Treasury to reimburse NCA, NEMA after scrapping construction levies

The government is working out a formula to fund state agencies affected by the scrapping of construction levies.

The National Construction Authority (NCA) and the National Environment Management Authority (NEMA) are the hardest hit institutions with the government now expected to factor it lost revenue in the budgetary allocations.

Speaking to Citizen Digital, Transport and Infrastructure Secretary James Macharia said the funding mechanism would ensure the two institutions run optimally but will also be expected to generate alternative revenue streams.

“We have calculated for each institution how much they require to keep on running on a normal basis without having excess funds. We have totaled the figure which has been approved by cabinet and will be provided by the exchequer,” Mr Macharia said.

According to CS, NCA for instance requires Sh1.7 billion for its operations in a year and that is what will be allocated in the next financial budget.

The National Construction Authority charges 0.5 percent of the property value for projects above Sh5 million, which developers had said was prohibitive.

Developers also paid a Sh10,000 or 0.1 percent of the project value to NEMA for environmental approvals.

Add to these the multiple levies charged by counties before any project is approved.

The environmental authority had already budgeted to collect Sh800 million from audit approvals in the current financial year.

Mr Macharia however said it was not all doom especially for NEMA, which has other income lines.

“NEMA has other obligations and mandates to fulfill outside the construction industry which have not been affected by this decision,” he said.

The directive is expected to take effect immediately with concerned ministries working to strengthen the regulations.

“We have to find mechanisms to ensure we comply with the cabinet decision which is not just good for the sector but the country as a whole in efficiency and ease of doing business,” Mr Macharia said.

Treasury Cabinet Secretary Henry Rotich had scrapped the levies in the 2016/17 budget but is yet to be gazzetted.