Economy

Sh394bn of China funded projects linked to graft

sgr

Standard Gauge Railway trains at the Port of Mombasa. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • A study by a top US research university suggests Kenya is among the top countries where implementation of Chinese government-funded projects has been slowed down by graft.
  • The findings are part of a report by AidData, an international development research laboratory based at the College of William & Mary, covering some 13,427 projects worth $843 billion (Sh93.23 trillion) funded by the Chinese.
  • Projects implemented under the BRI in Kenya include the expansion of the Mombasa Port, the construction of the Lamu port, the installation of safe city surveillance systems in Nairobi and Mombasa.

China-funded infrastructure projects in Kenya worth nearly Sh394.27 billion have been dogged by claims of graft and financial impropriety, the third highest value of tainted ventures being implemented globally under Beijing’s Belt and Road Initiative (BRI).

A study by a top US research university suggests Kenya is among the top countries where implementation of Chinese government-funded projects has been slowed down by graft allegations such as misuse of funds, collusion, inflation of costs, and kickbacks.

The findings are part of a report by AidData, an international development research laboratory based at the College of William & Mary, covering some 13,427 projects worth $843 billion (Sh93.23 trillion) funded by the Chinese across 165 countries over 18 years.

"We find that 94 percent of collateralised lending from official sector institutions in China between 2000 and 2017 supported countries 85 scoring below the global median on the WGI (Worldwide Governance Indicators) Control of Corruption," the researchers said in the ‘Banking on the Belt and Road’ report.

"These patterns in the dataset reinforce a key point: Beijing is more willing to bankroll projects in risky countries than other official creditors, but it is also more aggressive than its peers at positioning itself at the front of the repayment line (via collateralisation)."

The report does not specify the affected projects.

Projects implemented under the BRI in Kenya include the expansion of the Mombasa Port, the construction of the Lamu port, the installation of safe city surveillance systems in Nairobi and Mombasa, and the construction of the standard-gauge railway (SGR).

Kenya has for years been in the global spotlight for corruption largely in public procurement. Past estimates by the Ethics and Anti-Corruption Commission (EACC) show that as much as a third of the country’s annual budget is lost to graft.

This translates to about Sh900 billion every year, or Sh2.45 billion daily, given the country’s latest annual budget of about Sh3 trillion.

President Uhuru Kenyatta also recently acknowledged that corrupt officials siphoned about Sh2 billion daily from public coffers.

The researchers at the US University have flagged three China-funded projects in Kenya valued at $3.552 billion (Sh394.27 billion) whose implementation has faced claims of corruption and financial malpractice.

This is the highest value in Africa followed by Zambia’s $585 million (Sh64.93 billion), but dwarfed by Malaysia’s $14.541 billion (about Sh1.61 trillion) in two projects and a project in Venezuela worth $3.901 billion (Sh433.01 billion).

A notable example of a mega China-funded project that was marred by claims of graft is the August 2017 deal for the supply of computed tomography (CT) scanners to Kenyatta National Hospital, Moi Teaching and Referral Hospital, and 34 county hospitals.

The project was 80 percent funded by China Development Bank with a $78.792 million (Sh8.74 billion) loan.

The National Assembly’s Public Accounts Committee opened a probe into the project on allegations the equipment had been overpriced fourfold with officials at Health and National Treasury ministries as the beneficiaries.

"By identifying projects that faced claims of corruption or other types of financial wrongdoing, AidData is not rendering judgment about the veracity of the underlying claims," the researchers wrote in the ‘Banking on the Belt and Road’ report.

"Nor is AidData implying that the financiers or implementers of these projects were necessarily responsible for financial wrongdoing."

China has in two decades established itself as a financier of first resort for many low- and middle-income countries, providing record amounts of international development finance.

Beijing’s lending and grant-giving activities, however, remain shrouded in secrecy, the researchers reckon, despite China outpacing the US in overseas development finance programmes, committing about $85 billion (Sh9.44 trillion) every year.

Generally, the researchers found 30 infrastructure projects valued at about $30 billion under China’s BRI initiative to have encountered graft allegations.

They are concentrated in six countries – Pakistan (four projects), Kyrgyz Republic (four), Indonesia (three), Kenya (three), Zambia (three), and Papua New Guinea (three).

China’s influence on Kenya’s infrastructure development started in earnest with the construction of the Thika Superhighway between January 2009 and November 2012 at a cost of nearly Sh32 billion during the last term of President Mwai Kibaki.

Past analysis of the country’s investment landscape by the United Nations Conference on Trade and Development (UNCTAD) suggested a considerable number of big-ticket investors have been partly discouraged from investing in Kenya by "growing problems of corruption and governance".