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Riddle of loan bigger than water firm income

by kenya-tribune

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How a water service provider that collects an average of Sh240 million a year entered into a deal with a consortium of foreign private investors worth billions of shillings, is now the subject of an investigation by the Ethics and Anti-Corruption Commission (EACC).

Tavevo Water Company of Taita Taveta County got into a deal with the consortium led by Miraadi Ltd for the Njoro Kubwa Bulk Water Project to supply water to Jipe Settlement Scheme in Taveta and several ranchers in the county, with 10 percent of the water meant for household use in other parts of the county.

The Kenya Innovative Finance Facility for Water (Kiffwa) was listed as a co-developer and financial adviser of the project.

The consortium was to contribute Sh6.2 billion, which was to be converted to a loan repayable by Tavevo in equal amounts for six years.

This translates to more than Sh1 billion a year, yet Tavevo’s annual revenue collection is way short of that, according to reports by the Auditor General.

The company has been receiving adverse opinions from the Auditor General due to various audit queries and liquidity issues.

The questionable deal was entered into by former Governor John Mruttu’s administration just months to the August 2017 General Election.

The EACC’s investigations follow a complaint by the current county administration. “We have formed a team to investigate the allegations. That is all we can say for now,” EACC’s communications officer Yassin Ayila said.

Of interest is that, except for a few correspondences and a memorandum of understanding, there are no documents to prove that procurement procedures were followed and the input of the County Assembly, National Treasury and the parent water ministry obtained.

Correspondences seen by Sunday Nation show that the county first wrote to EACC on February 21 and a follow-up letter on June 7 inviting the commission to initiate investigations into the matter.

“Your expedient action will be greatly appreciated, paving the way to prosecution of those culpable,” the county’s legal adviser Edwin Chahilu said in the letter of June 7.

The EACC acknowledged receipt of the complaint, including audit reports, on July 5.

“The commission will institute an investigation into Tavevo company to ascertain the veracity of the allegations,” EACC deputy director in charge of investigations, Mr Humphrey Mahiva, said in the letter.

Attempts to get the former governor to shed light on the matter did not bear fruit as Mr Mruttu declined to answer our questions. “This being a private investment, please talk to the investors,” he said.

Tavevo managing director Habel Mwagha, now on suspension, did not respond to our messages for his side of the story.

Mr Tony Mwaruwa, managing director of Miraadi Ltd, which is the lead developer of the project, promised to give a response but had not done so by the time of going to press.

“We have a legal advisory on the project. We prefer to have a formal request to which we will respond in writing,” he said, and requested that we send him our specific queries through e-mail.

Later, he sent the reporter a threatening text message: “Your actions in the last 24 hours amount to harassment. It has been reported to Kilimani Police Station. Our lawyers will pick it up from here. Publish the unsubstantiated story at your own risk.”

Tavevo entered into the deal on January 30, 2017, just seven months to the elections and had the backing of Mr Mruttu, who in a letter dated June 28, 2017, said the county government “affirms our full support of the project”.

“The county executive has been actively involved with Miraadi since January 2015 vide a memorandum of understanding with them to develop the same project,” the governor noted in the letter.

Before the award was made, Tavevo is alleged to have spent Sh536,329 on project design by Amiantit Ltd, a company based in South Africa, and on benchmarking trips to different countries.

In the complaint to EACC, the current county administration claims that despite the huge amounts of money involved, “Tavevo does not have any records of transactions or documentation to qualify the journey towards this “flagship project’”.

Except for letters of award and acceptance and the memorandum of understanding, the complainants say they have found no minutes of public participation and of tender committee of county assembly approval, or input from the National Treasury and the Ministry of Water.

Moreover, there is no contract with the consortium on what the project entails and the obligations of the parties to the deal.

Mr Chahilu says the deal was never mentioned during the handover by the former governor to the current administration and no documents on it were given.

“The whole project was planned in an extremely casual way. All orderly, legal and regular ways of handling projects were avoided.

“The process of acquiring the loan is defective in that although the loan was sourced from outside the county, the governments both at national and county levels, were not appropriately done. This raises questions on guarantees of the loan. How was this aspect taken care of?” Mr Chahilu posed.

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