‘Govt preparing to abscond paying SGR debt’ – Nelson Havi

LSK President
Nelson Havi, Law Society of Kenya (LSK) President

Yesterday after the Court of Appeal ruling that declared the entire Standard Gauge Railway project contract between Kenya Railways Corporation (KRC) and China Road and Bridge Corporation (CRBC) illegal, the president of the Law Society of Kenya weighed in.

Nelson Havi wrote this morning on Twitter that the Government of Kenya (GoK) might be setting the process up so as to lose in preparation for not paying the over sh480 billion loan used in the construction.

Nelson Havi’s tweet.

On Friday, Justices Martha Koome, Gatembu Kairu and Jamila Mohamed set aside the part of the judgment of the High Court that held that the procurement of the SGR was exempt from the provisions of a section of the Public Procurement and Disposal Act, 2005.

“We substitute therefore an order declaring that Kenya Railways Corporation, as the procuring entity, failed to comply with, and violated provisions of Article 227 (1) of the Constitution and Sections 6 (1) and 29, of the Public Procurement and Disposal Act, 59 2005 in the procurement of the SGR project. The appeals succeed to that extent only,” the ruling reads.

The appellants in the case–Okiya Omtatah and Wycliffe Gisebe Nyakina–had argued that there was no due diligence or independent feasibility conducted and that the design of the project was undertaken before seeking contractors to implement it.

In 2014 before construction commenced, then High Court Judge Lenaola had ruled that documents tendered by the appellants as evidence in support of the petitions were inadmissible having been obtained illegally. This was eight months after the activists had sought orders to stop the implementation of the SGR project.

Something doesn’t add up in Court of Appeal’s decision declaring completed SGR project unconstitutional and unlawful. It may be a preparatory process for GoK to plead illegality at an international arbitration should China Road and Bridge Corporation sue for breach of contract.

Nelson Havi, LSK President

His thoughts are not far from from those of Minxin Pei, a professor of government at Claremont McKenna College and a nonresident senior fellow of the German Marshall Fund of the United States.

Prof Minxin Pei argued that ‘China’s gamble in Africa also flopped thanks to bad timing’. He added, ‘Its (China’s) foray into the continent coincided with the peak of the most recent commodity supercycle, skyrocketing prices of raw materials, this time driven by Chinese demand. As a result, Chinese companies paid top price for assets that most probably have lost huge value after the collapse in commodity prices”.

This is further complicated by the COVID-19 pandemic which ‘stressed’ world markets especially oil markets. He had advised China to look for an ‘exit strategy’ out of Africa, since ‘it is unlikely to recover most of its sunken investments or loans because of the economic impact of the virus on Africa’.

The professor also submitted that the only sensible policy flowing from such a reckoning is to ‘write off its loans as a humanitarian gesture’, otherwise, ‘Beijing has no realistic hope of recouping’, its investments.

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