Home Business Kenya to pay China firm billions for undone JKIA Greenfield job

Kenya to pay China firm billions for undone JKIA Greenfield job


Economy

Kenya to pay China firm billions for undone JKIA Greenfield job


terminal

Terminal 1A at Jomo Kenyatta International Airport (JKIA) in Nairobi. The Greenfield terminal was to handle 20 million passengers or three times the existing capacity. PHOTO | SALATON NJAU | NMG

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Summary

  • The talks mark a reversal from Kenya’s earlier position that the Chinese firm should refund Sh4 billion downpayment for the project that never took off.
  • The government has since 2016, when the JKIA contract was cancelled, argued that no work was done at the airport despite Catic receiving money from the State.

Kenya has opened compensation talks with a Chinese firm whose contract to build the second terminal at the Jomo Kenyatta International Airport (JKIA) was cancelled amid fears a standoff could cost taxpayers hundreds of millions of shillings.

The Kenya Airports Authority (KAA) board has approved negotiations with China National Aero-Technology International Engineering Corporation (Catic)—which wants Sh22 billion for termination of its contract.

The talks mark a reversal from Kenya’s earlier position that the Chinese firm should refund Sh4 billion downpayment for the project that never took off.

The government has since 2016, when the JKIA contract was cancelled, argued that no work was done at the airport despite Catic receiving money from the State.

“The KAA board has approved negotiations of the contractor’s claim and has constituted a team to do so, preparations on the talks are at the moment going on,” said a KAA director who sought anonymity.

“The team is supported by external legal and technical experts. Preparations for negotiations are on-going.”

The tender was cancelled in March 2016 after Sh75 million had been spent on a ground-breaking ceremony that was presided over by President Uhuru Kenyatta on May 23, 2014.

Some Sh129.9 million was paid to a consultant, Louise Berger, while PriceWaterHouseCoopers got Sh7 million for its role in securing the financier of the project.

Documents tabled before the Public Investments Committee (PIC) show that Catic wants the KAA to pay it Sh2 billion for the preparation of bill of quantities (BOQ), Sh2.4 billion in extra costs and Sh708.2 million being 16 per cent value added tax (VAT).

The Chinese contractor has slapped the KAA with a Sh500 million claim in interest and penalties for delayed payment of VAT charged by the Kenya Revenue Authority (KRA).

It is seeking a further Sh5.6 billion, comprising balance of the contract for BOQ, extra cost claim, VAT and interest and penalties, bringing the total claim to Sh17.6 billion.

Catic had been selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year.

The Chinese contractor was said to have dug the project foundation and mobilised 90 percent of the required equipment.

Former managing director Jonny Andersen claimed that they did not expect to pay anything to the Chinese company, following legal advice they received from then Attorney-General Githu Muigai indicating that the contract was void.

“As the custodian of the Kenya Airports Authority, I stand by the position that the contract was illegal and I want that money paid to them back,” Mr Andersen is reported to have told Parliament in 2019.

However, the MPs faulted Prof Muigai for offering conflicting opinions. In February 2012, he advised then KAA’s acting managing director Samuel Gichuki against terminating the procurement of the Chinese company for the work.

The construction of the new runway started to run into problems days after its launch amid claims its cost was inflated by up to Sh9 billion.

Some KAA’s top managers were sent on compulsory leave to pave the way for investigations.

CHECK-IN COUNTERS

The Ethics and Anti-Corruption Commission later cleared the multi-billion shilling project. The terminal would among other things have 50 international check-in counters, eight air bridges and 45 aircraft parking stands.

The KAA was to contribute 15 percent of the required cost, which was equivalent to Sh8.4 billion, while the balance of Sh48 billion was to come from other financiers, including the China Exim Bank, Africa Development Bank (AfDB), American Consortium AAE and Standard Bank Group.

AfDB said the new runway project would involve building a 4.9 km runway and associated infrastructure such as extra parking slots for aircraft and an air rescue firefighting unit.

In addition to the national carrier Kenya Airways, which uses JKIA as its hub, the airport also serves other airlines such as Emirates, Turkish Airways, British Airways and Ethiopian Airlines.



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