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Arror and Kimwarer dams scam shows Treasury has lost control

Tuesday July 23 2019

Henry Rotich

National Treasury CS Henry Rotich. He was arraigned on July 23, 2019 over the Kimwarer and Arror dams scandal. FILE PHOTO | NATION MEDIA GROUP 

Jaindi Kisero
By Jaindi Kisero
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There is a big chance that National Treasury Cabinet Secretary Henry Rotich, his principal secretary Kamau Thugge and long-serving director of the External Resources Department (now Directorate of Resource Mobilisation) at the National Secretary, Mr Jackson Kinyanjui, will not get their jobs back.

PUBLIC POLICY

I will be following the criminal proceedings keenly because I believe the evidence presented in court will shine light into the shady dealings at one of the darkest corners in the Treasury’s operations — namely, the external resources department.

Mr Rotich, Dr Thugge and Mr Kinyanjui have been in charge of key departments at the Treasury for donkey years. Indeed, top officers of the Directorate of Accounting Services and Quality Assurance (formerly External Resources Department and the Office of the Accountant-General) have the longest tenures at the Treasury.

As the saying goes, long tenures breed vested interests and stagnation of ideas. I’m restrained by the sub judice rule not to discuss the merits of the cases. But there are broad public policy questions which the prosecution raised which we must discuss.

Is it not incredible that the Treasury went ahead to release billions of shillings to a broke Italian contractor despite even something as rudimentary as acquiring the land where the dams were to be built having not been done?

Where was the sense and economic merit of releasing a whopping Sh20 billion to a bankrupt contractor, and at a time the government was struggling to clear pending bills for local contractors?

Treasury officials behaved as if complying with the terms of some shady commercial agreement the Kerio Valley Development Authority had signed with the Italian company was a higher calling to the Paymaster-General than protecting the interests of the taxpayer.

Is it not the height of irony that the Treasury was moving with alacrity to pay the company billions of shillings despite the fact that the Kenya Forest Service was yet to de-gazette the land on which the dams were to be built?

ACTION PLANS

In the statement that he put out Tuesday, the Director of Public Prosecution, Noordin Haji, released new information that raised even more fundamental questions about the saga.

When KVDA signed the commercial contract with the broke Italian company, the contract documents committed the parties to a contract price of Sh46 billion. By the time the Treasury was being brought into the scene, the figure had jumped to Sh63 billion. The Treasury had inflated the contract price by a whopping Sh17 billion.

Haji disclosed that a further Sh46 billion was borrowed in addition to the principal to pay interest during the contract period. The Treasury also released Sh643 million, ostensibly as compensation for land not yet acquired.

Let us see whether the prosecution will shed light on the vexed issue of huge advance payment to the broke Italians. The reason corrupt officials love projects with a provision for huge advance payments is that the arrangement allows kickbacks to be paid even if the project does not take off.

Unscrupulous international contractors, especially, love projects such as Arror and Kimwarer because they know they can sit back and enjoy the billions in advance payments, knowing pretty well that African governments take months — even years — to negotiate land compensation and resettlement action plans.

In the case of Arror and Kimwarer dams, the Treasury was willing to release payments to the Italians before acquiring the land.

SHADY PAYMENTS

President Kenyatta should use the exit of Mr Rotich and Dr Thugge to implement major reforms at the Treasury, the nerve centre of economic policymaking in Kenya.

After six years in office, Mr Rotich’s regime at the Treasury has clearly lost control of the running of the country’s financial affairs. The Arror and Kimwarer dams scandal has amply demonstrated that the Treasury has lost control of the budgeting process. We have a regime where every other influential bandit can push their pet project into the government’s budget.

The Treasury has also lost control on the management of procurement in the ministries. As we saw in the National Youth Service scandals, the Treasury, under Mr Rotich, has been unable to implement proper accounting systems.

Failure by the Treasury to rein in commercial debt is why we have ended up with too many overpriced and expensively financed projects and our external debt register is saddled with too many expensive commercial debts.

Although John Michuki, who died in 2012, had no training in economics or finance, he exerted his authority on ministries to block shady payments. I consider him the best Finance minister Kenya has ever had.

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