How President Uhuru Kenyatta snatched Sh500bn SGR deal from Raila Odinga man

NAIROBI: Jimi Wanjigi strode into the office of the Prime Minister one morning in early 2008. Raila Odinga was already at his desk, dipping purposefully into an overflowing tray of official papers.

Wanjigi was not an ordinary fixer. In the grand coalition government, there were brokers and wheeler-dealers. Then there was Jimi Wanjigi, the man who ‘got things done.’

Shrewd but self-effacing, Wanjigi’s name was known to many Kenyans but few could pick him out in a crowd. Indeed, only one picture of him could be found in the library of the country’s second biggest newspaper — a grainy facial shot cropped out of a group picture. Whoever took it had stumbled on luck.

Whatever forced Wanjigi to visit Mr Odinga, the co-principal in the Grand Coalition, that day could not be simple. He preferred to operate in the shadows but this was an issue he had to handle himself.

A deal he had helped midwife was falling apart, chipping away one day at a time. The proposal to build a Standard Gauge Railway (SGR) from Mombasa to Nairobi, at an eye-watering Sh327 billion, was facing the prospect of a stillbirth, chocked by resistance from Rift Valley Railways (RVR). Wanjigi was determined to save it. Time was running out.

The fragile coalition government, formed after a power-sharing deal between President Mwai Kibaki and Mr Odinga, was just settling in office. Wanjigi needed the matter cleared before the government found its footing — before committees of bureaucrats and railway experts set their probing eyes on the papers.

“RVR had refused to allow Jimi access the railway siding to carry out the feasibility study for the project. This access was also important for them to do a technical drawing,” a highly placed individual close to the making of the railway project said.

A son of former Kamukunji MP Maina Wanjigi, Jimi knew how government worked, when to go to a higher office and when to stay on the corridors.

The businessman was banking on Raila, with whom he was close friends, to help stop the deal from crumbling. The depth of their friendship would become obvious to the public eight years later after the death of Wanjigi’s bossom friend, Jacob Juma, which Raila repeatedly condemned. They were both prominent at Juma’s politically-charged funeral. The other problem Wanjigi faced that morning was dealing with the Transport Principal Secretary Cyrus Njiru, a new appointee at the corner office. But that could wait.

Raila phoned the RVR boss, who had become a stumbling block to Wanjigi’s project. Minister Chirau Ali Mwakwere, who was also in that meeting, was asked to invoke sanctions against RVR if it refused to cooperate. He warned that if RVR remained opposed to the feasibility study, then the government would punish it. RVR was headed into its third year as the operators of the old meter gauge line. RVR had won the concession from October 1, 2006. But pushed to the wall, RVR pulled back. After the meeting, everything came back on track. But not for long. It was the first time Raila intervened in the project. To calm RVR, the team proposed a soft landing for them in case the new Mombasa-Nairobi railway became a reality. “It was suggested that RVR would transform the old track into a tourist line to Tsavo, like the blue train of South Africa,” the source said.

But it was not until August 12, 2009 that the Memorandum of Understanding (MoU) was signed for a feasibility study and the preliminary design for Phase One. The first phase is the line between Mombasa and Nairobi. The study was being undertaken by China Road and Bridge Corporation (CRBC). Besides, it was going to cost the government nothing, since the Chinese company —CRBC— had volunteered to do it for ‘free.’

The feasibility study now cleared, the next mountain Wanjigi had to scale was getting the construction contract signed.

Two weeks ago, Raila told a public rally at Masinde Grounds in Mathare that the SGR was a project of the Grand Coalition government between him and Kibaki.

“SGR was a project of the grand coalition government,” Raila charged as he accused Uhuru’s Jubilee administration of “riding” on projects started by the Kibaki administration, in which he served as a PM. A ministerial statement seen by this paper also suggests that President Kibaki met Ugandan President Yoweri Museveni on October 28, 2008, regarding the SGR. The statement is dated February 2014 and signed by the then Principal Secretary of Transport, Nduva Muli.

It was at this meeting that the two countries agreed that they would build the SGR linking the port of Mombasa to Kampala with a branch line to Kisumu and Pakwach. This commitment was important because at that time, initial projections had indicated that the railway line would be a white elephant if Kenya went it alone. Another interesting thing happened in 2008.

Two Kenyans, Peter Maingi Gatere and Leonard Mwangi Ndungu, walked to the Registrar of Companies and registered a company with similar name to the Chinese State-owned company that won the tender to build the SGR. Their company, China Road and Bridge Corporation Kenya, was given the Registration Number C. 166624. They gave an address on Mpaka Road, Westlands, as their registered office. This would later turn out to haunt the project. The events of the post-election violence that saw the old railway line uprooted in Kibera served as an impetus to push Kenya to build a modern railway.

