Two Chinese Firms operating in Malawi are on World Bank Blacklist

Two Chinese construction companies whose contracts documents have become a subject of civil society audits following exposure of mediocrity in their workmanship were not supposed to be awarded the contracts if correct due diligence processes were followed.

China Geo Engineering Corporation (CGC) and China State Construction Engineering Corporation (CSCEC) continue to enjoy their rich vein in form in the Malawian construction industry despite the companies being on World Bank corruption and fraud blacklist, Nyasa Times can reveal.

The two companies allegedly colluded with local companies in the Philippines to rig the bidding of road projects partly financed by the international financing institution, according to a World Bank investigation report in 2009.

Both companies’ management refused to comment on the matter when contacted by Nyasa Times.

The World Bank barred CSCEC and CGC for a period of 6 and 5 years, respectively, from participating in projects financed by the bank.

In 2004, CSCEC, China’s largest building contractor, was also blacklisted by the Department of Public Works and Highways for six months over alleged violations of the procurement law.

CGC and CSCEC protested the World Bank decision, but the companies – along with others on the list who contested – lost their appeals at the bank’s sanctions board.

“Under the cartel’s system, bid prices were dictated by the cartel leadership; uncooperative bidders were forced out of the process before bids were submitted; winners were prearranged; and losing bidders, which in some cases participated to avoid displeasing influential members of the cartel, were compensated for their participation,” read the World Bank IVP 2009 annual report.

Back to Malawi, the two companies appear to be favourites of the Malawi government as they now dominate big projects worth billions of Kwachas, raising eyebrows over how they make inroads to Capital Hill’s main bedroom.

CGC for example has been has a deal to construct a 20-kilometer Ntcheu-Tsangano road at a project cost of K6.6 billion while CSCEC is the company behind the Karonga Water Supply project whose project cost is valued at $15.6 million.

The Karonga Water Supply project, however, is moving at a snail’s pace as mobilization of equipment was delayed and that the project is wallowing in logistical challenges.

An engineer working for one of the biggest private companies said in an interview that the continued engagement of the two companies by Malawi government simply shows that the country lacks the much-needed adequate capacity to conduct due diligence checks on foreign companies before awarding them contracts.

He also speculated that the awarding of the contracts could also signal the fact that corruption is taking center-stage as the blacklisted companies want to be shielded in a veil of secrecy.

This week, a decision by the Lesotho government to award CGC a $77million road construction has raised fears that the Ministry of Transport and Public Works was not conducting adequate due diligence checks on foreign companies before awarding them contracts.

The Ministry recently awarded CGC a deal for the construction of the Monontsa-Marakabei Road without an open tender process and the decision has sparked strong protests from the Consortium of Lesotho Contractors which has since threatened legal action to halt the deal.