Chinese Kwale road project flops

A China-led highway project in Kwale, reportedly set to cost a mind-boggling $2.6 billion (about Sh263 billion), has been suspended after one of the Chinese builders said it had not received an advance payment from the Kenyan contractor.

Shanghai-listed Guizhou Transportation Planning Survey and Design Academic Co. said in a statement Tuesday that it will back out of the contract after the project developer, Shelter Solution, failed to make the advance payment within the agreed deadline.

“Since the project was signed, it has been affected by various factors. The financing process of the owner of the project is not up to expectations. If the follow-up project cannot be successfully financed, the project will be temporarily suspended,” the State-owned firm said in a regulatory notice.

The Guizhou Transportation consortium submitted the winning bid to build a 1,073-kilometre highway in Kwale. It’s part of the work was worth $709 million (about Sh71.9 billion) and was supposed to see it provide survey, engineering and design services.

The work was a typical engineering, procurement and construction (EPC) contract, which has been a traditional way for Chinese infrastructure builders going to Africa.

In such EPC projects, the Chinese contractor is usually responsible for all activities, including design, procurement and construction. The host company provides financing guarantees, often using third-party sources to provide the actual funds.

Shelter Solution was set up in 2013 by the Kwale county government as an engineering infrastructure developer.

Guizhou Transportation said in the statement that the highway project could still continue if the Kenyan developer can fulfil the advance payment requirement.

The two-phase project was supposed to take two years effective 2017.