Chinese money grab

While two ministers have voiced stern opposition to the deal between the Roads Contractor Company (RCC) and Chinese firm Jiangsu Nantong Sanjian, the parastatal's board chairperson Fritz Jacobs is adamant they have done nothing wrong.

The beleaguered RCC, which is staring down the barrel of a meltdown, has increasingly come under fire for arranging off-balance sheet financing from Jiangsu to the tune of N$580 million.

Repayment will take place in the form of participation by the Chinese company in current and other identified future projects for “five years or earlier”.

The 47% stake that will go to the Chinese firm in these projects is worth an estimated N$2 billion.

Off-balance sheet financing means a company does not include a liability on its balance sheet.

Jacobs remained resolute this week that there was nothing untoward about the financing agreement with the Chinese firm.

This follows a report in which line minister John Mutorwa, who heads works and transport, was said to be upset by the RCC's marriage to the Chinese company and called the deal “a big transgression”.

According to a profile on Bloomberg, Jiangsu Nantong Sanjian provides special trade contracting services.

Speaking on the matter this week, Jacobs said his board was guided by a directive to turn the RCC around and that it was also acting in the best interests of the civil engineering company, which is fully owned by government.





Cabinet had reversed an earlier decision to place the RCC under a judicial management and instead gave the board a directive to find a solution to the public entity's financial woes.

“Let us consider the merits, substance, legal provisions, fiduciary duties and the cabinet decision, which authorised the RCC to conclude a suitable self-sustaining solution,” said Jacobs.

He also said his board's responsibility was now to steer the RCC into prosperity.

When asked if there was a plan B, in light of the opposition to the Chinese deal, Jacobs would not comment.

“We remain focused on the substance and prudential aspects of the cabinet authorisation,” said Jacobs.

Mutorwa nonetheless hopes cabinet will collectively make a decision on the future of the RCC that would not adversely affect its employees, when he was approached for comment by the media this week.

“I hope that cabinet will make a decision that will benefit the RCC and its people. As the RCC is the total of its many employees who are not guilty of any transgressions hitherto, it is my hope and wish that the government's final decision will not adversely or negatively affect the workers,” he said.

The agreement with Jiangsu will see the RCC get N$580 million for its operational plans. The partnership will extend over 14 years, and has a five-year repayment period at 15% interest per year.

The agreement also allows Jiangsu to participate in RCC projects for five-years after its long-term partnership comes to an end.

The arrangement also states that Nantong Sanjian would become the RCC's major partner in the projects.

“The repayment by the RCC to Jiangsu Nantong Sanjian shall be executed in the form of participation to the maximum of 47%, and the RCC shall execute 53% of its current and other identified future projects for five years or earlier,” the agreement said.

The 47% stake that will go to the Chinese firm is worth an estimated N$2 billion of the RCC's current projects worth a total of N$4.1 billion.

The N$2 billion could be higher since the agreement allows the Chinese company to participate in future projects within five years.

According to the contract, this ensures that losses to Jiangsu are minimised.

“The projects shall be executed in such a manner that profitability is achieved for each project so as to ensure fair and reasonable returns for Jiangsu to recoup its funding,” the agreement said.

The RCC has lucrative contracts lined up which include the Uis-Khorixas-Kamanjab road (N$2.7 billion), Gobabis-Aminuis-Aranos road (N$630 million), the Swakopmund-Henties Bay-Uis road (N$750 million), the massive land servicing project at Goreangab in Windhoek (N$45 million) and a ministry of environment project (N$24 million).

The partnership document said the RCC can still enter into project agreements with other companies, as long as it does not trespass on their current deal.

The RCC also promised to assist and facilitate administrative processes for Jiangsu, such as getting work permits for Chinese nationals.

Finance minister Calle Schlettwein recently said legal provisions were “completely ignored” in the N$570 million loan agreement between the RCC and Jiangsu.

He confirmed his assertions made elsewhere that the contract was entered into illegally, because necessary provisions, not only in the State Finance Act but also in the new Public Procurement Act, as well as the Public Private Partnership Act, were not adhered to.

Moreover, said Schlettwein, some of the road contracts stipulated in the loan agreement have not been budgeted for.

“We are obliged to act and we have therefore approached the attorney-general's office for advice. We have to do that when boards take negligent decisions,” Schlettwein said.

He said the contract, which has already been signed, will have to be set aside if proven it was entered into illegally.

“If there are financial implications then those responsible must be held accountable; there must be consequences.”

OGONE TLHAGE