E-Citizen scandal: Webmasters, the DCI probe that never was, and what Omtatah wants in court

Kenyans seek services at a Huduma centre. Regularisation of the eCitizen project, which has been in operation since December 2014, has threatened to crumble everything. 

In 2014, one of the key software developers in the Webmasters group of companies that built the eCitizen portal posted on social media that he planned to earn a billion shillings within five years.

The developer, a vibrant, brilliant and ambitious young man, may have just achieved his dream on account of the several local and international deals for government service automation that the Webmasters team has bagged over the years.

In the event that the billion-shilling vision has not materialised, then he is just on the cusp of achieving a feat that most people in the world can only dream about.

A few minutes past noon on Tuesday, Justice Enock Chacha Mwita was informed that Goldrock Capital, the Webmasters group and the National Treasury are engaged in out-of-court talks that could settle a vicious battle over ownership and control of the eCitizen portal that has dragged on for half a decade.

In 2019, when Webmasters first threatened to back out of the eCitizen project, a move that would have stalled hundreds of government services, its CEO, Mr James Ayugi, told various media houses that his company was demanding Sh1.5 billion compensation before handing the portal over to the government.

Government blunder

While Mr Ayugi and his firm were paid Sh70 million by the World Bank after taking the portal live, the government may have blundered in allowing Webmasters to upgrade and add thousands of government services to the portal without proper guiding principles on the project.

Last week, President William Ruto promised that in the next six months, all 5,000 government services will be accessible online, which means eCitizen will likely be a key player in the migration.
The President’s declaration may also be a pointer to why the government is willing to negotiate with Goldrock and Webmasters after a five-year-long cold war between the parties.

Lawyers representing Goldrock Capital Ltd, the firm that was kicked out of managing funds flowing from eCitizen users and which is seeking compensation for the move, confirmed that two months could be enough for all parties to reach a middle ground.

Goldrock Capital sued the National Treasury, Webmasters Kenya, Webmasters Africa and Safaricom after its access to the official 206206 mobile money wallets was revoked.

At the time, Goldrock had overseen the collection of Sh127.8 million from thousands of individuals seeking various government services.

Both Goldrock and the two Webmasters firms have since laid claim to the millions frozen in 2017.

Webmasters is also seeking court recognition that eCitizen is its intellectual property, contrary to the government’s claim that the World Bank’s lending arm – IFC – handed the portal over to Kenya.
On Tuesday, Justice Mwita was to give directions that would possibly lead to a hearing of the case in the near future.

Webmasters Kenya Communications Director Kiprono Kalya and Managing Director James Ayugi.

Webmasters Kenya Communications Director Kiprono Kalya (left) and Managing Director James Ayugi, address journalists during a press briefing at the Hilton Hotel in Nairobi in March 2019.

Photo credit: File | Nation Media Group

Busia Senator Okiya Omtatah filed a constitutional petition in which he claimed that the government ignored procurement laws when handing out funds management deals to various companies.
In 2019, his suit was consolidated with Goldrock’s case.

However, Justice Mwita has now allowed Mr Omtatah to pursue his case separately at the constitutional and human rights division of the High Court after none of the other parties opposed his request to the judge.

Mr Omtatah told the judge that he would make a formal application at the constitutional court to amend the petition.

Pesaflow Ltd entry

At the height of a storm over the collection and management of eCitizen funds in August 2017, a new company was incorporated to take over that role from Goldrock Capital, which had, apparently, been operating illegally.

Pesaflow Ltd was registered on August 24, 2017, when Goldrock Capital was in court fighting the government, Safaricom and the two Webmasters firms – the eCitizen’s developers – over control of mobile money wallets that were receiving millions from eCitizen users.

Goldrock Capital had been hired by the Webmasters group to provide a simple and transparent solution that would see eCitizen users pay for online government services, and ensure the money gets to the government’s consolidated fund account at KCB.

Webmasters Kenya developed the eCitizen portal.

The two firms — Webmasters Kenya and Webmasters Africa —under the stewardship of software developer James Ayugi, subcontracted the payment solutions work to Goldrock, but the National Treasury put an end to the lucrative deal on account that it did not approve the move.

At first glance, Pesaflow looks like a completely new entity with new faces not known to anyone in the eCitizen furore.

Evid Araka Sibi and Frank Lawrence Ochieng Weya are its largest stakeholders, owning 3,000 shares each. Charles Wambani Sewe and Larry Ochieng Agoro each have 2,000 shares in Pesaflow.

However, a deeper look into the Pesaflow shareholders reveals that the individuals worked for Webmasters Africa Ltd, which means Mr Ayugi’s group might have managed a silent coup amid the court drama sparked by Goldrock’s suit.

