The summoning this week by the Ethics and Anti-Corruption Authority (EACC) of all directors of Kenya Power to answer to allegations of unlawful interference in procurement at the company is a big scandal.
We can only wait and see how the investigations will pan out. But when you read the EACC letter and the framing of the summonses, you learn a lesson about the corporate governance of parastatals.
The issue at stake boils down to distribution of power and demarcations between the roles and functions of a board and management of the parastatal; that is, how far directors are allowed to go when it comes to making decisions concerning procurement of goods and services.
To me, the summoning of the directors by EACC is the height of irony. A visitor who has just arrived in Kenya may be forgiven for thinking that the management of Kenya Power has all along been doing a sterling and transparent job at procurement and that this is why the EACC is moving to tame meddling by directors.
It is as if the management has been procuring critical inventory so well that we have to restrict the role of the directors to merely approving a broad procurement plan at the beginning of the financial year. That they shouldn’t engage in constant oversight and vigilance over procurement.
I don’t claim knowledge in interpretation of legal text. Nonetheless, I can’t wait to hear how the EACC sleuths will interpret Section 25 of the State Corporations Act on accountability of parastatal boards.
Organised corruption in management of procurement of critical inventory such as meters, transformers and electricity poles is at the heart of the rot and misgovernance at Kenya Power. Entrenched corruption in the company’s procurement department is how the company has piled dead stock running into billions of shillings in its stores and warehouses.
The evidence of that is laid bare in its latest audit report. The external auditors found that billions of shillings worth of the equipment has lain in stores for years. They also cited slow-moving or obsolete inventory as a leading contributory factor to the utility’s dwindling financial fortunes.
Last year, the company was forced to chuck out a whopping Sh3.2 billion from its books in provisions to cover the mess.
Because of the power and influence of the corruption lords and networks that have, for years, controlled and driven Kenya Power’s Sh55 billion-a-year procurement budget, the buying spree will not stop even in the face of clear evidence of rot in its procurement processes.
I recently came across a new report from an investigation by the company’s internal auditors that analysed and compared meter statistics from the store databases with data from its customer database. It revealed huge gaps between what was purchased and what was installed.
The data also revealed that the company has hundreds of thousands of faulty meters in stock. The investigation made a strong case for a forensic investigation to confirm the true technical conditions of the pile of faulty gadgets to determine whether or not some of them could be fixed and returned to customer premises.
Even more damning, the analysis of billing and consumption patterns in the past two years showed that more than two million meters installed were either on zero vending in the case of pre-paid meters or zero consumption for post-paid meters.
The meters don’t exist at customer’s premises but are gadgets that had been clandestinely sold to private contractors after being fraudulently validated in the company’s databases.
The investigators suspect that the private contractors — mostly former employees — hold huge stockpiles of pre-paid meters and that there has emerged a black market where these contractors are doing brisk business, replacing post-paid meters, which remain in the system, with the pre-paid meters stolen from its stores.
This is how the company has ended up in a situation where hundreds of thousands of pre-paid meters cannot be found in locations where they were validated in the system and also all illegal connections have ‘valid’ meters.
When this new board was appointed, one of the first decisions it took was to order an independent external forensic audit on the supply chain. The Public Investment Committee of Parliament blocked it. Shortly thereafter, the Auditor-General also blocked it. Does it surprise anyone that the EACC has now jumped into the fray?
My parting shot is a remark by a leading international anti-corruption scholar Susan Rose-Ackerman, and I paraphrase: Tough, independent anti-corruption agencies can be potent tools but there must be checks on their ability to be used by corrupt networks.
More than ever before, Kenya Power needs an agile and engaged board.