In terms of ongoing reforms at Kenya Power — and as far as the future and direction of the running and management of this strategic national utility are concerned — the outcome of the current presidential contest will carry high stakes and far-reaching consequences for the fortunes of its financial health.
This week renowned allies of the political party, UDA, were on Twitter warning the company not to proceed to award tenders for meters and transformers. Clearly, the critical utility has become an unwitting pawn in political poker games.
A plan to procure meters, transformers and switchgear has been in abeyance since March, mainly due to appeals and disputes lodged at the Public Procurement Appeals and the High Court.
But decisions have dragged even after Kenya Power won the cases where it is pitted against a formal cartel of politically-connected suppliers calling itself the Energy Meters and Assemblers Association that has won all tenders since 2017.
They have opposed Kenya Power’s decision to open the tender to other international players on the grounds it was against the Buy Kenya, Build Kenya policy.
In the disputed tender, Kenya Power, invoking frequency of failure of meter and transformer by members of this association, introduced in the tender documents new and stricter technical specifications on quality standards, number of years in the equipment assembly business, and relationship with original equipment manufacturers — including a condition that suppliers with local shareholders must reveal beneficial owners. The suppliers argue that the new conditions are just meant to technically knock out local firms.
The high-stakes battles for the multi-billion procurement deal are happening the in the context where it has emerged that Kenya Power has in the last 10 years lost total control of the supply chain of critical supplies.
The entry into the space of manufacturing plants assembling Chinese meters and transformers and co-owned by politically-influential locals have had the effect of dragging a company so critical to the efficiency of the economy into sterile political battles between greedy elites.
The salvo this week by renowned UDA officials about the ongoing procurement of meters and transformers is a signal that progress in the company’s battle to take control of the supply chain of critical supplies from well-connected suppliers and to secure the return of participation of original equipment suppliers in these tenders will very much be affected by the outcome of the presidential contest.
We should not allow these merchants to dump meters that have been found to have high failure rates on us in the name of ‘Buy Kenya, Build Kenya’.
In purchasing meters, Kenya Power must not compromise on quality and global standards. It’s the electricity consumer who ends up paying for this difference. Period.
For any utility, that little gadget called a meter is its cash register. All revenues it collects can only be accounted for through this humble gadget. For Kenya Power, this gadget is what the SIM card is for the sustainable profitability of the giant telco Safaricom.
You lose control of the supply chains of this critical product and you are doomed to economic stagnation and persistent unprofitability.
When you are negotiating with suppliers of meters, your priorities are quality, standards, failure rates and accuracy. The price at which you buy is also important but secondary. I make these opening remarks as an entry into a discussion of the fortunes of Kenya Power.
One of the main reasons this critically-important national utility fell into financial dire straits is long-standing vulnerabilities in the supply chains of meters, transformers and poles.
Kenya Power lost control of the supply chain of meters. An internal audit conducted in July last year could not even reconcile rudimentary data on the number of meters purchased, the number of installed meters that were not vending and meters that were recorded as faulty.
Many former Kenya Power staffers who had been engaged by the company as contractors were found to be holding huge stockpiles of pre-paid meters, which they were selling directly to post-paid customers.
This messy situation spawned a bigger problem-namely, excessive buying of meters.
Many pre-paid meters could not be found in locations where they were validated within the ERP system, while illegal connections were found to have genuine Kenya Power meters that had been validated in the company’s ERP system.