THE CHINESE government has been using low priced loans from the China Export Import Bank (Eximbank) to trap Namibia into heavy debt by overpricing infrastructural projects executed through its engineering firm China National Machinery and Equipment Import and Export Corporation (CMEC), Informanté has established.

According to a secret memo presented to Cabinet on 1 July 2009, CHINESE industrial giant (CMEC) quoted Namibia’s Ministry of Works and Transport an astronomical N$1,63 billion for the construction of 62 kilometres of the Oshikango-Ondangwa railway, nearly ten times the cost of a project of similar size only four years ago.
China had offered Namibia a loan of N$300 million on condition that the Namibian Government waivers all tender procedures and contracts CMEC to do the work, although the company’s quotation was 10 times more expensive than what the South African and German railway construction companies were asking for.
For the Oshikango-Ondangwa railway project, which involves the construction of 62km of rail, CMEC quoted Namibia N$773 million for the installation of rail and N$290 million for the supply of 13,200 tonnes of rail, far exceeding the N$300 million loan advanced by Eximbank for the project.
Compared to other railway construction companies which have built railways in Namibia, CMEC’s cost for the project was inflated by up to 900%. For instance, CMEC quoted Namibia N$12,468 per metre for railway installation, while Lenning Rail Services of South Africa, which has done installations in Namibia before, quoted N$1,839.00 per metre for the same installation.
Railway experts from the Directorate of Railways in the Ministry protested against the cost, saying it was exorbitant and was not in the national interest, after which CMEC agreed to review it from N$1,63 billion to N$600 million and then to N$597 million.
Since the quote was still far above that of Lenning Rail Services, which quoted N$114 million, the Ministry of Works then proposed that the quote be reviewed down to US$50 million,   which CMEC said was “unacceptable”.
“Upon informing the Chinese company (CMEC) that the Ministry would now opt for other sources of finance, the Chinese offered to supply rails for US$23 million, and thereafter decided to accept to supply the rails and construct permanent way for US$50 million, which they initially refused,” reads the memo.
Asked why Namibia was opting for CMEC with its astronomical charges for the same job, Minister of Works and Transport Helmut Angula said the Chinese government had offered Namibia a N$1-billion loan on condition that it appoints a Chinese company to execute the project, adding that the terms of the Chinese loan were ‘favourable’.
“The other companies have no money to offer us. If they offer me somewhere to borrow at an equivalent rate, I would take it. The money (from Eximbank) is borrowed at 4% interest plus or minus a five year grace period. I must borrow on affordable terms,” said Angula.
He added: “We were offered a soft loan of N$1-billion, plus or minus. Out of that we have several projects including the rehabilitation and upgrading of Oshakati Hospital, rehabilitation of the Institute of Pathology, and we are still indentifying other projects.”
Angula said the N$1-billion loan from China would also be used for the rehabilitation of other sections of Namibia’s railway network, the purchase of the controversial customs X-ray scanners for the Ministry of Finance and electronic filing systems for the prime Minister’s office.
“It is from that N$1-billion that the funding of all the projects must be sourced. For each project the government of China will appoint a Chinese implementing company including CMEC. The Chinese company is selected and appointed by the government of China.”
Highly placed diplomatic sources this week complained that developing countries, Namibia in particular, were paying China too much for capital projects, especially in the wake of the customs X-ray scanners scam, in which a Chinese manufacturer Nuctech quoted Namibia US$55 million and paid a Namibian consultancy company US$12 million (N$120 million), ostensibly for consultancy services.
“This is the new capitalism, China now knows how to do business like a typical capitalist,” said a Windhoek-based diplomat, who declined to be named for diplomatic reasons.