Foreign firm yet to be paid Sh1.2b debt despite Ruto's directive

Spanish PM Pedro Sanchez (left) with President William Ruto at State House in Nairobi on October 25, 2022 with delegation and investors from Spain. [Denish Ochieng, Standard]

President William Ruto’s Cabinet has been caught up in a game of musical chairs over a decade-long Sh1.2 billion debt owed to a Spanish consulting company that has threatened to mar the diplomatic relationship between the two countries.

TYPSA was contracted on May 8, 2012, by the Ministry of Regional Development to provide consultancy service for a feasibility study and detailed design of the Lower Ewaso Ng’iro South Multi-Purpose Dam Development Project. The contract sum was in two currencies – €18,179,426 and $1, 690,700.

TYPSA concluded its contractual obligations on December 18, 2013, and a certificate of satisfactory completion issued on June 8, 2015. Thereafter several installments were paid, leaving a balance of €7,360,306 and $468,450, translating to Sh1.2 billion pending.

Several letters

The debt to the firm which is little known in Kenya has received attention from the highest offices in Kenya and Spain and is also the subject of several letters by different Cabinet Secretaries as well as the Spanish Embassy in Kenya.

During his visit to Kenya last year, the President of Spain Pedro Sanchez mentioned the matter to President William Ruto. This has since been the source of discomfort for some of the CSs, with Treasury on one end pushing for payment while the Regional Development Ministry appears to push back noting that it is perennially short of funds to pay the pending bill despite requests to Treasury for more money. 

“Following the recent visit of H.E. Pedro Sanchez, the President of the government of the Kingdom of Spain… H.E. the President of the Republic of Kenya raised concern over the pending payments and other issues with Spanish companies and directed that they should be addressed expeditiously,” said Prof Njuguna Ndungu, CS Treasury, in a November 2022 letter to the CS Ministry of EAC, ASALs and Regional Development, which also captures the work done by TYPSA, the payments made and the balance that the firm has been chasing for years.

President’s directive

“In view of the foregoing and as per the President’s directive, we wish to request your ministry urgently to prioritise, budget for and pay the said pending payment to TYPSA.”

Treasury in July, this year, followed up the matter with Chief of Staff and Head of Public Service Felix Koskei in which Prof Ndungu noted that the Regional Development Ministry should “urgently prioritise, budget for and pay the said pending payment to TYPSA within the 2023/24 financial year”.

In May, Alfred Mutua, the then CS for Foreign Affairs but has since been moved to the Tourism Ministry, also wrote to the Ministry of EAC, ASALs and Regional Development, also requesting for the processing of the payment to the firm.

The Regional Development Ministry, while acknowledging the debt, noted that it has over the years been allocated minimal funds and thus not able to pay the pending bill while continuing with operations.

“It is true that we owe TYPSA Sh1.24 billion in line with the verification reports of Accounting Officers and National Treasury pending bill closing committee,” said Rebecca Miano, the then CS for EAC, ASALs and Regional Development in a June letter responding to CS Mutua and copying CS Treasury and Mr Koskei. 

“We have consistently made appeals for funding to pay the pending bill to the National Treasury… the budget allocation for regional development has been very minimal over the years, making it challenging to absorb the pending bill among other pending bills on first charge.”

The exchanges between the CSs are in addition to letters from the Embassy of Spain in Kenya, which has sent several letters to the Ministry of EAC and Regional Development and noted that “the issue is endangering the future investment and operations of the company in Kenya, as well as the reputation of the government of Kenya”.

The project for which TYPSA did a feasibility study on, when completed, would have included a 180 Megawatts installed hydro-power generation, reliable water for 500,000 inhabitants of Narok County, development of tourism potential based on three water reservoirs and a new project road network including approximately 163 kilometres of seal roads.

Others would be social improvement of about 82 primary schools benefiting 20,000 pupils, 100 new water ponds for cattle, restoration of 5,800 acres of Mau Forest and flood control during heavy rains.

The outstanding balance to TYPSA had been approved by Parliament, verified by the ministry inter-disciplinary pending bills verification committee appointed on January 17, 2020, and also verified by the National Treasury pending Committee Bills closing Committee according to documents obtained by The Standard.

Upon the assumption of office of Kenya Kwanza government, the first high-profile visit to the country last October was that of the President of the government of the Kingdom of Spain Pedro Sanchez, who also doubles up as the rotating President of the European Union. This was the first by the holder of the office to visit Kenya.

During the visit, three MOUs were signed covering trade, health and education.

On March 6, 2023, more than Sh60 billion was allocated by the government to pending bills vide Supplementary Appropriation Bill No.4 of 2023, yet the pending payment for TYPSA was not considered. Notably, with the exchange rate fluctuations, the delay in settling of the debt has led to an escalation of the amount expressed in Kenyan shillings.

The real effect of the failure to promptly discharge President Ruto’s directive on the settlement of the pending bill is that the taxpayer stands to lose Sh229 million given that whereas the shilling exchanged to Euro at Sh137, it is now at Sh162 while a US dollar which was at Sh129 is now at Sh152.

In a letter dated June 22, 2021, addressed to Pati Calvo, TYPSA Group African Managing Director, the Controller of Budget noted that the Principal Secretary for Regional Development had confirmed that the pending bill had been verified.