished from VAT in three
ways:
a. an excise duty applies to a narrower range of products;
b. an excise duty is heavier, accounting for higher fractions (sometimes half or more) of the
retail prices of the targeted products;
c. an excise duty is specific (so much per unit of measure; e.g. so many cents per gallon),
whereas VAT is ad valorem, i.e. proportional to value (a percentage of the price in the
case of value added in the case of a VAT).
Income tax
Income tax is a direct tax charged on business income, employment income, rent income,
pensions, investment income and so on. The main types of income tax include Pay As You Earn
(PAYE), Corporation Tax, Withholding tax and Advance tax.
52
Kenya Revenue Authority Website; http://www.kra.go.ke/vat/aboutvat.html. Accessed on the 2 November 2010.
42
i. Pay As You Earn
PAYE is a method of collecting tax at source from individuals in gainful employment. The
employer deducts a certain amount of tax from his / her employee's salary or wages on each
payday then remit the tax to Kenya Revenue Authority. This relieves the employee from paying
taxes at the end of the year and shifts the responsibility to the employers. All employers in the
Construction industry are liable to pay this tax on behalf of their employers.
ii.
Corporation Tax
Corporation tax is a form of income tax that is levied on companies. Resident companies are
taxable at a rate of 30% while non - resident companies are taxable at a rate of 37.5%.
iii.
Withholding Tax
Withholding taxes are deducted at source from the following sources of income: Interest,
dividends, royalties, management or professional fees, commissions, pension or retirement
annuity, rent, appearance or performance fees for entertaining, sporting or diverting an audience.
Standards Levy
Pursuant to section 10 B of the Standards Act, Cap 496 Laws of Kenya, the Standards Levy
Order was gazzetted by the Minister for Industry vide Legal Notice No. 267 of 2nd June 1990 and
came into operation on 1st July 1990. According to the Order, each manufacturer shall pay to
KEBS a levy recoverable at source at the rate of (0.2%) of ex-factory price in respect of
Manufacture during each month, subject to a minimum of Kshs. 1,000 per month and to a ceiling
of Kshs. 400,000 per annum. If any person fails to pay the Standards Levy within the prescribed
time, a penalty at the rate of five (5) percent per month cumulative shall be imposed for each
month the amount due remained unpaid.
Customs Duty
Duties are chargeable on imports, exports and on specified goods and services. Customs duties
are charged under the East African Community Common External Tariffs.
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2.3
Contractual regulation
Construction contracts are governed by the general law of contract but some aspects of
constructions contracts are subject to statutory rules. Construction contracts may be defined as
any agreement under which a party carries out construction operations, arranges for other to
carry out construction operations (sub-contracts) or provides labour for carrying out construction
operations.53
All construction activities are founded on a contractual relationship that defines rights and
obligations of various players in the industry. Further it sets out the scope and cost of the project
to be constructed, allocate risks to which the project is exposed and to provide a clear statement
as to how the identified risks are to be dealt with and managed. A construction contract is a
legally enforceable agreement either oral or written between two or more parties negotiated for
the construction of assets such as bridges, building, dams, pipeline, road, tunnel etc.54 Parties to
the contract outline the terms of their agreement describing rights and obligations of each party,
the scope and cost of the project to constructed; and risk allocation and management. If a
contract is not performed; the remedy can be either the specific or actual performance of the
contract or a financial compensation.
Construction contracts in Kenya, like any contracts, are essentially founded and enforceable
under common law and applied to Kenya by the Law of Contracts Act, Cap 23 laws of Kenya. 55
One fundamental basis for contract under common law is the concept of freedom of contract.
Freedom of contract has been deemed the supreme facet of freedom since the beginning of social
intercourse. Freedom of contract in not, however, always balanced between the contracting
parties and as a result some injustices are committed. To address any injustices occasioned by
unbalanced bargaining power between the parties, the state and interest groups intervenes
through legislations and standard form contracts respectively.
53
Murdoch H. and Hughes W, Construction Contracts: Law and Management, 4 th ed. Canada, Taylor and Francis.
54
Krol J.P. 1993. Construction Contract Law, John Wiley & Sons, Inc. Canada.
55
See the Preamble and section 2 to the Law of Contracts Act, Cap 23 laws of Kenya.
44
In construction contracts the obligations and responsibilities of the contracting parties can be
extremely complex but to a large extent remain unchanged from one project to another. In such a
situation, the standard form contracts have been developed by various professional institutions in
order to make the contracts fair, just and equitable. In Kenya the Public Procurement Oversight
(PPOA)56 has developed numerous standard procurement documents with standard conditions of
contract to guide procurement of construction works. At the international level, the most popular
standard conditions of contract for the construction industry in Kenya are developed by the
International Federation of Consulting Engineers (FIDIC).57
2.4
Law of Torts and Construction
Apart from contractual regulation, common law has also developed the law of torts. A tort is an
unlawful act arising primarily from the operation of law and not from breach of agreement
between parties commission of a crime.58 They are civil wrongs which give rise to a legal
remedy in the form of an action for damages.59 Some of the common wrongs enforceable in the
construction industry in Kenya include negligence, nuisance, trespass and Ryland versus Fletcher
doctrine.
2.5
Rules of equity and construction
To some extend rules of Equity apply in regulating construction projects. Rules of equity were
evolved to correct the rigours of law when applied to individual cases. Some of the rules of
equity applicable to the construction industry include: regard must be paid to the intent and not
the form, specific performance and injunctions.
56
The Public Procurement and Disposal Act, 2005 created the Public Procurement Oversight Authority (PPOA)
charged with the regulation and development of public procurement in Kenya.
57
FIDIC, the International Federation of Consulting Engineers (the acronym stands for the French version of the
name) represents globally the consulting engineering industry. As such, the Federation promotes the business
interest of firms supplying technology-based intellectual services for the built and natural environment.
58
59
Tyas J.M.G, (1982). Law of Torts by (4th Ed.) M & E Handbook, London. Pitman Publishing Ltd.
Mohit Saraf, n.d. Law of Torts and the Construction Industry, New Delhi and Mumbai, Luthra and Luthra Law
offices.
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3.0
CONCLUSION
The construction industry plays a major role in social economic development of any society. To
ensure sustainable development of the industry and assure quality standards the area must be
well regulated. This paper has outlined some of the laws that are applicable to the construction
industry in Kenya. Players in the construction industry are required to abide by the provisions of
the outlined regulatory framework.
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