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Now it‘s Tanzania: More Africa graft trouble for China biz

China President Xi Jinping and Tanzania President Jakaya Mrishro inDar es Salaam in March 2013The former head of the Tanzania Ports Authority and his deputy were charged Monday with fraudulently awarding a bloated contract worth more than $523 million to a Chinese company to help expand a city’s main port.

The port expansion was abandoned earlier this year after officials said costs billed by China Communication Construction were double those for similar port projects, the Thomson Reuters Foundation reported Tuesday.

Last year, the Zambia government terminated a $210 million closed circuit television camera contract with China’s ZTE because of alleged corruption.

A government source said if the contract for traffic control had continued, Zambia could have lost $100 million through inflated billings.

The contract had been awarded “without an open tender procedure, raising suspicions of corruption,” reports said.

In Tanzania, the former chief of the Ports Authority, Efraim Mgawe, and his deputy Hamid Koshuma were charged with awarding the mega-contract to the Chinese company in December 2011 without obtaining competitive bids.  

Mgawe and Koshuma denied the charges and were released on bail.

In 2012, ZTE and Huawei Technologies were convicted of corruption in Algeria. The companies were banned for state telecoms tenders there for two years for bribing executives at state-owned Algérie Télécom.

In that case, three Chinese executives were sentenced by an Algeria court to ten years in prison in absentia for paying $10 million in bribes through offshore accounts in Luxembourg.

Authorities in Tanzania discovered the fraud, they said, when they saw the final price of the contract compared with earlier cost estimates for the port project.

Tanzania Transport Minister Harrison Mwakyembe said, “We also discovered that so many other things were not included in the contractor’s plan, which made us realize that the contractor had no good intention.”

In 2011, Uganda blocked a $106 million fiber-optic cable funded by a loan from the Import and Export Bank of China was stopped because of alleged inflated costs and the use of incorrect cabling.

China’s foreign investment in Tanzania rose from $700 million in 2011 to $2.17 billion last year.

Most of the investments are in infrastructure — railways, ports, buildings, road construction, gas pipelines and wind power farms.

In Kenya, opposition lawmakers accused the government in 2011 of ignoring tender procedures when it awarded Pan African Network Group of China a contract for the country’s digital TV signal distribution.”

Western companies and their governments complain that China turns a blind eye to bribery of foreign officials to garner international business.

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Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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