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The Ethiopian Roads Authority (ERA) is revising the award of part of the Mojo-Hawassa Expressway project to Keangnam Enterprises Limited following a warning from the financer, the Export-Import Bank of Korea.
The Export-Import Bank of Korea recently evaluated Keangnam’s capacity in Ethiopia and suggested that ERA put the agreement on hold until further assessment.
Sources told Capital that the project might be tendered again if the South Korean construction firm is considered “incapable of handling the project.”
Back in February 2015, ERA announced that it had selected Keangnam to construct the 37 kilometer road that stretches from Meki to Batu.
Keangnam Enterprises, which is at the center of a bribery scandal involving several political heavyweights, is under prosecution investigation on suspicion of embezzlement in its home country. Its office was raided and the probe is believed to be linked its connections with the previous government.
According to reports, out of the USD 31 million it received from overseas projects, Keangnam Enterprises allegedly misappropriated USD nine million. Most of the funding for these projects came from Export-Import Bank of Korea.
Moreover, creditor banks of the cash-strapped Keangnam turned down its petition for an additional USD 99.2 million in operating funds. The creditors, led by the policy maker Export-Import Bank of Korea, had previously poured in USD two billion for its rescue.
Stock trading of the company’s shares has also been suspended as its cumulative loss has eroded its equity capital as of March 11, 2015.
The road project, which will be financed through a loan secured from the Export-Import Bank of Korea and state funding, was expected to commence in the current fiscal year. However, Keangnam Enterprises and ERA have not signed the official contract so far.
Officials of Keangnam declined to comment on the issue saying that the issue is being handled by ERA. Officials from ERA also declined to comment on the issue saying that it is in its early stage.
The 209 kilometer Mojo-Hawassa Expressway project that will be constructed in different phases will connect the Southern Nations, Nationalities and Peoples’ Regional State (SNNP) capital of Hawassa to central Ethiopia with a comfortable toll road.
The African Development Bank (AfDB) has approved a USD 126 million credit for the first phase of the 56 kilometer Mojo-Meki section. The government will cover the remaining USD 99.10 million.
Keangnam Enterprises has been engaged in several road projects in Ethiopia in the past 16 years. The company has constructed the Mojo-Awash Arba, Ambo-Gedo, Azezo-Metemma, Hirna- Kulubi, and Alaba-Humbo projects, while the Jimma-Bonga-Mizan road project is currently being constructed.
The Chinese government and the World Bank will finance the remaining 116 kilometer toll road from Batu to Hawassa, which is the second phase of the Mojo-Hawassa toll road project.
The Batu-Hawassa project is also divided into two: Zeway-Arisi Negele and Arisi Negele-Hawassa.
This road will form a section of the cross country Mombasa-Nairobi-Addis Ababa highway project. The Mombasa-Nairobi-Addis Ababa road facility is expected to boost local agri-business and regional trade.
The existing Mojo-Hawassa road, which is dilapidated, forms the road link in the route from Cape Town to Cairo.