SGR contracts: What happens when private interest call the shots

The shocking details emerging from the Standard Gauge Railway (SGR) contractual agreements have put to rest the puzzle around Jubilee's government's empty rhetoric.

Evidentially, it never made sense how the government kept on reporting robust Gross Domestic Product growth rates that never seemed to reflect for households, businesses and even on government revenues. As it turns out, these were conduits to profit highly connected people in government and their associates.

Figuratively, it would seem these infrastructure projects were being plucked somewhere in Beijing, planted in the country and a debt voucher issued to the taxpayer. It is inconceivable how senior government officers could ever sign contracts under such terms.

There is every reason to believe these contracts were driven by private interests from highly placed and connected persons. Equally, they open a can of worms on the level of either incompetence or mediocrity of those entrusted with the responsibility to safeguard our national interests and public good.

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Articles 1 and 2 guarantee the sovereignty of the people, the republic and the supremacy of the Constitution. Article 201 unambiguously defines the minimum standards applicable in the management and administration of public resources. By deed of these articles, the enabling legislations and our shared heritage, it would mean there are sacred installations that preserve this sovereignty. Port of entries into the country will rank very high in this pecking order.

Ignored red flags

Important questions emerge from the SGR contracts: Under what circumstances did authorised officers of government subject a strategic port of entry to a loan obligation of a project that the port as a corporate was not even the developer? Under which law does the Kenya Ports Authority assume the ultimate risk and financial responsibilities of Kenya Railways? With whose authority did a public entity subject such a strategic national and security installation under the law of another sovereign state?

For instance, how can arbitration be done in the foreign capital of the contractor? Whose laws shall apply in such arbitration? If Article 201 (a) demands openness, transparency, accountability and public participation, under whose constitution was the contract secrecy clauses made?

These revelations are dumbfounding, but the red flags have always been there. I remember watching with dismay a submission by one-time Minister for Transport, Amos Kimunya, either in 2011 or 2012, to a Parliamentary committee investigating corruption allegations on a consultancy for SGR designs. The contract value was about Sh3 billion to a Japanese firm that initially had worn the design contract.

Kimunya argued that he should be congratulated, instead of being investigated, for saving the country at least Sh3 billion by cancelling the contract from the Japanese firm. In his wisdom, or lack of it, as the minister in charge, the decision to award the then-unknown China Road and Bridge Corporation (CRBC) was because they had offered to do the designs for free. Now, imagine a foreign company volunteering free consulting services for such a complex project to a sovereign state.

When did countries become lovers to exchange such pleasant surprises?

I'm on record here stating that the cardinal rule of any geo-economic political engagement is purely informed by perpetual national interests. It thus becomes a primary responsibility for each country to advance and protect the interests of its citizens.

Fast forward, as the contract implementation took shape, Rwanda and Uganda pulled out in quick succession. While the actual details as to why the two EAC comrades pulled out of the deal have never been made public, it is acknowledged within diplomatic circles that the cost of corruption padded into the project informed there choices. This not only put into serious question the commercial viability of the project, but also culminated into its termination in what the media characterised as the 'middle of nowhere'. The contractor and their financial partners ultimately refused to finance phase three of the project citing lack of economic viability.

The controversial policies on cargo handling from the Port of Mombasa and consolidation of all port agencies through an executive order cap the icing on the cake.

To the apologetics of the failures of the Jubilee administration, the taxpayers shouldn't ask questions because they can see the pieces of infrastructure. The same narrative has been extended to the Expressway, a project by the same contractor and equally shrouded in mystery. Similar to the SGR, the cost of the project kept on shifting beyond even the legal limits of the allowable contract variations. At some point, information leaked that the cost of telephone services for five engineers attached to the SGR project was billed at Sh5 million.

Tough lessons

As a civilized nation, we cannot fail to honor the contractual and financial responsibilities of the projects. The failures of the responsible government officers and their political benefactors cannot delegitimize the contracts. But we must ask the hard questions and those found culpable brought to account.

There are three lessons and action points to pick from this mess going forward.

One, a time has come when the country must develop standard contracting documents that must be binding at all levels of government. It is no longer tenable to leave details and specification of public contracts to any public officer.

Two, we must ask the relevance of the Attorney General (AG). Such a contract could never have been concluded without the involvement of the AG. Did he give his advisory? What was it or why was it not complied with?

Finally, it is time to define the minimum acceptable standards in terms of transfer in skills and technology for any foreign contractor doing contracts in the country.

As a precaution, it is probably also time we suspended the project financing and public-private partnership models until we fix our national values.

Dr Muinde is a development economist