Chinese company wins legal case against Namibia over $500m airport expansion

A Chinese construction firm has successfully sued the government of Namibia after its successful bid for a $500m airport expansion project was annulled.

Namibian President Hage Geingob ordered the cancellation of the contract to expand Hosea Kutako International Airport in December 2015, citing irregularities. This prompted the winning bidder, Anhui Foreign Economic Construction Group, to challenge the decision in the country’s High Court in February 2016. 

Earlier this month a High Court judge ruled the government’s cancellation to be unlawful.

Anhui Foreign Economic Construction Group (AFECC), a construction and mining conglomerate, won the tender for the refurbishment and extension of Hosea Kutako International Airport, Namibia’s largest, in December 2015.

AFECC won the contract in an open competition. At the time, the price was put at $366m, however a fall in commodity prices led to a collapse in the value of the Namibian dollar, which is linked to the South African rand. This inflated the price to $500m, or about 9% of Namibia’s GDP.

This led to reports in The Namibian newspaper that AFECC had inflated the tender price and paid kickbacks to unnamed officials.

The award was then cancelled by government the on the grounds that there were "irregularities" in the way it was awarded by the Namibia Airports Company. Hage Geingob, the president of Namibia, said he wanted the contract to be retendered to make it clear that the correct procedures had been followed.

Wang Hao, the chief executive of AFECC’s African operations, responded angrily to the reports. He said: "They are lies and slander and have caused damage to our international reputation and economic loss. For that we are going to take legal action against The Namibian."

He added that his company had won the tender because it had presented an "impressive, futuristic design that had won accolades at the International Aviation Forum in Canada".

The High Court’s ruling, issued on 9 September, said: "The instructions purportedly given under section 9 (1) (b) of the Airports Company Act of 1998 by the Minister of Works and Transport Alpheus Naruseb … are unlawful and therefore invalid and set aside."

President Geingob said the government would appeal the court’s ruling. If he fails, AFECC is likely to go ahead with the project.

Kutako International Airport handles fewer than 1 million passengers a year.

It has one terminal with one departure and one arrival hall and few services or amenities.

AFECC is based in the city of Hefei in Anhui Province, to the west of Shanghai. It operates mainly in the international construction, mining, hospitality, retail and jewellery sectors. It has been particularly active in Africa in recent years.

Meanwhile, another Chinese construction company recently rebuilt the terminal of Walvis Bay International Airport. This $8m project was carried out by New Era Investments and was opened by President Geingob on 22 July. It will be able to accommodate 1 million passengers a year.

Image: Room for growth: Hosea Kutako International Airport seen from the air (Petter Lundkvist/CC BY-SA 2.5)

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  1. Why sign a binding contract before fully scrutinising every single element of it to uncover any serious discrepancies of whatever nature! For instance why was the problem of fluctuating currency values not been catered for in the contract! The onus of due inspection and care lies with the client and the professional team he employs to serve his best interests before binding himself via signing and to no avail afterwards!!

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