Chinese expel locals from airport road project

By Marianne Nghidengwa

CHINA Railway Seventh Group (CRSG) has expelled its local partner, Onamagongwa Trading Enterprises CC (OTE) from Phase 1 of the N$800 million construction of the dual carriageway from Windhoek to Hosea Kutako International Airport, citing the locals’ lack of performance.

The expulsion of OTE is seen by insiders though as a move by the Chinese government-owned company to keep all proceeds from the massive road construction project to itself after the project was recently extended at an additional cost of N$151 million.

The removal of OTE from the equation cost some 60 workers employed by OTE their jobs, as well as a further 12 workers, who were employed by five sub-contractors. Confidente was told that the local company is also owed over N$1.3 million in unpaid services by the Chinese company.

The two firms were awarded the lucrative road construction tender by the Roads Authority in 2015 in a joint venture, with OTE taking a mere 20 percent share and CRSG the lion’s share of 80 percent. With this marriage of convenience in place, it was envisioned that OTE would be capacitated through skills transfer and that some of the money generated would stay in the country.

Legal representative of CRSG, Huang Shenghua told Confidente that prior to the tender being awarded, the partners concluded a JV agreement that was subsequently amended in March 2019. OTE, however, disputes that there was any amended agreement, saying it was forged to advantage the Chinese firm.

CRSG’s lawyers Cronje & Co in a strongly-worded letter on 16 September informed OTE that they were in breach of their obligations in terms of the JV agreement and should prove their performance capacity within 30 days.

“The commencement date of the project was 18 January 2016, the supposed completion date was 17 January 2019 and the actual completion date will be 29 November 2019. As of now and according to the minutes of the 39th site meeting, the total image progress of the project is 77 percent.

“According to the JV agreement, you are obliged to complete 20 percent of the total image progress, but according to the statistics, what you have completed is less than four percent.

“Due to OTE’s internal problems, its work on site has been fully stopped since 29 July 2019. Based on the abovementioned lack of performance capacity of OTE, it is hereby urgently put forward by our client to request OTE to prove its performance capacity of completing its construction scope within the contract period, failing which our clients will invoke the provisions of the contract.”

To ensure compliance, OTE suggested sourcing help from local company OTESA with the needed capacity to boost their performance on the project, but CRSG apparently turned down the suggestion.

On 11 November, their lawyers again wrote to OTE stating that the local company did not adhere to their demand, and “We confirm that you are as from 17 October 2019, excluded from participating in the joint venture as you have failed to remedy the breaches set out in the aforesaid letter.

“Our client will forthwith continue to comply with the main agreement, which the JV has with the employer on its own and our client will continue to do so up and until finalisation of the project.

“We also confirm that our client will have no further discussions, meetings or any other engagements directly with OTE or any of its members, employees or officials and that all issues should directly be addressed to our office, should you wish to do so. We therefore request you to vacate all equipment, employees and property of OTE from all sites relating to the project within seven days from receipt of notice.

“Should our client at any point in time feel intimidated by you, any of your members, employees or officials and should you remain on site and fail to vacate the sites, as requested above, we have instructions to bring an urgent interdict application, the costs of which you will be held liable for.”

FRAUD AND FORGERY CHARGES

RA chief executive officer Conrad Lutombi said while he was not aware of the local company’s expulsion from the project, he did not think such a move is allowed. “To our knowledge, the joint venture is still intact,” he said.

OTE through their lawyers at Makando Chambers wrote to CRSG on 20 November to deny the existence of the amended JV agreement. They have since lodged a case of fraud, forgery and uttering against CRSG with the police.

“Our client further denies that it is in breach of any of its obligations in terms of the valid joint venture agreement, and that you are to first engage our client… if any dispute arises. As a result of your failure, our client refuses to oblige your unlawful demands to vacate the premises. Consequently, any measures by your client to remove ours is wrongful and shall be resisted vigorously.

“It should be noted by your client that the alleged second joint venture agreement is false, and as such will be subject to criminal investigations.”

OTE HITS BACK

OTE founder Martin Ipinge told Confidente they were unfairly kicked off the project in July following years of unfair treatment. This he described as “revenge” by the Chinese for turning down their offer to buy them out of the project. Ipinge said the Chinese deliberately paralysed their operations with various tactics, including delayed payments.

He strongly disputed OTE’s alleged non-performance, saying their current status is attributed to deliberate non-payments by CRSG. He explained that the Chinese refused to have a joint bank account for the partnership with signatories from each team. This, he said, put OTE under critical financial constraints, which resulted in them owing various institutions about N$1.1 million.

“A majority of the time, they claimed not to have been paid by RA as the client, this was not the case. They deliberately delayed our payments, which affected our progress on the project. Without finances, it meant we did not have any work to do,” Ipinge said.

“Since inception of the project, they jeopardised our efforts by refusing to have a scope of work in place outlining who does what. We did not sign the scope of work until three years into the project after continuous pressure from our side. The scope of work was only signed in November 2018.  Before that, they have been verbally telling us what to do at their convenience, which slowed us down because they rarely communicate with us.

“Without a scope of work, how do we then determine whether we are ahead or behind schedule?  We are jointly and severally liable to the project.  We were to move at the same pace.  They failed to supervise the project because they were to ensure we are on par with them in terms of production.”

Ipinge also highlighted that the Chinese did nothing to capacitate or transfer skills to them. “When the tender was awarded, the idea was that they transfer skills to us, so that we are able to tackle projects of this magnitude in future and keep money in the country, however they never trained us, not theoretically, practically or supervisory. None of that happened.”

Ipinge said their financial troubles were deliberately placed on them by their JV partner. This, he noted in a lengthy letter to Lutombi dated 17 December, saying, “It must be stated that the mode of disbursing funds to this JV is very erratic and needs to be revisited as the monies are not paid to the JV Account but solely to the one of CRSG and that leaves OTE vulnerable and exposed to exploitation by CRSG.”

He also highlighted that while the original JV agreement makes provision for an arbitrator to mediate in the event a dispute arises between the parties, they were unilaterally and without proper procedures expelled from the project.

“We call on the Ministry of Finance in consultation with the line Ministry of Works and Transport to stop any sub-sequent payments until the parties have resolved the dispute.  We also call for the project to be put on hold until the matter is sorted.”

CRSG RESPONDS

CRSG’s Shenghua recently said that, “It appears as if the real problem experienced by OTE is that OTE does not have the capacity or financial means to continue with this project, but still demands to be paid for work not done. CRSG is not willing to pay OTE for work not done.

“A further issue in the JV relationship is the fact that various of OTE’s senior staff members have threatened CRSG staff and intimidated CRSG staff with violence. This has been reported to the Namibian Police under the case CR08/08/2019.”

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