NHIF

The National Hospital insurance Fund (NHIF) building in Nairobi.

| Dennis Onsongo | Nation Media Group

Broke Webtribe sues NHIF for Sh783m for pay system

What you need to know:

  • Webtribe Ltd has demanded Sh783 million for a digital payments system it sold to the state corporation three years ago.
  • Webtribe has claimed a compensation package from the courts for damage caused by the alleged delays in paying for the system.

Had the National Hospital Insurance Fund (NHIF) stuck to its plan to buy an integrated digital payments system in 2014, its operations would have run smoothly and taxpayers would have been saved billions of shillings that have now gone down the drain.

For the second time in a span of seven years, taxpayers are at risk of coughing up more than double for a digital payments platform to streamline the NHIF’s operations, and in turn extend the run of public finance mismanagement at the state-owned underwriter.

Webtribe Ltd, the firm that has been running NHIF’s integrated revenue collection services since 2014, has demanded Sh783 million for a digital payments system it sold to the state corporation three years ago.

When the NHIF agreed to buy the system from Webtribe -- the firm behind the Jambopay digital payments brand -- the transaction would have cost Sh495 million that was to be paid over a two-year period.

But Webtribe has claimed a compensation package from the courts for damage caused by the alleged delays in paying for the system, which has pushed the amount to Sh783 million.

If successful, the claim could rise to more than Sh1 billion, as Webtribe has asked the courts to slap interest onto any award from the courts.

That would mean that the NHIF will have paid double the cost for the system, shortly after paying nearly four times the purchase price to hire the same platform between 2014 and 2018.

For the taxpayer, it opens the risk of having paid more than Sh3 billion for the system.

Interestingly, at the time the NHIF was buying the system, the Directorate of Criminal Investigations (DCI) was combing through hundreds of document pages to find how and why the state-owned insurer paid Sh1.88 billion to hire Webtribe’s system.

The investigation was hinged on the fact that the NHIF had, in 2014, advertised a tender for the purchase of a digital payments system, but handed Webtribe a three-year contract for collection of revenue using the privately owned firm’s Jambopay platform.

Mismanaged public funds

And when the contract expired in 2017, the NHIF twice extended Webtribe’s contract before finally opting to procure a system that it would own.

The NHIF’s purchase of the system in 2018 all but confirmed what the DCI detectives had been looking for – evidence that the state insurer had grossly mismanaged nearly Sh2 billion of public funds for four years.

Under the purchase contract, Webtribe would install the system over a two-year period, and the funds would be released in four tranches pegged on agreed milestones.

The contract was signed on June 6, 2018.

Six months later, NHIF chief executive Geoffrey Mwangi and his predecessor Simon Kirgotty were charged with abuse of office and violation of procurement and public finance management laws for entangling the state-owned insurer with Webtribe.

Webtribe directors Danson Muchemi and Robert Muriithi were among the 17 people charged with misuse of public funds, but Director of Public Prosecutions (DPP) Noordin Haji later dropped charges against the two and converted them into witnesses.

In its case filed at the Milimani High Court, Webtribe argues that the state insurer has refused to pay, or even attend negotiation meetings over the debt.

Before Webtribe and its directors were turned into witnesses as part of the charges being dropped, Chief Magistrate Douglas Ogoti had ordered the firm to continue offering its services to the NHIF as stipulated in the purchase contract.

One month before the Jambopay owners were charged, they invoiced the NHIF for Sh148.5 million as the first tranche of payments under the two-year deal. NHIF did not pay.

A second invoice of Sh99 million was not paid either.

Collecting revenue

On March 1, 2021 Webtribe sent a third invoice of Sh49.5 million which was also not honoured.

Webtribe now says in court papers that it contemplated halting services to the NHIF, a move that would have hurt thousands of patients across the country, but that the firm was forced to abide by court orders to continue collecting revenue on the state insurer’s behalf.

Neither the NHIF nor Attorney General Paul Kihara Kariuki has responded to the suit.

“The challenges and frustrations experienced in performance of the contracts above referred to notwithstanding, between December 28, 2018 and September 23, 2020, it (Webtribe) collected for the NHIF Sh28.5 billion. Webtribe has incurred heavy costs in running the system, collecting revenue for NHIF including personal costs, support and maintenance costs and payments to third party service providers, including internet service providers, trustees of the collected funds, rent and rates, network maintenance and network security,” Mr Muchemi says in court papers.

He says that the NHIF’s non-payment has crippled the firm, and it was forced to lay off workers to stay afloat.

One of the firm’s workers, Mr Joseph Gathuka, last year sued Webtribe for failing to pay him his dues of Sh1.2 million after the firm laid him off.

Aside from the terminal dues, Mr Gathuka is claiming Sh1.075 million in unpaid salaries between December, 2019 and April, 2020 when he was declared redundant.

Mr Muchemi, in that case, said that Webtribe has been paying laid off staff in installments of Sh70,000 every month.

In the case against the NHIF, Webtribe says that there are several other former workers that are owed terminal dues and could follow Mr Gathuka’s route.

Webtribe had initially demanded a blanket Sh804 million compensation from the NHIF, but lowered its claim after analysing costs incurred after its contract with the NHIF expired in September, 2020.

Additional reporting by Nasibo Kabale