Tag Archives: PRC

Grand railroad corruption: Kenya’s Daily Nation drops expose of grossly inflated pricing and alarming details from “secret” SGR contracts

Posted on by
Reply

A vital “must read” from the Daily Nation confirms that in spite of Kenyan president Uhuru Kenyatta’s promise to release the contracts for the truncated Standard Gauge Railroad project, the Government of Kenya has been withholding the documents concerned about meeting public records obligations. It is said that Kenya signed the undertakings with Chinese state-owned corporations rather than the Chinese State as such, and that the documents include secrecy provisions that the lawyers are interpreting to conflict with Kenyan law as to the Governments obligations to its own citizens for public contracting.

The story details item after item of hugely inflated prices for components such as generators, supplies, machinery and equipment:

This explains how Kenya ended up paying two times more for a diesel train than what Tanzania negotiated for an electric train. A comparison of the costs shows that Tanzania is building an electric rail at half the price of Kenya’s diesel SGR line.

TANZANIA’S FASTER

At $1.92 billion, which translates to about Sh192 billion at current exchange rates, for the 422 kilometres, Tanzania’s line is not just cheaper; being electric, it’s designed to support a maximum speed of 160km/hour for passenger trains and 120km/hour for freight.

This pales in comparison to Kenya’s line, whose passenger trains have a maximum speed of 120km/hour with freight hauliers doing 80km/hour at best.

Kenya opted for diesel-powered engine that can be upgraded into electric in future.

It is the results of this greed and negligence that taxpayers are now paying for.

OPERATION COSTS

Currently, the revenues generated from the passenger and cargo services on the track cannot meet the operation costs, estimated at Sh1.5 billion a month against average sales of only Sh841 million.

Meanwhile, Kenyans transporters who have allegedly been hurt by Kenyan restrictions intended to forcibly subsidize the non-competitive costs of the Chinese-operated SGR, are seeking the contracts in court. Likewise, the civil society coalition Okoa Mombasa has filed a formal records request as a precursor to a suit if the documents continue to be withheld.

Readers may remember previous reporting of a leaked Auditor General documents indicating that Chinese firms may have been given a security interest in Kenya Port Authority assets and property to secure the loans for these inflated costs. From Maritime Executive in December 2018:

Kenya runs the risk of losing control of the Port of Mombasa if it should default on loans from state financial institution China Exim Bank, according to a new report from Kenya’s auditor general. The terms of a $2.3 billion loan for Kenya Railways Corporation (KRC) specify that the port’s assets are collateral, and they are not protected by Kenya’s sovereign immunity due to a waiver in the contract. 

KRC accepted the multi-billion-dollar loan in order to build the Mombasa-Nairobi standard gauge railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC).

“The payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the Government of Kenya’s debt to China Exim bank if the minimum volumes required for [rail] consignment are not met,” auditor F.T. Kimani wrote. “The China Exim bank would become a principle over KPA if KRC defaults in its obligations.”

In addition, any dispute with China Exim Bank would be handled through an arbitration process in China, not in Kenyan courts. The auditor general expressed concern that the port authority had not disclosed these arrangements in its financial statements. 

The Auditor General’s term expired before publication of a final report and has been left vacant, conveniently for freedom of action and ability to avoid disclosure by Kenya’s political officials.

The more information that comes to light the more it would appear that the uneconomical nature of the “white elephant” megaproject was baked in from early stages and does not look to be readily resolvable without exterior finance, renegotiation, write down or other intervention.

Meanwhile, The Star covers a report by the Tax Justice Network that Kenya’s financial sector is well designed to hide corruption as the second most secretive in Africa:

Kenya’s financial sector is the among most secretive globally, according to a new report  by Tax Justice Network.

The sector has been ranked the second most rigid in Africa after Algeria and among the top 30 in the world in the latest Financial Secrecy Index of 2020.

The annual index by Tax Justice Network (TJN) has scored Kenya’s secrecy rate at 76 per cent, meaning the country is a fertile market to stash ill-gotten private financial wealth and other illicit financial flows (IFFs).

Ten years into the major multinational counter piracy missions off the Horn of Africa, are China and India paying their fair share?

Posted on by
Reply

Operation Atalanta of the European Union (EUNAVFOR) commenced in December 2008 and was joined by the Combined Maritime Forces (CMF) Combined Task Force for counter piracy force (CTF-151) in 2009.

The Combined Maritime Forces are a multinational security venture based in Bahrain, with U.S. and U.K. top command.

  • 33 member nations: Australia, Bahrain, Belgium, Brazil, Canada, Denmark, France, Germany, Greece, Iraq, Italy, Japan, Jordan, Republic of Korea, Kuwait, Malaysia, The Netherlands,  New Zealand, Norway, Pakistan, The Philippines, Portugal, Qatar, Saudi Arabia, Seychelles, Singapore, Spain, Thailand, Turkey, UAE, United Kingdom, United States and Yemen.

China and India do send ships independently to cooperate in the CTF-151 mission. But given the volume of Chinese and Indian trade and shipping at this point, are they bearing their fair share of the cost?

Piracy has been radically reduced in recent years off Somalia and in the bab-el-Mandeb, Gulf of Aden region patrolled by CTF-151.

For the United States to solve the “free rider” problem for trade competitors, especially the PRC, the best approach it seems to me is to increase our own trade and investment in East Africa, as well as globally where we have facilitated the rise of the PRC as a trading power through free global maritime security, direct and indirect foreign investment, lax cybersecurity and intellectual property protections, etc.

While it has been our policy since my childhood to facilitate the rise of China, although under slightly varying rationales at different times over the years, President Trump has sometimes, along with a few of his advisors, expressed a desire to change this policy and our formal National Security Policy calls for recognition of “great power competition” as the superseding longterm priority to the ongoing war with al-Queda and progeny or similar groups.

National Security Advisor Bolton announced a “New Africa Policy” suggesting some rethinking back in December, but it seems to have been largely overcome by events since then. Bolton’s “back to the 80’s” focus on Cuba and Nicaragua to add to the standoff involving Venezuela, along with primary redirection of focus to the permanent “shadow war” with Iran, takes bandwidth, already constrained, away from African issues. Meanwhile rapidly unfolding events in Sudan, Algeria, Libya and Egypt at a time of increased uncertainty in much of Central Africa with limited clear U.S. engagement suggest that we are very much in flux about whether we are serious about recalibrating our overall reticence to compete in Africa.

Powerful forces of bureaucratic inertia and domestic American politics suggest that we are likely to continue deficit spending to help secure Chinese trade with Africa without get much further toward making it pay for itself at least through the 2020 election.

As of 2017, US exports to Sub-Saharan Africa were $ 11.7B., or somewhat less than the cost of an aircraft carrier or two amphibious assault carriers, with a trade deficit of $3B. Chinese exports were $37.4B with imports of $18.5B. (India had exports of $13.1B and imports of $19.7B.) The Chinese trade surplus with Sub-Saharan Africa approximately equals the annual U.S. Navy Shipbuilding and Conversion budget.