Why Treasury's appetite for paying failed projects can't be satisfied

A huge traffic jam along Naivasha town on 3rd January 2021. [File, Standard]

This week closes on a sad note with news that Treasury paid Sh6.2 billion of taxpayer money without parliamentary approval for the cancelled Rironi-Mau road project. This joins the ranks of many other bad deals committed by senior public officers that not only exposes our sovereign interests at great risk, but also drains public coffers with zero value for money.

Not long ago, the Greenfields terminal project, then targeted to build a second runway and expand the Jomo Kenyatta International Airport (JKIA) was abruptly cancelled over commercial viability concerns. At least Sh4.5 billion of taxpayer money has gown down the drain to the Chinese contractors, with no single tractor ever stepping on site. The matter is still active with the Kenya Airports Authority officials appearing before the Public Investments Committee of the National Assembly as late as last week over the project.

After the controversial cancellations and subsequent cost to taxpayers, the project re-appeared in the form of a controversial privately initiated Public Private Partnership (PPP) of Adani deal. The renewed initiative was only abandoned due to public pressure against the secrecy of its details, and exposure of Adani proprietors dirty dealings in other countries. Top political and public officials vehemently defended Adani deal makers.

While the Adani Airport deal collapsed in its formative stages, a similar secret contract had already been completed with the Kenya Electricity Transmission Company Limited (Ketraco).

The Ketraco contract stands in limbo due to public pressure against it and subsequent exposure of Adani corruption dealings in the United States. What is definite though is that sooner rather than later, taxpayers will receive a hefty fee note as damages for termination or stalling of the contract.

Other long abandoned projects like the Arror and Kimwarer dams in Elgeyo -Marakwet County still have valid contracts with the governmrnt despite the contractor, CMC di Ravenna, having filed for bankruptcy in Italy on December 4, 2018.

Officially, Kenya is currently listed as an active defaulter of the associated loan agreements, with President William Ruto’s administration controversially agreeing to revive the contracts in March 2023, when Italian President Sergio Mattarella visited the country.

The Nairobi-Nakuru -Mau Summit road contract, famously referred to as the Rironi-Mau Summit project, seems to have taken the same familiar and well-trodden path.

It really does not matter which public entity takes the lead role, the choreography is the same.

hen the Ruto administration cancelled the contract with the French consortium, it cited potential strain on the country’s fiscal space. They cited associated service contracts, and the contractors insistence to underwrite any toll-revenue shortfalls with budgetary allocations from ordinary taxes.

Last month, the Kenya National Highways Authority (KeNHA) is cited confirming the initial contract signed with the French firm Vinci consortium was not economically tenable.

According to the Authority, reviewed risk exposures found potential low traffic on the highway and attendant service contracts to be untenable. Besides, it argued proposed toll charges of between Sh780 and Sh6,450 to be too expensive for majority of Kenyan motorists.

It is such laxity in project design that now cost taxpayers a whopping Sh6.2 billion, with the French firm never moving a single tractor on the construction site, similar to the Greenfields project at JKIA.

The reviewed risks over the project notwithstanding, the publics are told that miraculously, a new Chinese Contractor will now deliver the project at half the initial cost of Sh180 billion) under either another public-private partnerships (PPP) arrangement.

From a sound analytical point of view, one cannot fail to wonder what a circus? If a PPP was not viable due to traffic numbers and toll fee concerns under the French Firm consortium, how does it now all of sudden become economically viable under the Chinese contractors?

Was this not the same script played for the Greenfields project?

The Uhuru Kenyatta administration cancelled the project at a costly price to taxpayers, but suddenly became economically viable again for the Ruto administration to generously offer it to the Adani Group under a PPP last year!

What is it about this big infrastructure projects that taxpayers are not told that must bleed their taxes with such reckless abandon? Why is it that no one is ever held to account for the billions lost in taxes despite the express provisions of Article 226(5) of the Constitution?

This column hypothesises that it is never about the projects under controversy per se, but it is always about who is in the feeding trough. There are clear trends to persuade a critical analytical mind that this hypothesis is not out of scope. For instance, most of the costly contracts cancelled under flimsy grounds happen after regime change. Greenfields had been initiated by the Kibaki administration, only for Kenyatta II administration to question the speed at which the procurement process had been completed. Henceforth, they initiated a protracted frustration of the project before eventually questioning its economic viability to justify its cancellation.

In the case of Arror and Kimwarer dams, it appears one faction of the then TNA-URP coalition initiated the projects without proper evaluation of the dams commercial viability and attendant costs on taxpayers. As it would emerge later in court proceedings on the corruption cases over the projects, the National Treasury was not fully appraised on the contracts. Later, the other faction of Jubilee coalition would cancel the contracts after the ‘UhuRuto’ fallout, exposing taxpayers to billions in potential debt related damages.

Does it come as a surprise that the corruption cases over the projects seemed to collapse in court when the Ruto administration took the reigns of power? Why are there attempts to revive the projects despite what is publicly known about the black-hole that this projects are? Many other public projects ges defunded after regime change, that cost taxpayers billions in interest charges, demurrage and protracted legal costs.

The Public Procurement and Asset Disposal Act, 2015, and the subsequent Public Procurement Regulation of 2020 sets guidelines for contracting and administration of public financial contracts.

While this appears to be a good starting point, the Act left full discretion to decide an the nature and details of public contracts to the Accounting Officer of the contracting entity, except for contracts of thresholds above Sh5 billion that must go through the Attorney General .

Similarly, such contracts of this threshold value must be brought to the attention of the Cabinet by the relevant Cabinet Secretary, except for project under Parliament or the Judiciary. Does this ring a bell of the recent fights over the custody of the official seal?

The questions that we must now ask are: for good governance, should accounting officers, who are appointees of the president or governors at the county level, be left with full discretion to decide contract details that are binding to the Kenyan people?

Should public officials, who carelessly commit Kenyans to poorly designed public projects and subsequent contracts be left scot-free with taxpayers been left to bear the pains of their carelessness?

Is it about time the country standardised key provisions of government contracts, similar to agencies like World bank and other development agencies?