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The East African : January 27th 2014
4 CHINESE ONSLAUGHT The EastAfrican NEWS JANUARY 25-31,2014 Probing the dragon: China Inc runs into ethics barrier With China-linked p≥ojects showing a penchant fo≥ att≥acting cont≥ove≥sy, the Chinese way of doing business in Af≥ica is on t≥ial By WASHINGTON AKUMU The EastAfrican key Chinese-funded project in a parliamentary probe in Kenya, the former country’s dominance in the battle for regional infrastructure contracts now faces a severe integrity test. While the probe has cen- W tred on the propriety and legality of the procurement process for the standard gauge railway line from Mombasa to Nairobi, its cost and whether Kenyan taxpayers will be getting value for their money if the project goes ahead, what is really on trial is the Chinese way of doing business in Africa. And with the rising number of China-linked projects in the region showing a penchant for attracting controversy and accusations of “not playing by the rules,” several questions are inevitable: Is the open partiality governments have shown for Chinese contractors wise? Are citizens getting value for money in these mega infrastructure projects, or are the projects merely creating new frontiers for Chinese labour, capital and construction materials, in the process opening avenues to exploit the ith a sensational claims being made against a region’s natural resources? What is the level of complicity of the ruling elite and other rent-seekers in all this? In the case of Kenya’s big- gest ever infrastructure job, the government handed the SGR contract to China Road and Bridge Corporation in what the bureaucrats describe as a “government to government” deal, awarded without competitive bidding. Even then, Attorney-Gen- eral Githu Muigai has differed with his colleagues, Transport and Infrastructure Cabinet Secretary Michael Kamau and Principal Secretary Nduva Muli, echoing critics’ views that even in the case of government-togovernment the Public Procurement and Disposal Act, which calls for open tendering, still applies. Firm blacklisted It will be interesting to see what direction the project takes at the end of the probe by the Public Investment Committee, considering that some preliminary works have already started. However, the deals signed between Kenya Railways and CRBC — which is a subsidiary of CCCC (China Communications Construction Company), a firm blacklisted by the World Bank in 2009 over fraud in a project in the Philippines — are subject to the AG’s approval. The other major point of contention in the Kenyan SGR project is the cost, which critics say has been inflated without justification, ostensibly due to variations to the original design. It does not help the gov- ernment’s case that its officials have erected a virtual Tower of Babel over the issue before the PIC, quoting different figures. While Mr Kamau and Mr Muli have stuck to Ksh327 billion ($3.27 billion) as the total cost of the project, Treasury Cabinet Secretary Henry Rotich has introduced a new figure into the discussion, Ksh447 billion ($5.13 billion), after factoring in elements such as interest, compensation for land, insurance, management and commitment fees. Uganda must be watching transactions, the events in Kenya keenly. Its own recent dalliance with Chinese contractors, who seem to be snapping up all the big infrastructure jobs in Kampala, has not been without controversy. The high-stakes battle for the SGR project in Uganda saw at least three different Chinese companies sign separate memoranda with different arms of government. The issue had to be re- ferred to the president’s office for determination in November last year. The firms in question were China Communications Construction Company (CCCC), China Civil Engineering Construction Cor- poration (CCECC) and China Harbour Engineering Corporation (CHEC). To untangle the mess cre- ated by the firms and their promoters in the government bureaucracy, it was suggested that they form a consortium and share out the project. According to a source fa- miliar with the high-level discussions, the CCCC, which is the parent company of the firm contracted by Kenya to build the Mombasa-Nairobi line, has now been put out of the race due to its “lack of background” in rail building, amid fears that it would have to sub-contract, potentially inflating the cost. The firm is also said not to have done a good job on the 51km Entebbe Express Highway. The EastAfrican has learnt that the tide seems to have changed in favour of CHEC for the Kampala-MalabaSoroti-Gulu-Juba segment of the SGR, following highlevel consultations in which US lobbyist Rosa Whitaker is understood to have played a key role. On January 22, Ms Whitak- China has been very strategic in how it has supported its companies to look for investments in Africa.” Julius Ngonga, Ernest & Young er led a delegation of American, British and Chinese businessmen to State House Entebbe. Twenty four hours later, it was announced that British civil contractor Mott MacDonald would work with CHEC to build a new 670km SGR line running from Kampala to Pakwach and Nimule on the border with South Sudan. While this gives provides some clarity on the project finally getting off the ground, it does not address lingering questions about CHEC’s lack of background in railway construction and the cost implications of it sub-contracting the work to Mott Macdonald. Perhaps it is only in Tan- zania that projects involving Chinese funds or contractors have not generated major controversy recently. The latest big contract there, the construction of a $1.2 billion gas pipeline from Mtwara to Dar es Salaam, was awarded to three Chinese companies in July last year: China Petroleum Technology Development Corporation, Petroleum Pipeline Engineering Bureau and China Petroleum Pipeline Engineering Corporation. After Dar put down violent demonstrations by locals who wanted the refinery and other key installations lo- Cont≥ove≥sy dogs fi≥m building standa≥d gauge ≥ailway line By WASHINGTON AKUMU The EastAfrican LIKE ITS peers with whom it has been engaged in a bare-knuckled fight for mega infrastructure projects in the region, China Road and Bridge Corporation is basically an appendage of a government department. According to the firm’s website, it “grew out” of the Foreign Aid Office of China’s Ministry of Communications. Corporate restructuring It is reported to have become a wholly owned subsidiary of China Communications Construction Company Ltd (CCCC), the company banned by the World Bank, after a major corporate restructuring in 2005. On the site, the firm is described as “one of the four large stateowned companies in China, which earliest (sic) entered the international project contracting market mainly focuses on the contracting of such projects as roads, bridges, ports, railways, airports, tunnels, water conservancy projects, municipal works and dredging works both at home and abroad.” The firm flaunts its credentials as the builder of “award winning and highly acclaimed landmark” projects. Reconstruction and expansion It lists Tajikestan-Uzbekistan Highway, reconstruction of ChinaPakistan Karakoram Highway, reconstruction and expansion of Mauritanian Friendship Port, Serbia Zemun-Borca Bridge and so on. Interestingly, no railway line makes this list, which perhaps explains why the Uganda government is not keen to hand it its SGR project. A statement by the Kenyan Min- istry of Transport and Infrastructure, however, cites some three lines said to have been built by the firm in China. CRBC has offices in more than 50 countries and regions in Asia, Africa, Europe and America, including Nairobi.
January 20th 2014
February 3rd 2014