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CHINA STATE CONSTRUCTION ENGINEERING CORPORATION LIMITED

(601668)
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China State Construction Engineering : Fisd Cornered

10/11/2021 | 07:06am EST

Circumstances that have emerged appear to reverse the spear that the Foundation for Irrigation and Sustainable Development (FISD) Limited threw towards China State Construction Engineering Corporation (CSCEC).

Last month, on the 15th, High Court judge, Justice Manda delivered a ruling ordering CSCEC to pay an equivalent of US$2 million in a case in which FISD accused CSCEC of breaching a Strategic Cooperation Agreement.

The two companies understandably entered into the said Strategic Cooperation Agreement in which the local company was positioned to benefit from a sub-contract agreement from the expatriate contractor within a specific agreed period.

The said breach resulted into FISD withdrawing from the agreement, further accusing the international company of using it to beat policy corners of the country which require international companies to sub-contract at least 30 percent of contracts in Malawi to local indigenous companies.

However, information gathered points to the fact that the main interest of FISD was to rush for free money without spending any investment or work in the particular project, by rushing to terminate the Agreement, assert breach of contract and claim money.

When FISD was allegedly not granted access to the project site where Mzuzu University is being constructed, it transformed its frustrations into an interpretation that the main Contract is not up to give the sub-contract.

However, it is understood that the nature of the sub-contract that was to be executed by FISD was sanitary (plumbing) works and electrical fittings. These, by their very nature, are components that become executable when the structure itself has been raised.

Meanwhile, construction of the Mzuzu Library and Auditorium structures, which are currently on halt following an NCIC order, are in their foundation stages, making it pre- mature for the Sub-contractor to execute the components of his works.

While FISD Limited and China State Construction Engineering Corporation signed what they call Strategic Cooperation Agreement binding the latter to sub-contract at least 3 per cent value of it secured contract to the former, any Sub-contract remains amenable to its specific terms and conditions.

For example, the Sub-contract related to the construction of Mzuzu University contained specific terms among which included a sub-contract value of almost 30 percent of the total contract value.

An official from the NCIC speaking in strict terms of anonymity briefed that, by rushing to terminate contract without following termination procedure, FISD rendered itself amenable to legal suit for breach of contract.

"In so far as FISD rushed to unceremoniously terminate the sub-contract after being angered by events without following the procedure that may have been inscribed in the sub-contract agreement itself, it made its hands dirty and actually breached the contract itself. In this case, China State Construction Engineering Cooperation may even sue FISD for breach of contract and claim money," he said.

Falling on all fours with these views, a letter written by a legal firm, Likongwe and Company, on behalf of China State Construction Engineering Corporation has told FISD, through its legal representative Gift Nankhuni, that the Sub-Contract had its own specific terms and that China Corporation deserves the right to sue FISD for breach of that Sub-Contract.

"The Sub-Contract has its own specific terms. If you terminate that specific Sub-Contract without following the terms of that Sub-Contract, our Client reserves the right to sue FISD for breach of that Contract," the legal letter dated 26th April 2021 signed by Pempho Likongwe reads in part.

FISD has recently become famous for dubious claims around project contracts.

In November last year, Times Group published an investigative story chronicling a fraud scheme in which FISD eventually claimed a whooping K1.23 billion.

The genesis of that scheme was a project contract in which Government through the then Ministry of Irrigation and Water Development in conjunction with the African Development Bank (ADfB) contracted FISD Limited to construct gravity-fed water schemes in Ntcheu and Phalombe Districts.

FISD breached the related contract through prolonged delays in completion of the project, resulting into the Client terminating it and demanding compensation from FISD as per contract terms.

However, termination of the contract led to misunderstanding among parties involved, leading to the arbitration by the National Construction Industry Council (NCIC) which had Ministry of Irrigation as a client, NCIC as the arbitrator and Fisd on the other hand.

The arbitrator declared that the termination of the contract was fine and went further to order Fisd to pay the government K 281 million.

However, before the payment was effected, FISD obtained a court injunction stopping the Client from redeeming the money.

Under very controversial circumstances as the then Attorney General Kalekeni Kaphale argued, the court further appointed a lawyer as a new arbitrator.

This lawyer reversed the NCIC order and determined that Government should pay FISD K1.23 billion.

So far, K627 million has been paid to FISD as a result under the immediate former Attorney General Chikosa Silungwe.

Copyright Nyasa Times. Distributed by AllAfrica Global Media (allAfrica.com)., source News Service English

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Net Debt 2021 191 B 30 020 M 30 020 M
P/E ratio 2021 3,96x
Yield 2021 4,99%
Capitalization 201 B 31 446 M 31 449 M
EV / Sales 2021 0,22x
EV / Sales 2022 0,21x
Nbr of Employees 356 864
Free-Float 42,0%
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Zhi Ping Shi Chairman-Supervisory Board
Nai Xiang Zhou Chairman
Chen Jia Independent Director
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