Kenya’s Broken Tendering System will Undo Years of Economic Development if Left Unchecked

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Kenya’s government has had a complicated history with its contractors, both local and international. The country’s tendering process is no stranger to corruption.

By greasing the right palms, contractors can secure a tender to build roads or other structures worth billions. And by failing to grease the right palms, other contractors can do a spectacular job and fail to get the dues they deserve.

Corruption is hampering the country’s economic development at a time when Kenya’s economy is otherwise expected to maintain its growth momentum. Kenya is East Africa’s largest economy and boasts a gross domestic product (GDP) of $ 74.94 billion.

GDP is the total value of everything produced in the country, otherwise known as the broadest quantitative measure of a nation’s total economic activity.

According to the Kenya Investment Authority – a statutory body responsible for facilitating the implementation of new investment projects – Kenya is also the most advanced economy in East and Central Africa due in part to its strong growth prospects supported by an emerging, urban middle class and an increasing appetite for high-value goods and services.

The East African nation’s economy grew by nearly 6% in 2018. According to a United Nations report, it will sustain that level in 2019 and 2020.

However, some economists argue that this growth would be in the double digits were it not for corruption. Researchers from the World Economic Forum (WEF) – an international institution for public-private cooperation – for instance, imply in one of their Global Competitiveness Reports that Kenya’s economic growth potential has been hampered by rampant corruption.

While many countries are indeed rife with corruption, there are some sub-sectors in Kenya that have made the trend seem like a professional sport.

Recently, It emerged that two of the country’s principal secretaries (PSs) are under investigation over the award of Ksh4.8 billion (about $47.6 million) classified tenders for the supply of sophisticated weapons to the Kenya Prisons.

The Ethics and Anti-Corruption Commission (EACC), Kenya’s anti-graft body, managed to thwart the payment of Ksh3.6 billion from the cash, which was to be paid before the delivery of the security items yet there was no tender performance security or bank guarantee, exposing the government to high risk loss.

And previous reports show that Kenya’s government is failing to pay many of its contractors on time, as corruption drains funds for legitimate projects from state coffers, suppliers and officials say.

Economists say the delayed payments are detrimental to the country’s financial sector, where non-performing loans jumped in 2018 to their highest level in more than a decade.

Mid-last year, several officials and business people were charged with involvement in the theft of nearly $100 million of public funds.

Kenya’s President Uhuru Kenyatta promised to fight corruption when he was first elected in 2013. The Head of State has made renewed affirmations to keep his promise. However, some of his critics say he has been slow to pursue top officials and ministers.

Kenya Loses Billions to Corruption Each Year

In 2016 Former Ethics and Anti-Corruption Commission boss, Philip Kinisu claimed that Kenya was losing a third of its national budget to corruption every year, a figure that has been contested by government officials. While actual figures may come into question, it is evident that billions are indeed lost every year.

In 2018, a scandal involving Kenya’s National Hospital Insurance Fund (NHIF) revealed that Ksh1 billion was reportedly lost through a payment system known as the Jambo Pay service.

In the same year, the Kenya Pipeline Company (KPC), a state corporation responsible for transporting, storing and delivering petroleum products to consumers, lost Ksh2 billion as corrupt officials misappropriated its funds.

A recently-released survey by PriceWaterhouse Coopers (PwC) revealed that corruption is slowing own the growth of family businesses in Kenya.

The analysis, dubbed the ‘PwC 2018 Family Business Survey’ sampled 46 top family owned businesses in diverse sectors shows that 72% of respondents have been forced to either shelve a transaction, are denied a license or asked for a favour so as to obtain services from government officers.

The report found that corruption has increased the cost of doing business in the country over past five years since 2014.

“Businesses have to juggle stiff neck bureaucracy in order to obtain basic services from both national and county governments,” the report said.

Speaking during the survey launch in late March, 2019, PWC Kenya Country Senior Partner, Peter Ngahu said corruption has overtaken other factors to stay at the top position since 2016. This was while access to skills, costs of energy, raw materials and international competition impeded business by more than half.

Pending Investigations

In early 2019, it emerged that at least Ksh7 billion meant to pay for the construction of two dams in Kenya was reportedly looted by corrupt officials. Earlier reports had put the figure at close to Ksh21 billion. As at February 2019, 107 firms were summoned by Kenya’s Director of Criminal Investigations (DCI) to explain what had happened. The matter is still under investigation.

“The under listed companies and their directors are believed to be connected with or have information which will assist in the ongoing investigations into fraudulent construction of both Arror and Kimwarer multi-purpose dams valued at Ksh63 billion,” said DCI chief, George Kinoti.

Countless cases are piling up as more officials are accused of corruption, theft or outright financial greed and reckless apathy.

On the other end of these affairs is the Ethics and Anti-Corruption Commission, whse investigators are looking into allegations of procurement irregularities of tenders in Kenya’s Gatundu South region.

Companies mentioned or otherwise implicated in the scandal include Numerical Strength Ltd, Lujatech Enterprises, Smith & Gold Production, Mwaura Timber Yard, Kiki Holdings, Kelly (E.A), and Supreme General Traders, among others. This scandal, like many other cases across the country, is pending an investigation.

Possible Solutions

According to Kenya’s Finance Minister Henry Rotich, late payments are a contentious issue in the contract and tendering sectors. The Finance chief has said that his department is doing its part to see that such issues are resolved.

“This is a problem which we are obviously addressing,” Rotich said in an earlier statement.

“It is important that we ensure there is prompt payment both at national government and at the county government,” he added during a previous exchange with Reuters.

Kenya’s Interior Ministry has also condemned corruption and began an attack against those suspected of bribery.

Speaking in Nairobi in early February, 2019, Kenya’s Interior Cabinet Secretary Fred Matiang’i stated that contractors behind stalled projects must complete them in 90 days. He warned that if there are any delays or disparities in fees, the contractors must name the Government officials they bribed assuming that is the reason for questionable contract sum variations.

On the other hand, Kenya’s President has been put to task, having declared a war of corruption, coupled with a development initiative dubbed the ‘Big 4 Agenda’.

The Head of State has come under fire from opposition party leaders and political rivals as his administration attempts to create a lasting legacy in the fight against corruption. Certain players within his administration have been accused of engaging in corruption. And while some are likely to face the consequences of their actions, there are those that have caused a great deal of damage over the years, having stolen, embezzled or misappropriated public funds.

Kenyatta has nonetheless vowed to crackdown on the vice. The President has gone so far as to pledge his support for the EACC.

“Nothing will be further from the truth to say that you do not have my support,” Uhuru said in an earlier address.

Speaking at a 2018 meeting with EACC led by Chairman Eliud Wabukala and CEO Halake Waqo at State House in Nairobi, he urged the Commission to work harder to support the achievement of Kenya’s development goals.

Meanwhile Finance Minister Rotich said in a previous exchange that Kenya’s government had drawn up new regulations requiring payments be made within 60 days of goods or services being supplied.

Assuming things go as planned, there will be major changes within the industry. However, corruption is like a mythical hydra, a creature that grows two new heads every time one is cut off. The only way for this ambitious graft war to be won is to strike the corruption menace at its heart. Some critics have suggested a zero-tolerance policy, whose tenets have received avid support from some members of the current regime.

By condemning illegalities and enforcing the strictest punishments on corrupt officials, Kenya may yet maintain its standing as East Africa’s economic powerhouse.


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