Thwake Dam's Chinese builder now faces auction over debt

Works at Thwake dam in Makueni, Eastern Kenya. [Courtesy]

The construction of a multibillion-shilling dam in Eastern Kenya billed as critical for the country's food and energy security needs has been thrown into uncertainty after the contractor was slapped with an auction suit.

The Chinese contractor of the Sh82 billion Thwake Multipurpose Dam is faced with auction over non-payment of a disputed debt owed to a local construction company it subcontracted to execute part of the mega project. 

The financial headwinds that have rocked the Chinese firm are likely to throw the project in limbo at a time the African Development Bank (AfDB), which has been financing it, is mulling bankrolling phase two of the dam to include irrigation and power generation systems.

China Gezhouba Group Company Ltd has been ordered to pay JTG Enterprises Ltd Sh682.76 million for breach of a sub-contract entered into in July 2019.

JTG Enterprises, which was hired to do excavation and support for the main spillway project, successfully sued the Chinese contractor following a dispute over payment as per the terms in sub-contract supplementary agreements.

Justice Alfred Mabeya of the High Court awarded the Kenyan firm the sum that included amounts arising from the supplementary agreement which the Chinese firm had failed to remit on “erroneous contention” that it amounted to variation of the sub-contract.

“I find that the plaintiff has proved its case against the defendant on a balance of probability and that the defendant had breached the contract between itself and the plaintiff,” Justice Mabeya ruled, while also throwing out a prayer by JTG Enterprises for general damages in a judgement delivered on August 9. 

AfDB revealed earlier this year that the Kenya government was in line to receive a huge financial boost to expand the project into other phases that included irrigation and energy generation.

"We have the Thwake water dam project, though most of the dam is almost done," AfDB Director-General for East Africa Nnenna Lily Nwabufo told The Standard earlier this year.

"Now we are having a conversation with the government on how just building the dam is not enough. We have to do the irrigation part, there is an energy part, and there is a water part to supply people are the area.

"So we are engaging with the government, but what we have done so far is to prepare the studies that are required to implement the other phases so we are looking forward to engaging the government to see if maybe next year we go back to the board to be able to fund the real phase, which is where the water gets utilised."

The supplementary agreements between the Chinese firm and the local contractor were signed to take care of unforeseen excavation works on the dam site in Makueni, which the construction firm found had increased rock material than earlier anticipated.

This led to an additional payment claim based on higher excavation rates for rock formation in the sub-contract.

China Gezhouba had in the counter-claim accused the sub-contractor of not undertaking the sub-contracted project to completion date of December 12, 2022, which it argued was also in breach of contract.  

The court, however, found the breach on part of JTG Enterprises was “a result of the defendant’s actions which frustrated the contract”.

As a result, Jamdee Enterprises Auctioneers is now seeking to recover millions of shillings from China Gezhouba by selling its properties.

The first phase of the project jointly funded by the government and AfDB was to take 56 months from 2017. The latter would foot 35 per cent of the cost.

The contract to construct the dam on the border of Kitui and Makueni counties was signed in  November 2017 between the government and the China Gezhouba Group, the lowest bidder for the project at Sh36.9 billion.

The dam, a Vision 2030 flagship project, is planned for implementation in four main phases.

They included construction of a 77-metre-high dam, hydro power generation component, 34,600 cubic metres of water supply and a final phase of irrigating 40,000 hectares in the two counties.

It is designed to supply piped water for domestic use, to serve the Konza Technology City and adjacent towns.