Kenya demands back Sh4bn from China contractor after JKIA deal is cancelled

What you need to know:

Transport secretary James Macharia says Catic will have to pay back Sh4 billion as a refund on what the government had paid them before the contract was cancelled.
Mr Macharia said no work had been done at the airport despite Catic receiving money from the State.
There are reports the Chinese firm is demanding billions of shillings as compensation for the botched contract.

Kenya is demanding a refund of Sh4 billion from a Chinese firm whose contract to build the second terminal at the Jomo Kenyatta International Airport (JKIA), Nairobi was cancelled amid fears the botched deal could cost taxpayers hundreds of millions of shillings in compensation.

Kenya has been in talks with the China National Aero-Technology International Engineering Corporation (Catic) over the past month and negotiations are expected to end in two weeks.

Transport secretary James Macharia says Catic will have to pay back Sh4 billion as a refund on what the government had paid them before the contract was cancelled.

Mr Macharia said no work had been done at the airport despite Catic receiving money from the State amid reports the Chinese firm is demanding billions of shillings as compensation for the botched contract.

“Catic must reimburse what we had paid them. The negotiations are ongoing and we expect to conclude in the next two weeks,” said Mr Macharia.

The Kenya Airports Authority (KAA) scrapped plans for a new terminal building at JKIA, whose construction President Uhuru Kenyatta launched in December 2013, due to financial pressures and excess capacity caused by recent upgrades to existing facilities.

READ: Macharia stops the building of Sh56bn terminal at JKIA

Catic had been selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year, and the cancellation signals a legal battle over compensation.

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

Mr Macharia insists that the cancellation of the greenfield was a good decision as the current expansion will provide enough capacity.

“Expansion and modernisation of the existing terminals will offer a capacity of up to 14 million, which is the airport’s projection for 2025,” he said.

Terminal 1E and 1A started operations in March with KAA saying the two facilities have the capacity to handle 2.5 million passengers annually.

The CS pointed out that the greenfield project would have cost Kenyans more than Sh100 billion as compared to the quoted amount of Sh50 billion.

The contract was to be financed by a loan from the African Development Bank (AfDB).

The greenfield project was to turn the JKIA into Africa’s largest aviation facility in line with Kibaki administration’s vision of making Nairobi the region’s air transport hub.