Kenya: Chinese Firm Demands Sh17 Billion Over Aborted JKIA Deal

Though taxpayers paid a Chinese firm Sh4.2 billion for no work done on a new terminal at Jomo Kenyatta International Airport (JKIA), they may have to fork out billions more.

The contractors -- Anhui Construction Engineering Group Ltd (ACEG), in a joint venture with China Aero-Technology International Engineering Corporation (CATIC) -- are demanding Sh17 billion in compensation for the cancellation of their contract.

The money is the cumulative amount as of November 2017, but the figure is much higher now. The Sh64 billion Greenfield contract was terminated in March 2016.

Kenya Airports Authority (KAA) executives, led by Managing Director Jonny Andersen, on Thursday told the National Assembly's Public Investment Committee that they will not pay.

INVALID CLAIM

Mr Andersen told lawmakers that the authority had instead made a counterclaim for the Sh4.2 billion already paid. He added that Transport Cabinet Secretary James Macharia had taken up the matter and was in talks with the company.

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Former Attorney-General Githu Muigai had also objected to the compensation demand. In his advisory opinion on the contract review, Prof Muigai, in a letter tabled before the committee on Thursday, said that when a contract is terminated, the contractor has no rights and obligations to demand compensation.

"Accordingly, ACEG-CATIC cannot claim or maintain an action against KAA for compensation against any works done pursuant to an illegal contract. Similarly, KAA cannot benefit from the works done by ACEG-CATIC pursuant to the void contract.

"It is, therefore, advisable that parties engage ... without prejudice to settle on a gratis basis any costs incurred thus far, and KAA should ensure that it receives a warranty from the contractor that it will make no further claims on the contract," Mr Muigai said.

SCANDAL

The committee, chaired by Mvita MP Abdullswamad Nassir, raised concerns that Kenyans may have to pay billions of shillings for a grassy field.

"This is really interesting and is turning out to be a worse scandal than even Anglo Leasing," said committee vice chairman Ahmed Abdisalan Ibrahim.

"The Chinese company -- Anhui Construction Engineering Group Ltd -- needs to be investigated. So much money has been paid and there is nothing to show for it. This is pure fraud," added Kirinyaga Woman Representative Purity Ngirici.

Besides the Sh4.2 billion, another Sh75 million had been paid for the ground-breaking done by President Uhuru Kenyatta in December 2013. Also paid were consultants (Sh129 million) and PricewaterhouseCoopers (Sh7 million).

CONTRACT BREACH

The proposed terminal, whose cost was put at Sh64,745,354,325, was to have a floor area of 178,000 square metres with a capacity for 8.7 million passengers a year.

But KAA terminated the contract and asked Anhui to vacate the site.

In a letter to the company, KAA cited four instances of breach of contract. Notable among these was that it excluded 16 per cent VAT from the contract price and that the firm began working before financing was secured for the project, flouting request-for-proposal rules.

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