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Bad dam deals to cost Kenyan taxpayers Sh38.4 billion

The site of Itare Dam
The site of Itare Dam. FILE PHOTO | NMG 

Taxpayers risk losing a staggering Sh38.4 billion in advance payments made to foreign contractors for five dam projects whose completion now looks uncertain.

The National Assembly’s Committee on Environment has raised fears that part of the billions of shillings that the government has made in advance payments cannot be recovered.

The five dams are either yet to start, progressing at a snail’s pace, have stalled altogether or their contracts have been terminated.

The advance payments have been made in the controversial Itare Dam (Sh4.2 billion), Karimenu II dam (Sh4 billion), Badasa (Sh2 billion), Umaa Dam (Sh1.6 billion) and Thwake Multi-Purpose Dam (Sh7.4 billion).

In addition, the committee has raised questions regarding the ongoing construction of Chemususu Dam and the Northern Collector Tunnel.

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The committee did not review the controversial Kimwarer and Arror dams where the government made advance payments of Sh19 billion, including Sh11 billion in unnecessary debt insurance, Sh4.6 billion as loan interest and other costs.

Director of Public Prosecutions (DPP) Noordin Haji says that the money was shared out in accounts belonging to the conspirators and their agents in payments that led to the prosecution of suspended Treasury Secretary Henry Rotich. State House has since cancelled the Kimwarer dam construction and downsized the Arror project, raising fears that the billions spent in advance payments could be lost.

"The Auditor-General should institute a performance audit to inquire into the circumstances under which Athi Water Works Development Agency made the Sh4 billion advance payments to Chinese firm AVIC before acquisition of the requisite land for implementation of the Karimenu II Dam, leading to loss of public funds through idle time," Kareke Mbiuki, who chairs the committee, said in the report on the Inquiry into the Status of Dams in Kenya.

MPs have recommended that the government should not make any financial commitment with donors or partners before acquiring land for construction of dams to avoid huge costs that accompany delays in the implementation phase. The committee has also asked the government to urgently engage the Italian firm, CMC Di Ravenna, to secure a subcontractor to complete the Sh28.9 billion Itare Dam project since the main contractor is facing financial challenges.

"This will save the project from permanently stalling. There is urgent need to renegotiate the terms of the loan to allow for a subcontractor to complete the project," Mr Mbiuki said The committee said the broke Italian contractor had raised bills totalling Sh4 billion at the time of filing the report on October 11.

CMC Di Ravenna has filed for bankruptcy in Italy. The Itare dam project stalled when it was 30 percent complete.

In the Sh36.7 billion Thwake Multi-Purpose dam, the committee wants the Water and Irrigation Ministry to closely monitor the performance of the Chinese contractor, China Ghezuoba on site and invoke relevant clauses in the contractual agreements to ensure speed of works is improved.

The dam, meant for hydro generation, irrigation and providing water for domestic use is progressing at a slow pace with the contractor having been paid Sh7.4 billion but only seven percent of works had been done according to the ministry of Water.

The report notes that the project is being handled by international contractors and supervised by international consultants to the detriment of local expertise.

The Sh23.6 billion Karimenu II dam is being handled by a joint venture led by China’s AVIC but despite the government making an advance payment of Sh4 billion, no works had commenced 24 months after the signing of the contract in January 2018.

The committee wants the auditor to probe discrepancies in land valuation where the agency put the amount at Sh517 million but the National Land Commission valued it at Sh1.8 billion.

In the Sh6.8 billion World Bank backed Northern Collector Tunnel, the MPs want the Auditor-General to conduct a special audit of the Kigoro Water Treatment Plant that cost the taxpayer an additional Sh4.5 billion.

"The auditor should establish if indeed the country realised value for money and report to Parliament within six months from the date of adoption of the report."

The MPs want the Water ministry to ensure that no advance payments are made on the Sh14 billion Mwache dam project before issues raised by land and property owners are conclusively addressed.

China’s Sino Hydro Corporation was awarded the project at $140 million but works are yet to start due to land acquisition problems.

Chemususu dam water supply project that is fully funded by the government at a cost of Sh3.5 billion and which was completed five years ago. Although works on the last mile connectivity for phase II is ongoing, challenges in resettlement is likely to delay the project.

The committee found that taxpayers lost Sh1.6 billion through an arbitral award to a contractor after terminating the Umaa Dam contract.

In the case of the Sh3.3 billion Badasa dam, the contractor had been paid Sh2.4 billion before the contract was terminated with 57 per cent of the work done.

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