Tycoons tied to Chinese contractors face probeMonday February 07 2022
Parliament has opened an inquiry that could unmask the local directors or beneficiaries of Chinese companies undertaking multi-billion shilling projects in key sectors of the Kenyan economy.
The inquiry will cover all contracts that the Jubilee administration has awarded to Chinese State-owned companies or those linked to China since it came into power in 2013.
It promises to lift the veil on the overnight millionaires the projects have created during the tenure of President Uhuru Kenyatta amid speculation that rich and powerful Kenyans have minority ownership in local special-purpose operating firms created by the China-based firms for their projects.
The investigations target contracts awarded to the Chinese firms that undertook or are undertaking projects in the lucrative transport, infrastructure, housing, and urban development.
The inquiry follows a request by Garissa Township MP Aden Duale, who is also seeking to know the status of contracts awarded to China-linked or China State-owned firms in the energy and ICT sectors.
National Assembly Speaker Justin Muturi has directed the Transport committee to commence investigations into the matter.
Key infrastructural projects which were undertaken by Chinese firms include the Sh427 billion standard gauge railway (SGR), the Sh67 billion Nairobi Expressway, the Sh40 billion new Mombasa oil terminal and the multi-billion shilling Port of Lamu.
Mr Duale, who fell out with President Kenyatta after being ousted from the all-powerful Leader of Majority in the National Assembly seat, has taken the battle to Mr Kenyatta by targeting deals that were largely awarded through the Transport ministry.
“In line with Article 95 (5) (b) of the Constitution, I do hereby request a statement from the Cabinet Secretary for Transport, Infrastructure, Housing, and Urban Development on the names and local Directors/and or representatives of all China State-owned or Chinese-linked companies undertaking projects in the Transport, Infrastructure, Housing, and Urban Development,” he said in the statement.
“This should include a breakdown of contracts awarded.”
Mr Duale wants the State to disclose the names, directors and local representatives of Chinese companies awarded construction projects.
A handful of the China-based firms have closed deals worth Sh1 trillion under the Jubilee administration.
China Communications Construction Co (CCCC) and its subsidiary China Road and Bridges Corporation (CRBC) hold the bulk of the road and railway contracts, earning about Sh777.1 billion.
Others are China Wu Yi, Synohydro, Jiangxi Engineering, China Railways 21 Bureau Group and Third Engineering Bureau of China City Construction Group that have earned hundreds of billions of shillings for projects across the country.
Local companies like S.S Mehta, H. Young, and Seco have been pushed to the periphery as Chinese firms secure lucrative road, rail, and electricity contracts.
Mr Duale was a key insider in Mr Kenyatta’s government having served as the National Assembly Leader of Majority for seven years and pushed through critical government business from 2013 to 2021. He was dewhipped from the post due to perceived allegiance to Deputy President William Ruto.
The Transport docket, held by Cabinet Secretary James Macharia, awarded mega infrastructural projects to Beijing-linked firms. The projects were backed by funding from the Chinese Exim Bank.
Local contractors reckon that political influence has played a role in the Chinese firms clinching mega State-backed contracts.
Chinese contracts have claimed several casualties in graft cases, including former Transport Cabinet Secretary Michael Kamau, former Infrastructure Principal Secretary Nduva Muli, Mohammed Swazuri, the chairman of National Land Commission, and Atanas Maina, former Kenya Railways Corporation MD.
The US is the leading aid donor to Africa but China surpassed it as a trade partner in 2009.
Beijing has pumped billions into infrastructure projects in Kenya, though critics say the use of Chinese firms and labour undermines their value.
The US says Chinese investments “do not bring significant job creation locally” and has criticised how Beijing structures loans to African government.
Mr Kenyatta’s administration has largely taken loans from China since 2014 to build roads, bridges, power plants and the SGR.
Beijing is now one of Kenya’s biggest foreign creditors, having lent Sh797.8 billion as at December. The terms of China’s loan deals with developing countries are unusually secretive and require borrowers to prioritise repayment to Chinese State-owned banks ahead of other creditors. A cache of such contracts was revealed in an earlier report by Reuters.
The dataset — compiled over three years by AidData, a US research lab at the College of William & Mary — comprises 100 Chinese loan contracts with 24 low- and middle-income countries.
It uncovered several unusual features, including confidentiality clauses that prevent borrowers from revealing the terms of the loans and informal collateral arrangements that benefit Chinese lenders over other creditors.
In addition to unearthing the local directors or representatives, Mr Duale wants the House team to compel Mr Macharia to disclose the number of contracts awarded to each of the Chinese-linked firms and the amount paid from the 2013/14 financial year to date.
The House team has also been tasked to ensure that Mr Macharia provides a breakdown of contracts awarded by all the State agencies in the ministry Transport from 2013 to date.