Being a businessman, Wanjigi saw the opportunity and took it. This was not just any project. It was going to be the single biggest project Kenya has ever undertaken since independence.

Wanjigi speaks

The Sunday Standard reached out to Wanjigi to comment on his role and what caused the rift with the government. He declined to give the specifics, on grounds that he has since moved on.

“I do not wish to comment on the railway matters. But those who were with us from the beginning know how much work we put in and this was not what we had in mind,” Wanjigi said. “I worked hard and was a little disappointed by what happened. I am a businessman I know you must not always get what you deserve all the time. We moved on,” he said.

This is the first time he has publicly said something about the deal. But an insider says Wanjigi was an asset to the Chinese companies who were trying to strike government deals. They wanted someone with his experience and connections to help them navigate the bureaucracy and ‘smoothen the way.’

This was a job Wanjigi was good at. He had helped introduce the Chinese company that had won the contract to construct the new terminal at Jomo Kenyatta International Airport (JKIA) to the right people in government. This contract has now been cancelled following the fallout with government.

So together with a small team in his office in Westlands, they came up with the perfect plan to get Kenya a modern rail. In this team was also the then General Manager of China Road and Bridge Corporation (CRBC), Mr Du Fei.

To sweeten the deal, the taxpayer needed to pay nothing. Wanjigi’s initial plan was to get a Chinese company that would do a Build Operate and Transfer (BOT) project. He had already identified some companies that would snap it up as soon as he placed it on the table.

A BOT is where a contractor builds for you a project using his own funds, he operates it until it he gets his money back. He will then hand it over to the owner, in this case, the government.

The Chinese were already on board. If he got the clearance he needed from the second most powerful office at the time under the Kibaki administration, he knew he would push the deal through. There was also a strong case for a modern railway. The old line that linked Kenya to Uganda was developed more than 100 years ago. It had serious limitations in terms of technology and capacity. In 2012 for example, the line had only handled 0.9 million tonnes compared to the Mombasa throughput of 22 million tonnes.

According to their initial plan, China Road was to just build the railway and let other players take over from there.

“CRBC was just to lay the track, period. Then the rolling stock (wagons and trains) was to be done by another group. There was a suggestion that large transporters would come up as a consortium to operate the railway or buy the wagons,” the source said.

Before he was moved from Nairobi, Du Fei and Wanjigi had come to know one another and developed a working relationship. But this relationship would later be put to test when the deal matured. “Du Fei and Wanjigi were the main men at the start. Problems started when they felt like they were losing control of the project and they accused the government of hijacking it,” the source said. The CRBC general manager was transferred to Angola, and replaced by Mr Li Qiang. Things started changing after this replacement was done.

The mighty fallout

No one who was initially involved in the project is still in charge. It was the best laid plan until sometime in 2012 when things started falling apart. Everyone was positioning themselves to be in a point of influence in the next government. Wanjigi took his bet with Jubilee given the fact that they had made building a modern railway a main campaign issue in the manifesto. The Chinese, who after completing the feasibility wanted to remain part of the action, became ‘a little greedy’ at this point and this ‘fueled the undercutting that followed.’

“Now they wanted everything. Since they saw the challenges the government would have before they make the line profitable, they decided that the best route was to just offer a loan, build it and let Kenya handle the rest. This is what turned the project from what it was initially to a loan,” a top government official who did not want to be named since he had left the government said.

A lot of action on the project happened in 2012. “There was uncertainty. So it was important that the contract is awarded before the next government. There was a lot of money going around at this time to ensure this happened. Politicians were back in the political mood and this is usually the best time to strike deals,” the government source said.

The letter of award for the civil works was drafted on July 10, 2012. According to the letter of award written by the then Kenya Railways boss, Mr Nduva Muli, his corporation was going to be the ‘employer’s representative’ for the project.

CRBC wrote back to then Kenya Railways on the same day, accepting the award. No time was wasted.
“This refers to your letter of award…awarding the above captioned project to our company, we hereby give a formal unconditional acceptance of the award,” Mr Qiang, who had now taken charge of the CRBC Kenya office, wrote. The tender amount was Sh220.9billion. This amount was only for the construction of the railway, without the wagons.

With a letter of award, CRBC had won the first half of the battle. The other most important step was to secure a commercial contract. “We take this opportunity to convey our appreciation for the award of the contract, and look forward to signing the commercial contract at the earliest time,” the firm wrote to Nduva Muli.

One week after the award of the civil contract, Kenya Railways set up a nine member team to discuss the finer details of the deal. “This is where the additional cost began to pile up over consideration of the terrain, the quality of materials to be used and the required approvals,” a brief by the Budget Office of Parliament notes. It is during this meeting chaired by a Mr Solomon Ouna that it was decided that CRBC would also supply locomotives.

