[Cancelled] CSCEC provides supplier’s credit worth CFA 50 billion for PK12-PK105 Road Rehabilitation Project (Linked to Record ID#60366)

[Cancelled] CSCEC provides supplier’s credit worth CFA 50 billion for PK12-PK105 Road Rehabilitation Project In April 2018, the Government of Gabon’s Ministry of Equipment and China State Construction Engineering Corporation (CSCEC) signed a commercial (EPC) contract worth $183 million (or CFA 95.4 billion or RMB 1.17 billion) for the PK12-PK105 Road Rehabilitation Project.

It was originally envisaged that the Government of Gabon would secure a China Eximbank loan to finance this commercial contract.

However, the Government of Gabon had not yet secured a China Eximbank loan agreement at the time that the commercial contract was signed, so CSCEC agreed to ‘pre-finance’ the commercial contract by issuing a supplier’s credit worth CFA 50 billion to the Government of Gabon.

CSCEC also reportedly insisted upon a contractual clause that conditioned the start of road construction upon the Government of Gabon repaying its outstanding debt obligations related to the construction of the Libreville Sports Palace (see Record ID#60366) and the repair of the Gabonese embassy in China (two projects that were previously undertaken by CSCEC).

The purpose of the project was to rehabilitate a 93 km section of National Route 1 (RN1) between Libreville (the capital of Gabon) and Ndendé (a town and the capital of Dola Department in Ngounié Province within southern Gabon).

The starting point of the road, which is considered to be the most important north-south transportation channel in Gabon, is PK12 and the ending point is PK105.

The project was divided into four sections (or ‘lots); Lot 1 runs from PK12 to PK24.5 (Nkok); Lot 2 runs from PK24.5 to PK40; Lot 3 runs from PK40 to PK74; and Lot 4 runs from PK94 to PK105. Wuhan Comprehensive Transportation Research Institute Co.

Ltd. was the contractor responsible for project design and CSCEC was the contractor responsible for project implementation.

In May 2018, China Eximbank reportedly rejected the Government of Gabon’s loan application for the PK12-PK105 Road Rehabilitation Project. However, CSCEC decided to proceed with project implementation. After CSCEC commissioned Wuhan Comprehensive Transportation Research Institute Co. Ltd. to lead the design of the project on April 20, 2018, Wuhan Comprehensive Transportation Research Institute Co.

Ltd. dispatched personnel to Gabon to carry out the design work on April 30, 2018. A preliminary project design was drawn up on May 19, 2018. Then, between May 19, 2018, and May 21, 2018, staff from Wuhan Comprehensive Transportation Research Institute Co. Ltd. conducted detailed on-site surveys for the PK12-PK24 section of the road project.

Between June 5, 2018, and June 6, 2018, staff from Wuhan Comprehensive Transportation Research Institute Co. Ltd. conducted detailed on-site surveys for the PK24-PK40 section of the road project. Two days later, on June 8, 2018, the design team from Wuhan Comprehensive Transportation Research Institute Co.

Ltd. submitted an engineering feasibility study report (Part A). Between June 10, 2018, and June 12, 2018, staff from Wuhan Comprehensive Transportation Research Institute Co. Ltd. conducted detailed on-site surveys for the PK24-PK60 section of the road project. It should be delivered by the end of 2018.

Lot 1 construction activities commenced on July 27, 2018.

It was originally envisaged that the project implementation period would run for 22 months between July 2018 and May 2020.

However, in early 2019, CSCEC halted work on the project due to payment failures on the part of the Government of Gabon. A meeting to discuss the matter with CSCEC took place at the Gabonese Prime Minister’s Office on March 14, 2019.

During the meeting, the Government of Gabon agreed to pay CFA 10.3 billion to CSCEC in order to reimburse it for funds that the contractor had advanced to start up the project.

It was also agreed that CSCEC would resume work as soon as it received the CFA 10.3 billion payment and a ‘project financing committee’ was established.

Then, on July 12, 2019, Gabonese Minister of Equipment Arnauld-Calixte Engandji was interviewed on a radio program (called ‘Dafrehsmorning’) and he said that ‘[w]e are trying to make [CSCEC] understand that this is none of our business, because the contract we have only concerned the PK12-PK105 road.

If the [Government of Gabon] has other debts [to CSCEC], we cannot be hostages of that.' He also noted that other financiers — including the African Development Bank — were willing to finance the project if the contractual dispute with CSCEC could not be resolved.

Less than a month later, on August 9, 2019, the Government of Gabon notified CSCEC of its decision to terminate its April 2018 commercial contract for the PK12-PK105 Road Rehabilitation Project. At that point in time, the project had only achieved a 5% completion rate (due to a lack of funding).

Then, on August 20, 2019, CSCEC sent the Government of Gabon’s Ministry of Equipment a letter requesting financial compensation.

The letter said that ‘[c]onsidering the impossibility for the moment of the mobilization of the funds of the project and without suitable proposal to solve them, we accept the termination of the contract and ask for the compensation to cover our losses suffered.’