China heavily overcharges Namibia for railway projects
· CMEC China: N$773 million for 62km of rail
· Lenning Rail Services South Africa: N$114 million for 62km of rail
By Tawanda Kanhema, Windhoek
WINDHOEK: THE CHINESE government is using low priced loans from the China Export Import Bank (Eximbank) to lure African countries, including Namibia, into heavy debt for overpriced infrastructural projects executed through its engineering firm China National Machinery and Equipment Import and Export Corporation (CMEC), Informante has established.
Namibia heavily overquoted, suspends contracts
According to a secret memo presented to Cabinet, Chinese industrial giant (CMEC) quoted Namibia’s Ministry of Works and Transport an astronomical N$1,63billion for the construction of 62 kilometers of the Oshikango-Ondangwa railway, nearly ten times the cost of a project of similar size only four years ago.
China had offered Namibia a loan of N$300 million on condition that the Namibian government waivers all tender procedures and contracts CMEC to do the work, although CMEC’s quote was ten times more expensive than South African and German railway construction companies in the same league.
For the Oshikango-Ondangwa railway project, which involves the construction of 62km of rail, CMEC quoted Namibia N$773 million for the installation of rail and N$290 million for the supply of 13,200 tones of rail, far exceeding the N$300 million loan advanced by Eximbank for the project.
Compared to other railway construction companies which have built railways in Namibia, CMEC’s cost for the project was inflated by up to 900 percent. For instance, CMEC quoted Namibia N$12,468 per meter for railway installation, while Lenning Rail Services of South Africa, which has done installations in Namibia before, quoted N$1,839.00 per meter for the same installation.
Railway experts from the Directorate of Railways in the ministry protested against the cost, saying it was exorbitant and was not in the national interest, after which CMEC agreed to review its quote from N$1, 63 billion to N$600 million, then to N$597 million.
Still the quote was far above that of Lenning Rail Services, which quoted N$114 million, and the Ministry of Works then proposed that the quote be reviewed down to US$50 million, which CMEC said was “unacceptable”.
“Upon informing the Chinese company (CMEC) that the ministry would now opt for other sources of finance, the Chinese offered to supply rails for US$23 million, and thereafter decided to accept to supply the rails and construct permanent way for US$50 million, which they initially refused,” reads the memo presented to cabinet.
Asked why Namibia was opting for CMEC with its astronomical charges for the same job, Minister of Works and Transport Helmut Angula said the Chinese government had offered Namibia a N$1 billion loan on condition that it appoints a Chinese company to execute the project, adding that the terms of the Chinese loan were ‘favourable’.
“The other companies have no money to offer us. If they offer me somewhere to borrow at an equivalent rate, I would take it. The money (from Eximbank) is borrowed at 4 percent interest plus or minus with a five year grace period. I must borrow on affordable terms,” said Angula, adding,
“We were offered a soft loan of N$1 billion, plus or minus. Out of that we have several projects including the rehabilitation and upgrading of Oshakati Hospital, rehabilitation of the Institute of Pathology, and we are still indentifying other projects.”
Angula said the N$1 billion loan from China would also be used for the rehabilitation of other sections of Namibia’s railway network, the purchase of the controversial customs X-ray scanners for the Ministry of Finance and electronic filing systems for the prime Minsiter’s office.
“It is from that N$1 billion that the funding of all the projects must be sourced. For each project the government of China will appoint a Chinese implementing company including CMEC. The Chinese company is selected and appointed by the government of China.”
Highly placed diplomatic sources this week complained that developing countries, Namibia in particular, were paying China too much for capital projects, especially in the wake of the customs X-ray scanners scam, in which Chinese manufacturer NUCTECH quoted Namibia US$55 million and paid a Namibian consultancy company US$12 million, ostensibly for consultancy services.
“This is the new capitalism, China now knows how to do business like a typical capitalist,” said the diplomat, who declined to be named for diplomatic reasons.
Short URL: http://investigativezim.com/?p=2095
Posted by Investigative Africa
on Jul 24 2009. Filed under DOCS, Featured Stories, INVESTIGATIVE STORIES, NEWS.
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