This decision was not random. It was a direct reaction to scandals like the 2013-2019 Zakhem International Construction (ZIC) scandal, where the Ksh48 billion Mombasa-Nairobi pipeline ballooned to over Ksh52 billion.

In this Article:

• A Brief History of the Zakhem Scandal

• How Joint Ventures Are Used as a "Local Front"

• KPC’s Bold New Rules and the Push for Procurement Reform

• Pushback Against the Ban

• What’s Next for Kenya

A BRIEF HISTORY OF THE ZAKHEM SCANDAL

ZIC, which built the original pipeline in the 1970s, promised a modern, reliable system in 18 months. Instead, it became a nightmare.

Costs ballooned to over Sh52 billion by 2018, four years later than planned.

The pipeline itself has been a letdown.

Within a year of operation, it leaked in Makueni’s Kiboko area, raising environmental concerns.

Worse, it became a target for fuel siphoning, with a sophisticated syndicate in Mlolongo using valves suspected to have been installed during construction.

ZIC blamed KPC for ignoring advice to install a leak detection system, costing Sh2 billion extra to fix, per the National Assembly’s Energy Committee. KPC fired back, saying ZIC’s foreign welders from Nigeria and India did shoddy work, causing flaws.

Legal battles erupted, with ZIC suing for Sh13.26 billion over unpaid dues, while a 2021 High Court order demanded KPC pay Sh5 billion.

The National Treasury paused payments for investigations, and Auditor General Nancy Gathungu warned KPC risked losing billions more.

From the beginning, there have been allegations of corruption, with whistleblowers claiming KPC insiders took bribes to inflate costs. The Ethics and Anti-Corruption Commission (EACC) and Directorate of Criminal Investigations (DCI) are probing, but no convictions yet.

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HOW JOINT VENTURES ARE USED AS A "LOCAL FRONT"

ZIC wasn’t acting alone, they had a local partner.

They used a common tactic where a foreign firm, looking to win big infrastructure contracts in Kenya, partners with a locally registered company to act as the face of the deal.

It’s like a foreign chef who wants to open a restaurant in Nairobi but needs a local partner to get the license. So, they team up with a Kenyan who holds the permit, while the chef runs the kitchen behind the scenes.

Here’s how it works for building projects:

The Local Firm (e.g. Azicon Kenya Limited):

• Acts as the face of the company

• Handles paperwork and bidding with Kenyan registration.

• May have insider connections.

• Gets a small cut (10-20%).

The Foreign Firm (e.g. Zakhem International):

• Brings money, skills, or equipment, doing most work.

• Hires foreign workers (e.g., ZIC’s welders).

• Takes most profits, sometimes abroad.

This setup helps the foreign firm meet tender requirements, gain trust from government or parastatals like the Kenya Pipeline Company (KPC), and navigate local regulations.

Foreign firms love this tactic because it’s a low-risk way to tap Kenya’s infrastructure boom (think roads, pipelines, or dams) without fully committing to the local market.

For Kenyans, this tactic means higher fuel prices, fewer jobs, and a weaker economy. KPC’s new rules aim to change that.

KPC’S BOLD NEW RULES & THE PUSH FOR PROCUREMENT REFORM

Here’s what this specific tender requires:

• Only 100% Kenyan-owned firms can apply.

• Subcontracting is capped at 25%, and must also go to Kenyan firms.

• The project is split into three lots: Kisumu (KSh2.73 billion), Eldoret (KSh2 billion), and Nakuru (KSh119.6 million), with high bid securities to ensure only serious local contractors apply.

However, these rules only apply only to this one KPC tender. They are not (yet) national policy, but they may be a sign of what’s coming.

Proposed amendments to the Public Procurement and Asset Disposal Act would:

• Reserve all government contracts under KSh1 billion for Kenyan-owned firms only.

• Ban foreign firms from bidding on these smaller projects.

• Allow foreign participation in contracts over KSh1 billion, but only through joint ventures where at least 30% of the work goes to local firms.

If passed, these changes would formalize what KPC is testing: a new procurement framework designed to build local capacity, reduce capital flight, and make sure public contracts truly benefit the Kenyan economy.

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PUSHBACK AGAINST THE BAN

They claim joint ventures bring technical expertise and financial muscle that local firms might lack for such complex projects.

On April 7, 2025, High Court Judge Bahati Mwamuye lifted a temporary freeze on the tender, but a final ruling looms on July 3, 2025.

Posts on X reflect the public’s split: some hail KPC’s stand as a step toward economic sovereignty, while others question if local firms can handle the job without foreign know-how.

WHAT’S NEXT FOR KENYA

Whether KPC’s policy becomes the new normal, or a one-off stand, remains to be seen.

But for now, it’s a powerful case study in how countries across Africa are beginning to rewrite the rules of engagement. Not just asking foreign firms to “partner” with locals, but demanding a seat at the head of the table.

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P.S.

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