Kimwarer scam wake-up call to probe all single-sourced projects

What you need to know:

  • Our budget has been reduced to a vendor-driven affair, where influential individuals push their pet projects for personal gain.

  • If as a big foreign contractor you can collude with the local political elite to dump a project on the government. The Chinese have become masters of the game.
  • And, many export-import entities do not require that the contracts they back must go through competitive bidding.

It is good President Uhuru Kenyatta cancelled the scandal-ridden Kimwarer Dam project. Despite that, taxpayers have been left with massive dollar-denominated liabilities on their head, which they have to pay.

All manner of unsubstantiated figures purporting to portray the extent of public indebtedness and the money lost in the scandal have been flying around. I prefer to go with the numbers which the suspended Treasury Cabinet Secretary, Mr Henry Rotich, disclosed publicly in a statement on January 26 this year.

BORROWING

First, we contracted a finance facility that commits us to make a massive Sh23 billion advance payment to contractors. According to the Treasury, we released Sh3.5 billion for Kimwarer on November 6, 2018.

Secondly, we have already paid Sh5 billion to the Italian export credit agency SACE. Thirdly, we have released more billions for all manner of fees — including commitment, management and agency fees.

The Director of Public Prosecution has also disclosed in a public statement that an additional borrowing of Sh40 billion over and above the principal was committed to advance interest payments on the loans for both Kimwarer and Arror dams.

What lessons have we learnt about the current state of play of the corruption game in Kenya from Kimwarer and Arror?

First, these two scandals offer a gripping lesson about the hypocrisy of these countries we call donors.

We have seen how Western countries and China have turned their export-import agencies into institutions for underwriting corruption in Africa. Indeed, SACE is at the heart of these highly questionable transactions.

ADVANCE PAY

Granted, SACE, like export-import agencies in other countries, was established to provide insurance services to Italian companies doing business abroad against risks such as not being paid.

The trends you will observe in Africa is that export-import agencies are allowing their companies to bribe their way into getting contracts in Africa and other poor countries and to get away with murder.

The ordinary man and woman in Africa ends up paying the price in the form of massive debts for overpriced and poorly planned projects.

There are lessons from the Kimwarer saga. We can see clearly why international contractors and export-import agencies prefer financial deals that come with huge advance payments. Is it not ironic that billions of taxpayer shillings were released before a spade had been lifted?

Is it not incredible that the Treasury was prepared to release billions of shillings to that broke Italian contractor despite the fact that even something as rudimentary as acquiring the land where the dams were to be built had not been done?

And is it not the height of irony that the Treasury was moving with alacrity to pay the firm billions of shillings despite the fact that the Kenya Forest Service was yet to degazette the land on which the dams were to be built?

ENJOY BILLIONS

I now agree with the academics who argue that international contractors prefer opaque procurement contracts with provisions for large advance payments because corrupt elites are keen to access kickbacks and backhanders early enough.

President Kenyatta was right in cancelling Kimwarer but the horse had bolted. The European creditors are at a stronger position.

As a category of payments which the government has to make, debt service is a first charge on the Consolidated Fund. Put simply, servicing foreign debts comes as a priority and must be done first even before all appropriations by Parliament. The repayments on the borrowings we have committed for Kimwarer and Arror are almost guaranteed.

International contractors love arrangements with a large provision for advance payments so that they can sit back and enjoy the billions for months even as the government struggles with sticky issues such as compensation for land and resettlement of the former landowners.

The third lesson is the distance the political elite can go in abusing the budget. Our budget has been reduced to a vendor-driven affair, where influential individuals push their pet projects for personal gain.

BAN MoUs

If as a big foreign contractor — you have good contacts within export import companies in your country — you can collude with the local political elite to dump a project on the government. The Chinese have become masters of the game.

And, many export-import entities do not require that the contracts they back must go through competitive bidding.

That is how we have ended up with too many overpriced and expensive projects and why our external debt register is saddled with numerous expensive commercial debts.

The State should ban all MoUs and commercial agreements signed by ministers. That is the only way to ensure that another Kimwarer does not happen.