Dam projects: Kenya’s multi-million-shilling monkey business
What you need to know:
- The shock is that we have poured billions of shillings here since 1985 for paperwork.
- Arror dam was mooted in 1985 by Kerio Valley Development Authority – even before some of Dr Ruto’s Cabinet and Principal Secretaries were born.
- While Arror was included in the list of projects in the appendix, Kimwarer was not.
Now that President William Ruto has decreed that we forgive and forget the past on Arror and Kimwarer dam scandals, we can end this chapter of sleaze and hope the eating will stop. The national gluttons have had more than enough.
Many people think that these projects, our sites of impunity, started recently. The shock is that we have poured billions of shillings here since 1985 for paperwork.
Arror dam was mooted in 1985 by Kerio Valley Development Authority (KVDA) – even before some of Dr Ruto’s Cabinet and Principal Secretaries were born.
To bring you up to speed, this was the period the French were financing Turkwel dam in the same region.
In those days, the man in charge of KVDA was Kipng’eno arap Ng’eny – one of the untouchables of the Daniel Toroitich arap Moi era and who later brought down Kenya Post and Telecommunication Corporation (KPTC).
He left KPTC with a Sh85 billion debt and a bloated workforce after hiring 15,000 semi-skilled staff – mostly from his Ainamoi backyard. These people had to be paid colossal amounts to leave.
Ng’eny was the master of impunity. His running of KPTC intrigued the World Bank and the International Monetary Fund.
Still, he masked his dishonesty by owning the prestigious Soin Arcade in Nairobi, Kapsoit Millers Ltd in Kericho, and Mid-West Hotel in Kericho.
President Mwai Kibaki took him to court over scandals at the Ministry of Water.
Back to Arror, Ng’eny first invited the Italian company, Beb Ingg Consulting Engineers, to conduct feasibility studies for a multi-purpose scheme.
As is known all over, the Nyayo-era blue-eyed boys were using dam feasibility studies to make money.
Dams, if you didn’t know, were low-hanging fruits. The classic case was the proposed Ewaso Nyiro dam (it was never built) used by Kenya Power and Lighting Company (KPLC) – Now Kenya Power – Managing Director Samuel Gichuru to earn money as a consultant even though he signed the agreement on behalf of the parastatal.
Though he is wanted on the island of Jersey to answer charges of money laundering and concealing proceeds of crime, Director of Public Prosecutions, Noordin Haji, says extradition was stopped on “medical grounds”.
So, even though Gichuru and then-Finance minister Chrisantus Okemo hid more than Sh900 million of KPLC loot in hard currency in Jersey, the UK, they might never face the law since Gichuru is said to be ailing.
I have used the Gichuru case to help us understand the Arror and Kimwarer dam projects because they were conceptualised similarly –and there were precedents in deceit.
The first feasibility study for Arror indicated that the project would cost $240 million and that there was potential to irrigate 6,460 hectares of the Arror River Basin.
The power project was to add 70MW to the national grid.
Twice in Parliament, and he must have sensed something, then-Marakwet MP Boaz Kaino complained that “many studies have been done on the same project, and every study has come up with 70MW”.
Another separate feasibility study was done on Kimwarer dam by G&G S.p.A – but ended on KVDA shelves.
While these two feasibility studies were completed in 1991 and both dams were found to be “technically feasible”, nothing was done as there was no money after donors pulled out.
That was after the bad press over Turkwel dam and the Western sanctions over president Moi’s thieving tendencies.
It was not until August 4, 2009, that the matter resurfaced at the Grand Coalition Cabinet of President Mwai Kibaki and Prime Minister Raila Odinga.
President Kibaki wanted to revive projects shelved under his predecessor.
The Ministry of Regional Development, then under Fred Gumo, tabled a Cabinet memorandum that contained proposals for the Arror dam, projected to cost Sh16.3 billion.
During that Cabinet meeting, the office of the Prime Minister was asked to coordinate the relevant ministries and agencies “and take the lead” to actualise the projects tabled by regional development authorities.
While Arror was included in the list of projects in the appendix, Kimwarer was not. It appeared in the list later.
Three more feasibility studies were carried out on Arror after the Cabinet approval, costing billions of shillings.
So though there were four feasibility studies on Arror, there were no funds to actualise the project.
Let me give you an idea of how much was paid.
One of the feasibility studies was procured on May 31, 2010 by the ministry of Regional Development from Iran’s Naqsh Tarsim Milad Consulting Engineers at Sh934.5 million.
It recommended that an earth and rock fill dam was feasible and that the land acquisition would cost approximately Sh237 million.