Other Kenya Railways employees who attended the meeting were Mr Alfred Matheka, Mr David Mwadali, Ms Marianne Kitanu and Mr Stanely Gitari.

Representatives for China Road who attended the meeting were Mr Yang Jie, the team leader. Other members of his team were Xiong Shi Ling, Mr Mo Yong Nian and Mr Zhou Yi Hua.
The initial contract that was signed between KRC and CRBC limited the Chinese firm to the civil work of the line.

It is this award that escalated the tension among various stakeholders who were positioning themselves to get part of the Sh95 billion that was up for grabs. It is this award of the second part of the deal that triggered the fight that followed. The government also gave the Export-Import (EXIM) Bank of China a guarantee that the railway line would have control of at least 35 per cent of the cargo business from Mombasa Port.

It was all good until when it emerged that the company appeared headed to do everything. CRBC was going to be the one to build the railway after doing feasibility study. It was now also going to buy the wagons and trains. It was also going to supervise itself. As if this was not enough, it was also on its way to operate it indirectly through a subsidiary. This revelation caused discomfort within government as well as among other companies who were eying a piece of the railway action.

But the biggest fight happened after Jubilee took power. “I don’t know what happened during the first visit that President Kenyatta made to China. Things changed immediately he returned. It was clear the government had taken a position and you were to support it or fall by the wayside,” the source said.
It is understood at the height of the fights, President Kenyatta summoned top officials of the Chinese company doing the railway and warned them from any ‘further dealings’ with ‘other people outside government.’

Navigating legal challenges

As the country was focused in the 2013 election, Kenya Railways was busy sealing all procurement loopholes that it had found itself in with the railway deal.

This is when the Public Procurement Oversight Authority (PPOA) started asking questions after it emerged that the contract had now been made a government to government deal. The procurement watchdog wrote to Kenya Railways, asking it to explain how it had met the conditions of procurement law that required competitive bidding. But noting its gaps, Kenya Railways said the report was in error and that it wished to withdraw.

The law requires that any project that costs Sh500,000 and above was to be subjected to the procurement law. Since it was not a complete grant from the Chinese government, the tender was subject to competitive bidding. The Chinese government was only funding 85 per cent of the deal while the remaining 15 per cent, which translates to Sh50billion, was to be taken care by the taxpayers.

The two agencies turned for legal advice from the Attorney General to help them navigate the dilemma.
“On February 19, 2013, the procurement entity informed PPOA that the report submitted to PPOA on October 2, 2012 reporting this subject tender as a direct procurement, was in error and that the procuring entity’s wish was to withdraw,” the letter from the PPOA to the Attorney General Githu Muigai read in part.

Kenya Railways instead now argued that the tender was as a result of a negotiated grant between the Kenyan Government and the Chinese Government on a government to government funding. But there was one problem. The negotiation agreement as negotiated by the government of Kenya and China was not available. They were now stuck and needed the AG to intervene.

But even if this was to pass, there was another challenge. CRBC would need to be compared with other railway construction companies from China to ensure that the government was dealing with the most suitable company for railway constructions. This had the potential of taking the deal away from the firm to another Chinese company.

“Something had to be done to protect the process in a way that there was only one outcome. This was the time money was being carried in briefcases,” the source said. There was also money to deal with Members of Parliament.

“Some MPs who were seen as troublemakers were given Sh200,000 to cause no trouble in committees. After the election, MPs were broke and they would take any amount. What you saw in Parliament was stage managed, MPs wanted the money and they were never interested in stopping the process,” another source said.

Enter Jubilee government

To ensure that the railway plan succeeds, intense lobbying was done to ensure Nduva Muli is elevated to a strategic position. No one was better placed to be the new Principal Secretary of Transport than Nduva.

But the first thing that Nduva had to do was to eat his own words. When Nduva was in charge at Kenya Railways, he was very concerned about the viability of the project. In one of the letters to the then Transport PS Cyrus Njiru, Nduva had said the study had failed to deliver a bankable project. “The study by CRBC falls short of delivering a bankable project. Even where funding for the infrastructure was secured, there are several PPP interventions that will require private capital,” Nduva had said.
It is not clear what caused his change of heart when he was appointed the PS.

But he said in an earlier interview that most of the issues he had raised were part of a process to ensure Kenyans got value for money and that CRBC had responded satisfactorily to them or had arrived at a compromise to save costs.

Every effort was done to ensure that the project continued irrespective.
The project promises to transform the country’s transport system, create thousands of jobs and give the economy the necessary kick it needs to push Kenya to a truly middle income country. But at what cost?