Tanzania auditor says StanChart demanded pricey Turkish contractor in rail loan deal

- Tanzania’s auditor general has accused Standard Chartered STAN.L of demanding that the state rail company hire a Turkish contractor who overpriced the cost of building track in a $10 billion mega-project.

The bank denied the claim and Turkish construction company Yapi Markezi could not be reached for comment.

President Samia Suluhu Hassan’s government, which is completing big transportation projects begun by her late predecessor John Magufuli, has been taking action over some past deals where corruption is suspected.

Hassan disbanded Tanzania Railways Corporation’s (TRC) board on Sunday without specifying reasons beyond ordering legal action against anyone found responsible for misuse of public funds.

In an annual audit report seen by Reuters on Thursday, Auditor General Charles Kichere said that Standard Chartered, which provided project loans to the government, pegged its involvement on the award of the tender to Yapi.

“Standard Chartered Bank ... issued terms that it would agree to be an international coordinator and lead agent on grants and loans to the ministry of finance and planning only if Yapi Markezi is selected as a contractor,” the auditor said.

On sections three and four of the line, which were covered by Standard

Chartered’ s funds and implemented by Yapi, the government paid $5.2 million and $5.5 million per km respectively, an over price of $1.3 million and $1.6 million per km, Kichere said.

Standard Chartered said it was aware of the “incorrect claim” when asked about the report, and denied that it played any role in the award of the construction contract.

“We remain committed to working with all parties involved to address any concerns that may arise and uphold the highest standards of ethics and integrity in all our business operations,” the group told Reuters in an emailed response.

The ministry of finance subsequently accepted the terms, leading to TRC awarding the contract to Yapi without competitive bidding, the auditor said.

The award to a single bidder flouted procurement regulations, the auditor said, and cost the government money through excessive pricing per kilometre of railway tracks.

“The additional costs could have been avoided,” said the audit report.

Yapi did not immediately respond to requests for comment by telephone and email.

The $10.04 billion 2,102-km rail project connecting the commercial capital Dar es Salaam on the Indian Ocean to the city of Mwanza on Lake Victoria, is being built in phases.