Tanzania’s Controller And Audit General (CAG) slammed the terms of a loan agreed with Standard Chartered Plc for raising the cost of a railway project by millions of dollars.
The lender, three years ago, agreed to arrange a $1.46 billion loan for the construction of a section of a railway network, on condition that the government would hire Turkish contractor Yapi Merkezi, according to a review by the National Audit Office of Tanzania.
The arrangement helped to secure two tenders for Yapi Merkezi and increased the cost of construction per kilometer by about $1.3 million and $1.6 million respectively, partly “due to uncompetitive procurement,” the auditor’s office said in a report posted on its website. The deal was made possible by effectively circumventing procurement rules, according to the report.
Representatives for Standard Chartered’s Tanzanian unit and Yapi Merkezi declined to comment.
The audit report comes as Tanzania’s President Samia Suluhu Hassan calls for efficiency in the use of national resources for development. In a recent speech, she reprimanded officials who submitted a significantly higher bill for procuring planes for the national carrier.
In December 2021, Yapi Merkezi signed a $1.9 billion contract with the Tanzanian government to design and build 368 kilometers (240 miles) of rail network at an average cost of $5.2 million per kilometer. In July 2022, it signed another deal of $900 million to build a 165-kilometer section at approximately $5.5 million per kilometer.
Other sections of the railway network, awarded after a competitive bidding process, are being built at costs of between $3.9 million and $4.6 million per kilometer, according to the audit findings.
The two Turkish firm’s contracts, awarded without competitive bidding, were pricier despite having a lower scope of work, the auditor’s office said in the report.