AG okayed Sh12bn to secure funding for Arror, Kimwarer dams – Treasury

March 3, 2019 11:08 am
The Sh12 billion was part of the conditions precedent outlined in a financing agreement approved by the Attorney General before the National Treasury signed it on April 18, 2017/FILE

, NAIROBI, Kenya, Mar 3 – The government spent Sh12 billion to secure funding for the construction of the Arror and Kimwarer dams under a government-to-government arrangement, according to figures provided by the National Treasury.

Treasury Cabinet Secretary Henry Rotich on Sunday said the sum was paid to meet set conditions before funding for the two dams in Elgeyo Marakwet could be released.

“Like any other standard loan facility signed by the government, there are several conditions to be met before funds are available to the borrower and the contractor to commence work,” he said in a press statement published in local dailies.

The Sh12 billion was part of the conditions precedent outlined in a financing agreement approved by the Attorney General before the National Treasury signed it on April 18, 2017.

The amount entailed an arrangement fee of Sh545.9 million, a Sh359.5 million commitment fee, a Sh3.5 million agency fee and a Sh11.1 billion insurance premium paid to an Italian contractor.

According to Rotich, the government-owned Italian firm – Servizi Assicurativi del Commercio Estero (SACE) – was paid a Sh7.8 billion advance fee representing 15 per cent of the contract amount.

The National Treasury denied reports that up to Sh21 billion had been paid in respect to the construction of Arror, and Kimwarer dams before commencement of works.

The figures provided by the Treasury inclusive of the Sh12 billion loan facilitation fee add up to Sh19.8 billion, with Rotich saying the Sh7.8 billion advance payment was in line with Section 147 (1) the Public Procurement and Asset Disposal Act.

“Under exceptional circumstances advance payment may be granted and shall not exceed 20 per cent of the price of the tender and shall be paid upon submission by the successful tenderer to the procuring entity of an advance payment security equivalent to the advance itself and that security shall be given by a reputable bank or any authorized financial institution issued by a corresponding bank in Kenya recognised by the Central Bank of Kenya, in case the successful tenderer is a foreigner,” the Act provides.

Rotich dismissed the alleged financing of the projects without submission of designs saying the procuring ministry – Ministry of East African Community and Regional Development – adopted a design-build model which he argued had been proved to be cheaper and effective.

The design-build model allows the firm contracted to solely engineer, procure, and construct, as well as enter into financing agreements.

The contractor – SACE – covers 85 per cent of an estimated Sh52 billion contract amount with a consortium of banks funding the remaining fifteen per cent.

An Italian banking group, Intesa Sanpaolo, is said to have signed the facility agreement on April 4, 2017 on behalf of three other banks – Paribas Fortis S.AIN.V, UniCredit S.P.A, and UniCredit Bank.

The debate over misappropriation of funds allocated for the construction of the Arror and Kimwarer dams took a new twist Thursday after Deputy President William Ruto dismissed a Sh21 billion figure reported in a section of dailies.

Ruto who was in the company of President Uhuru Kenyatta when he made the remarks termed the reports “a flat lie.”

“The money in question is about Sh7 billion and for every coin that has been paid, we have a bank guarantee. No money will be lost because we’re a responsible government; we’ve engaged every arm of government to ensure public resources are safe,” he said during the release of the 2017/18 State of Judiciary and Administration of Justice report.

The DP cautioned against fabrication of information in the fight against corruption saying misleading reports would only derail anti-graft efforts.

“Correct information must be used as we target the fight against corruption so that we can nail the true culprits,” Ruto said.

The Directorate of Criminal Investigations had Monday asked directors of some 27 firms to make documents available among them delivery notes and quotations as it continued to probe fraud allegations that have marred the construction of the multi-purpose dams for the production of hydro-electricity and provision of water for irrigation.

The DCI noted that it was particularly concerned with the fact that construction had not started long before scheduled commencement in December 2017.

Oshwal Wholesalers, Silent Night (Kenya) Limited, Red Court Hotel Company Ltd, Azimath, Infinity Furniture, Charleston Travel, Mutual Registrars and New Italycor Limited were among companied listed by the DCI.

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