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Home » News » Business » African Development Bank blacklists Sinohydro

African Development Bank blacklists Sinohydro

Publishing Date : 19 June, 2017

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Integrity in Development Projects: African Development Bank and Sinohydro have reached a settlement agreement on fraudulent practices.  Sinohydro Corporation has agreed to a comprehensive verification of its compliance program by the African Development Bank following the detection of a fraudulent practice in tendering for works contracts in Uganda.


Sinohydro has been awarded contracts in Botswana before and had a protracted conflict with the Botswana Government over the construction of the Sir Seretse Khama International Airport. The project was marred in controversy due to cost overruns, delays and technical glitches.


On June 15th, 2017, the African Development Bank Group (AfDB) announced the conclusion of a settlement agreement with Sinohydro Corporation. An investigation conducted by the AfDB’s Office of Integrity and Anti-Corruption established that Sinohydro Corporation engaged in a fraudulent practice in bidding for works contracts in the context of the AfDB-financed Road Sector Support Project in Uganda.


As part of the settlement, the AfDB imposes a conditional non-debarment for a period of three years, subject to the company enhancing its global corporate compliance program within that period to the institution’s full satisfaction. The AfDB will verify the adequacy of Sinohydro Corporation’s compliance framework and the robustness of its implementation prior to any release decision.


In addition, Sinohydro Corporation committed to cooperate with the Office of Integrity and Anti-Corruption in its investigations of unrelated cases of misconduct in AfDB-financed projects. The period of conditional non-debarment may be reduced to 24 months if Sinohydro Corporation complies with all conditions of the agreement early.  
 

“The purpose of the Bank’s sanctions regime is in equal measures the deterrence of sanctionable practices such as fraud and corruption and the rehabilitation of entities found to have engaged in such”, says Anna Bossman, Director of the AfDB Office of Integrity and Anti-Corruption. “Engaging with companies and ensuring the implementation of robust corporate compliance safeguards is key to avoid recidivism”.


In 2013, Sinohydro Corporation is said to have participated in a tender for works contracts under the Bank-financed Road Sector Support Project in Uganda. The investigation by the Office of Integrity and Anti-Corruption found that Sinohydro Corporation misrepresented its prior project experience by using not yet successfully and substantially completed contracts as references.  


The Office of Integrity and Anti-Corruption of the African Development Bank Group is responsible for preventing, deterring and investigating allegations of corruption, fraud and other sanctionable practices in Bank Group-financed operations.  The investigation by the Office of Integrity and Anti-Corruption of the African Development Bank was conducted by Mohamed KONNEH and Esther Lynn MHONE. African Development Bank staff and the general public can use the Office of Integrity and Anti-Corruption secured hotlines to report sanctionable practices within the Bank or operations financed by the Bank Group.


Since 2006, investment from China has rapidly increased in Africa. According to a World Bank report in 2008, most of the Chinese investment goes to the infrastructure sector, mostly hydropower, railroad, and telecommunications. The hydropower projects are widely blamed for negative impacts on local community and natural environment.

SINOHYDRO AND BOTSWANA GOVERNMENT

Fed 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.


At some point 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 then 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, disputed 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. At the time of termination of the contract, Sinohydro had completed approximately 90 percent of the project and had been paid about P527 million. MIST Permanent Secretary, Dikagiso Mokotedi had told the Public Accounts Committee that Government’s rushed tendering process for the expansion of the Sir Seretse Khama International Airport (SSKI) was the major factor that led to poor management of the project and its subsequent delays. 


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