This means that the individuals who illegally subcontracted a private firm to manage funds on behalf of the government without permission from the National Treasury, as required by law, are still the ones that took up the role.

Despite this, Mr Ayugi has asked the High Court to rule that his Webmasters companies are entitled to the convenience fees collected.

Soon after its incorporation, the National Treasury published a gazette notice giving Pesaflow authority to manage the flow of funds from eCitizen users’ mobile money wallets to the government’s consolidated fund account at KCB. 

At the time, the fight for control of the mobile money wallets and Sh127.8 million that was frozen therein had already attracted the attention of the Directorate of Criminal Investigations (DCI).
On September 17, 2017, the DCI wrote to Webmasters Africa Ltd seeking information on five identity cards whose holders were believed to have embezzled an unspecified amount of money from the eCitizen fund's flow process.

In the letter addressed to Mr Agoro, one of the Pesaflow shareholders, detectives sought to find out the transaction history of the five individuals dating back to 2015 when the suspected fraud and embezzlement took place.

The DCI letter is part of the court file in Goldrock Capital’s suit but does not give details on how much may have been embezzled. It only states that various government ministries, departments and agencies (MDAs) had lost funds paid through the eCitizen portal.

Person of interest

Seven months earlier, the DCI had written to the government’s head of digital payments seeking information to assist its investigation into possible fraudulent issuance of driving licences through eCitizen.

The correspondence indicates that detectives may have treated Webmasters Africa as a person of interest, as it sought the contracts between the government and the private firm.

Mr Mwangi responded to the letter and handed the DCI service level agreements between the Government Digital Payments Secretariat (the eCitizen task force) and Webmasters Africa.
The investigation did not lead anywhere, and nobody has been charged with any crime involving the portal.

As the parties in the Goldrock case were still haggling over control of the mobile money wallets, the controversies over eCitizen seem to have attracted the attention of Mr Omtatah – Kenya’s famous serial litigator and activist-turned-senator.

Mr Omtatah filed a fresh suit at the Milimani High Court’s constitutional and human rights division raising questions about the Sh50 convenience fee while pointing out potential breaches of procurement laws.

The Busia senator argues that the seven digital payment options on the platform – M-Pesa, Airtel Money, Visa Card, MasterCard, Eazzypay, E-Agent, KCB Cash and Equity Cash – were single-sourced as no public procurement was ever done as required by law.

Okiya Omtatah

Busia Senator Okiya Omtatah.

Photo credit: Pool I Nation Media Group

He adds that several service providers like Ipay, Jambopay, Pesapal, Pesapap, Kenswitch, Tangaza, Cellulant and others have been locked out of providing digital payment options to eCitizen users in contravention of the Constitution’s requirement for inclusivity.

One of his biggest grievances, however, is with the Sh50 convenience fee users are charged.
Mr Omtatah holds that the government lied when publishing a gazette notice to introduce the Sh50 convenience fee.

The gazette notice of December 23, 2014, stated that an administrative fee will be charged to users, which would be calculated based on the transaction type and cost, and not a flat fee as is with the convenience fee.

“The truth, to the contrary, is that the eCitizen.go.ke portal charges a flat rate convenience fee of Sh50 per transaction, irrespective of the amounts involved, and above the transaction costs billed by the e-Citizen service providers,” Mr Omtatah says in court papers.

“The petitioner posits that the administrative fee of Sh50 per transaction billed over and above the transaction fees is way above the market rate for such services and was set without any benefit of a market survey to ascertain the average market price as required under Section 54 (2) of the PPADA,” he adds.

No proof

He argues that there is no proof that the convenience fees collected since 2014 have ever been deposited in the government’s consolidated fund.

Interestingly, the National Treasury, in its defence in the Goldrock case, argues that one of the irregularities spotted in an audit of the portal was the failure of private firms to remit the convenience fees into its consolidated fund account.

“The petitioner is also aggrieved that, the respondent has never disclosed the amount of money that has been raised through the e-Citizen portal and how it has been used,” Mr Omtatah further states.
Among the orders Mr Omtatah is seeking is for the government to disclose how much money has been raised through eCitizen and how the funds were used.

The failure to conduct public procurement for services within the eCitizen ecosystem has exposed Kenyans to cartel-like behaviour of price fixing, Mr Omtatah argues.

On September 5, 2019, the High Court ordered that Mr Omtatah’s suit be consolidated with Goldrock’s.
In yet another demonstration of how slow the wheels of justice move in Kenya, the case has never proceeded to hearing, and has only had the occasional mention.

On December 5, Justice Mwita adjourned proceedings after the court file was tampered with and all of Mr Omtatah’s filings removed.

Both Goldrock and Webmasters are seeking court orders to guarantee them access to the convenience fees.

Webmasters also argue that it owns the portal until the government pays for its intellectual property.