Court ruling opens a Pandora’s box of flawed SGR procurement

Last week’s Court of Appeal ruling that the procurement for the standard gauge railway (SGR) project was illegal is bold and welcome. That the venerable court has given a legal response to Kenyans’ many doubts and questions is good for our country and the justice system.

For a long time, many of us have questioned the process and substance of the infamous — indeed, notorious — SGR drama. This was an opaque, lopsided agreement conjured up behind closed doors between a self-selected coterie of Kenyan officials and the Chinese government and its various commercial counterparts.

It was so lopsided that it benefited the China side enormously, but landed us with a project of questionable value at an obscenely ridiculous cost, which we literally can neither afford nor sustain.

Besides the massive, arguably over-inflated, cost of this untendered turnkey project is the questionable issue of a company both getting a contract to do the construction of the railway and then running it.

This is most irregular.

The argument for an SGR project was always valid as long as it was cost-effective. But the way we went about creating this unaffordable and under-performing monster, is a veritable blot on President Kenyatta’s past and current government and legacy, and our economic landscape.

So what of its legal implications? Article 2 (4) of the Constitution says very clearly that anything done in contravention of our Constitution is null and void.

The SGR contract violated Articles 227 and 10, making it null and void. That means it is not worth even the paper it is printed on, is unenforceable and is not legally binding on us. In short, the government is not obligated to pay another shilling and, if it does, it risks a mountain of domestic outrage and court cases from Kenyans.

NEGATES COLLATERAL

Even more pertinent is that it invalidates and negates the clauses about collateral. As then-Auditor-General Edward Ouko said, the government committed Mombasa port as part of the collateral. So, if the government defaulted on the loan, the port could be taken over. Not anymore.

What recourse does Beijing, and the concerned companies, have in this situation in case of a payment standoff? It could walk away and let Kenyans run the SGR. But seeing as the Chinese are quite involved in its day-to-day operations, it is fair to guess it would grind to a halt.

The matter could go to international arbitration, which could be a double-edged sword for the Chinese, especially as the Appeal court is clear the procurement was highly flawed and fraught with irregularities. The first thing any arbitrator would look at is the legalities and processes regarding the project’s inception, especially tendering and procurement.

A third and more Machiavellian option would be for the Chinese to leak into the public domain the details and figures of the beneficiaries — so to put it into corruption parlance. Undoubtedly, the full details of the relevant bank transactions and payments are somewhere. Given the size and enormity of this Sh500 billion project, one can conclude that the kickbacks were considerable.

Whether the government comes clean on such an issue or not, the public will be treated to a galaxy of exposures. And this could well be the mother of all scandals. The government, and China Road and Bridge Corporation are caught between a rock and a hard place. Whichever way, forward or backward, will be a minefield.

With the project only two-thirds finished, for it to fulfil its ‘dream’ role of being the seamless link to inland Eastern Africa, it must get to Uganda and beyond. But it is marooned at some waterhole outside Naivasha.

Maybe the best way to get the government take its head out of the sand on this is for Kenyans of every rank and file to make it clear to it that it’s no longer business as usual on the SGR. After all, we have spent a fortune on it and it makes sense to see how we can make it work and even pay its way in time.

Mr Shaw is an economic and public policy analyst. [email protected].