alexa Sh7bn Galana Kulalu project collapses after Israeli firm leaves - Daily Nation

Sh7bn Galana Kulalu project collapses after Israeli firm leaves

Saturday February 23 2019

Maize farm at Galana-Kulalu in Tana River County which is part of the Galana Kulalu Food Security Project on September 9, 2015. PHOTO | EVANS HABIL | NATION MEDIA GROUP

Maize farm at Galana-Kulalu in Tana River County which is part of the Galana Kulalu Food Security Project in picture taken on September 9, 2015. PHOTO | EVANS HABIL | NATION MEDIA GROUP 

 NYAMBEGA GISESA
By NYAMBEGA GISESA
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President Uhuru Kenyatta’s grand plan to ensure Kenya’s food security is in jeopardy now that construction of a Sh7.2 billion Galana Kulalu model farm that was part of the project has stalled.

Kenya now risks losing Sh5.9 billion already paid to the Israeli company that was contracted to build the farm. This money constitutes 80 per cent of the entire sum dedicated to the project.

Investigations by the Saturday Nation have revealed the contractor, Green Arava, has downed tools for several months now, despite multiple promises to resume work.

PAYMENTS

Experts say if the works are not completed and all required equipment not installed, the billions spent will go to waste.

The Saturday Nation has seen a series of letters and minutes of meetings between the firm, the National Irrigation Board (NIB), the implementing agency for the project, and the Ministry of Water and Irrigation. These communications reveal the sour relations between the parties.

In the documents, Green Arava accuses NIB of failing to honour requests for payments before threatening to stop any further work until all its requests for payments are addressed.

On the other hand, NIB accuses the contractor of going rogue, failing to respond to numerous letters, demobilising from the construction site contrary to contractual obligations, and embarking on a go-slow.

“We have reached a point of no return. We cannot continue with more payments for work whose progress we are not pleased with. We have written to the National Treasury so that they can advise on a way forward,” Charles Muasya, the head of design and planning of irrigation projects at the National Irrigation Board, told the Saturday Nation.

WORK PLAN

On February 12, Gitonga Mugambi, the CEO of NIB, wrote to Mr Fred Sigor, the principal secretary for Irrigation, asking to disengage from the contract between the government and Green Arava.

“The contractor demobilised from the site on August 24, 2018, citing non-payment of the certificate No. 11 amounting to Sh363, 598,011.69. On evaluation, the contractor merited payment of Sh142,984,775.06 for works done. However, due to recovery of advance payments, … no further cash that should be paid to the contractor,” part of the letter signed by Mr Mugambi reads.

Mr Mugambi adds: “To date, the contractor has not honoured the submitted work plan. We are afraid that he will not be able to complete pending works worth Sh989 million.”

Initially, the project was to run for 30 months, with March 9, 2017 set as the completion date. After failing to meet the deadline, Green Arava requested an extension of the contract to January 2018, but again failed to deliver.

In September last year, the firm asked for another extension to finalise by April 2019. However, the firm has not situated any construction machinery.

Instead, on January 17, Noam Ftecha, a project manager at Green Arava, wrote to NIB blaming the agency for the woes facing the project and claiming it would only continue if its needs are met.

Mr Ftecha complained NIB was solely to blame for the incomplete project, citing various issues, among them a lack of funds to start cropping small parts of the farm before preparing the rest of it for the same purpose. They also cited “imprudent deferment of certain components in the original contract, which had a net effect of slowing down implementation,” as well as “delay in approving and honouring payments as and when they fall due, such as certificate No. 10 which was delayed for a record six months.”

MONKEY BUSINESS

Green Arava also blamed the weather for the woes facing the project, pointing out “a force majeure event on or around the El Nino of November 2015 to January 2016; the short rains of November to December 2014 and long rains of March to April 2015,” which they say caused delays to the project.

The January 17 letter followed another dated November 30, 2018 in which Green Arava said “the major impediment to the performance of the contract has been a sustained failure by the employer (NIB) to honour payments as and when they fall due.”

However, NIB accuses Green Arava of monkey business.

“The contractor claims that we have refused to pay him. But out of the Sh7.2 billion contract, we have already given out Sh5.9 billion. The balance in the contract is Sh1.2 billion whereas the value of pending works not done is Sh989 million. We needed the contractor to make progress in the works done but he has refused. Basically, he doesn’t deserve to get paid, “Mr Muasya said.

These issues are cropping up at a time when the project should be making Sh1.2 billion in maize sales per season, per projections. Instead, it has only managed 119,000, 90kg bags of maize, worth about Sh273.7 million.

“The contractor wants to be paid for equipment that is still in Israel. We even asked for a bill of lading to show that he has already shipped the equipment but he has failed to provide one. We don’t know if he has purchased the equipment or even made arrangements for shipment,” Mr Muasya said.

INITIAL COST

Ofir Meroz, the country director of Green Arava, refused to comment on the issue. “I don’t want to talk about the government, the employer (the National Irrigation Board), or about the project. I am just not interested,” he said.

The Galana-Kulalu Food Project is being financed by the government and an Israel bank known as Bank Leumi, which provided a loan of Sh6.35 billion towards the scheme on condition that an Israeli firm be picked to start the farm.

This week, NIB wrote to the National Treasury and the Attorney-General seeking a way forward.

“We have resolved to disengage with Green Arava. Consequently, we need guidance if the unspent funds can be given to another contractor to complete the works. As we wait for guidance, we will continue to charge the contractor Sh10,000 per day as liquidated damage for failure to complete the project in time,” Mr Muasya said.

The Galana-Kulalu Food project was the brainchild of former Naivasha MP John Mututho, who proposed it when he served as the chairman of the parliamentary Committee on Agriculture.

President Uhuru Kenyatta and his deputy William Ruto were to include it as part of the Jubilee government’s agenda, with the promise that it would help solve the country’s food crisis.

A feasibility study located 1.2 million acres of arable land in Tana River and Kilifi counties, of which the government planned to use one million acres. It was established that a dam with water harvested from River Galana would be sufficient to irrigate 400,000 acres.

From the studies, it was proposed that a model farm be built on one per cent of the one million acres, translating to 10,000 acres. This project was given to Green Arava on September 11, 2015 at an initial cost of sh14.5 billion.

LOGISTICS CENTRE

Green Arava was tasked with setting up an irrigation system, pumping stations and a logistics centre that included offices, a garage and a maize mill. Under the contract, the company was to put the model farm to use for one year before handing it over to NIB.

The project was originally scheduled to have moved into its second phase, which involved planting at least 200,000 acres of maize with estimated earnings of about Sh24 billion a year following the success of the model farm. This output would have solved the country’s maize shortage crisis.

And if an extra 200,000 of it would have been put towards the production of horticulture crops, an apiary and fruit trees, Kenya could have realised food security.

In October 2015, the then Cabinet secretary for Water and Irrigation, Eugene Wamalwa, the Israel minister of agriculture, Uri Ariel, and Israel ambassador to Kenya, Yahel Vilan, visited the project to witness the first harvest. The maize crop yield was 8,575 bags of 90kg, translating to 17 bags per acre.

In the second season of planting, September 2015 to January 2016, 500 acres gave only 3,101 bags of 90kg, translating to six bags per acre. The contractor blamed this poor yield on the El Nino floods.

Between April 2016 and October 2016, Green Arava planted on 2,000 acres of land, managing a harvest of 59,066 bags of maize — 31 bags of maize per acre. This harvest was widely celebrated as a breakthrough. However, the celebration did not last long as the communication woes between NIB and Green Arava came to the fore.