Kenya to Pay Chinese Contractor Billions for Undone JKIA

The Kenya Airports Authority (KAA) board has approved negotiations with China National Aero-Technology International Engineering Corporation (Catic)—which wants Sh22 billion for the termination of its contract.

This comes after the Chinese firm’s contract to build the second terminal at the Jomo Kenyatta International Airport (JKIA) was cancelled amidst fears that a standoff could cost taxpayers hundreds of millions of shillings.

The tender was cancelled in March 2016 after spending  Sh75 million on the ground-breaking ceremony, presided over by President Uhuru Kenyatta on May 23, 2014.

The compensation talks will see Kenya withdraw its earlier statement that Catic should refund the Sh4 billion downpayment for the project that never took off. The government had argued that no work has been done at the airport despite Catic receiving money from the State since 2016 when the JKIA contract was cancelled.

“The KAA board has approved negotiations of the contractor’s claim and has constituted a team to do so, preparations on the talks are at the moment going on,” a KAA director explained.

According to the director who sought anonymity, the team is supported by external legal and technical experts and the preparations for negotiations are on.

In line with documents presented to the Public Investments Committee (PIC), Catic wants KAA to pay it Sh2 billion for the preparation of bill of quantities (BOQ), Sh2.4 billion in extra costs and Sh708.2 million being 16 per cent value-added tax (VAT).

The Chinese contractor also wants  KAA to pay them Sh500 million in interest and penalties for delayed payment of VAT charged by the Kenya Revenue Authority (KRA).

Catic is seeking a further Sh5.6 billion, comprising a balance of the contract for BOQ, extra cost claim, VAT and interest and penalties. They were selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year.

The contractor was said to have dug the project foundation and mobilised 90 per cent of the required equipment.

However, according to former managing director Jonny Andersen, they did not expect to pay anything to the Chinese company, following legal advice from then Attorney-General Githu Muigai which indicated that the contract was void.

“As the custodian of the Kenya Airports Authority, I stand by the position that the contract was illegal and I want that money paid to them back,” Mr Andersen told Parliament in 2019.

However, the MPs faulted Prof Muigai for offering conflicting opinions because, in February 2012, he advised then KAA’s acting managing director Samuel Gichuki against terminating the procurement of the Chinese company for the work.

The construction of the new runway started to run into problems days after its launch amid claims its cost was inflated by up to Sh9 billion leading to some of KAA’s top managers being sent on compulsory leave to pave the way for investigations.

KAA was to contribute 15 per cent of the required cost( Sh8.4 billion) while the balance of Sh48 billion was to come from another financier; China Exim Bank, Africa Development Bank (AfDB), American Consortium AAE and Standard Bank Group.

AfDB has said that the new runway project would involve building a 4.9 km runway and associated infrastructure such as extra parking slots for aircraft and an air rescue firefighting unit.

By Philly Opere.