Friday, July 27, 2012

■ BOTSWANA: Government fires Chinese firm Sinohydro over delays to Gaborone Airport Expansion project.

Botswana Government logoFed up with continual delays and deadline setbacks, the Botswana Government has decided to fire the primary contractor on Gaborone's Sir Seretse Khama International Airport (SSKIA) Expansion Project Phase 2, Chinese state construction firm Sinohydro, with 95% of the works completed.

Since January, Sinohydro has been paying daily fines amounting to BWP1.7million (USD$220'000) as a result of the delays in completion, which should have taken in place in June of 2010. Despite assurances given to Botswana Minister of Infrastructure, Science and Technology (MIST) Johnnie Swartz during an on-site inspection in April that the project would be ready for hand over by July 2012 at the latest, it seems the firm was not able to keep its promises which ultimately led to the termination of its contract.

Sinohydro however, disputes the validity of the Ministry's reason for termination of contract, stating that Government payment delays, constant redesigns and additional works were to blame for Phase 2's delays and escalating costs. Sinohydro also held the reigns during Phase 1 of the project, which also suffered massive deadline setbacks, with its completion date having been pushed back from October 2009 to March 2010 much to the Botswana Government's irritation.

In November of last year, the situation came to a head when a request by the Department of Building and Engineering Services (DBES), the employer for the contract on behalf of the Botswana government, for further funds for the by then already over-budget SSKIA Project, was rejected leading to freeze on finances available to Sinohydro.

Subsequent to the termination of contract, the Botswana Government has paid Sinohydro BWP527million for work done, whilst in the meantime, it has been forced to look for a new firm to complete the project leading some Batswana politicians to query why the MIST didn't look to give the contract to a local firm in the first place.
"Minister Swartz was asked several questions from the floor.  
Question: Why are most projects undertaken by Chinese companies? 
Reply:  There is no expertise in Botswana to undertake projects of this magnitude; also bids are open and anyone can bid.  
Question: Are any international companies blacklisted in Botswana? 
Reply: None."

Sir Seretse Khama International Airport
Sir Seretse Khama International Airport
In Botswana currently, Chinese companies are involved in 18 projects worth roughly USD$740 million which has proven to be cause for concern for many in the country. Given that Sinohydro is backed by the Chinese Government, which in effect gives it enormous financial resources, so it is able to substantially underbid just about everyone in a tender, leaving very little of the playing field for local and regional players.

But, the silver lining to this particular cloud is that by undercutting everyone else, the Chinese have forced the competition (in the past, European and American construction firms used to win most Botswana tenders) to dramatically lower their profit margins in a bid to keep up (or down) with them thereby easing pressure on state coffers.

With many a nation's purse strings now tight thanks to a difficult global economy, it isn't hard to see why so many African governments (Angola, DRC, Congo Brazzaville to name but a few) have swooned to the dulcid inexpensive tones being played by Beijing's construction symphony. For instance, out of the six companies that tendered for the Khama International Airport project, Sinohydro’s submission was the lowest in price. However, that hasn't necessarily guaranteed quality, and that's exactly what Botswana needs right now in its Civil Aviation scene if it is indeed serious about becoming a regional player.