The letter of notification for that contract was written by then-Permanent Secretary Carey Orege, and the agreement was signed by Naqsh arsim Milad executive director, Hojjat Ashouri.
Now you have an idea of how much we pay for the feasibility studies.
Later, the Auditor-General flagged the procurement.
According to the Auditor-General, the procurement “was done without evidence it was factored in the Ministry’s annual plans and budgets”.
The report also noted that the studies carried out by China CAMC Engineering in 2012 and Water and Power Consultancy Services (India) Ltd were missing.
During the Jubilee administration of Uhuru Kenyatta and Ruto, the National Treasury allowed KVDA to take a commercial loan from a consortium of Italian banks to build Arror and Kimwarer dams.
The total amount was Sh51 billion. Some Sh10 billion was added to cover the risk of non-repayment since it was a KVDA deal.
In December 2014, the Ministry of Environment, Water and Natural Resources, under Judi Wakhungu, issued two requests for proposals for Arror and Kimwarer dams.
The request was for an infrastructure concession contract, where the contractor would charge fee to facility-users on a build, operate and transfer.
However, the government had told the bidders that there would be no “sovereign guarantee” and that they had to source a financier.
But after receiving the bids, the government on September 2, 2015 made a U-turn and abandoned its original position by issuing an addendum stating that it would provide sovereign guarantees to the financiers– in case the borrower failed to repay.
The scope had also changed from build, operate and transfer to engineering, procurement, and construction, meaning the government was funding the entire project and the private partner or the contractor was only involved in engineering expertise.
In essence, the government was going for an expensive commercial loan.
Several illegalities happened after that. First, the tender committee appointed by the KVDA had no rights to award these projects under Section 92 of the Public Procurement and Disposal Act.
It should have done so under the new Public Private Partnerships Act that commenced in February 2013.
That meant the entire tender notice as advertised in December 2014 was pegged on the wrong law and that the nine-member committee formed on March 30, 2015 to evaluate the bids had no jurisdiction to do so.
Again, while CMC di Ravenna South Africa Ltd bid and won the tender, the contract agreement was signed by another entity known as CMC di Ravenna-Itinera SPA Joint Venture Ltd, while invoices for advance payments were done by CMC di Ravenna Itinera JV Kenya Branch Ltd and paid to CMC di Ravenna Itinera JV at Intesa Sanpaolo SPA Bank in London, the UK.
While SinoHydro had been awarded the Kimwarer project, it pulled out after KVDA refused to issue it with an award letter to enable the company to negotiate with banks and allow it to submit a financial proposal.
After SinoHydro pulled out, KVDA entered into a contract with CMC di Ravenna for Arror and Kimwarer dams.
The government became the borrower for the loan – which negated the original financing model. Why the Jubilee government changed the financing model after inviting bids is unclear.
On April 5, 2017, KVDA – relying on the tender committee recommendations – signed two supply contracts with CMC di Ravenna to construct both dams.
Then KVDA realised it needed a due diligence report.
It hurriedly sent a tender team to South Africa to carry out the due diligence between April 25 and May 3, 2017, long after the contract agreements had been signed for Arror and Kimwarer.
“KVDA had, therefore, already made a decision and entered a contractual commitment and the due diligence process was a formality and was not to add any value to the contractual process,” the report by the Auditor-General said.
The National Treasury then entered two agreements with BNP Paribas Fortis S.A/N.V., Intesa Sanpaolo S.p.A, Unicredit S.p.A. and Unicredit Bank AG to finance the two projects.
In the two agreements, it was stated that the “Bank Syndicate…will benefit from an insurance policy issued by Servizi Assicurativi del Commercio Estero (SACE), an Italian export credit agency.
That meant that Kenya would pay an Italian insurance firm to guarantee the syndicate’s money.
The total amount to be paid for the two projects was €94,180,510 (Sh13.6 billion), which was to be drawn as the first utilisation of the loan. This was our first payment.
The second advance payment of $33.7 million was paid to a new entity registered in Nairobi, CMC di Ravena/Itinera JV Kenya Branch and which was neither contracted nor had a contract agreement with KVDA.
This entity was based on the eighth floor of Westside Towers.
Another advance payment of $41.6 million was approved in November 2017. More so, the farm owners were not compensated though the money had been set aside.
There is a lot of monkey business in dam projects.
But now that we have agreed to forget the past, we can pay the old Arror and Kimwarer (and Itare dam) loans, negotiate a new one and deliver the dams to the people of Marakwet.
[email protected] @johnkamau1