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White elephants gobble up Sh72.5b of taxpayers cash

BUSINESS
By Moses Michira | October 2nd 2019
ODM Party Leader Raila Odinga (right), National Irrigation Board Chief Executive Gitonga Mugambi (centre) and Kilifi Governor Amason Kingi examine a maize crop during a tour of the Galana-Kulalu irrigation scheme in August. [Maarufu Mohamed, Standard]

Economic advisers to Parliament have returned a damning verdict on some 618 projects that are unsustainable including the Galana irrigation scheme which is on the “verge of collapse”.

At least 545 of them are already white elephants, according to a recent circular issued by the National Treasury, which resulted to a loss of Sh72.5 billion.

Most of the projects found to be unsustainable are major dams which might have been started without proper feasibility studies. Already, Kimwarer Dam in Elgeyo Marakwet County has been cancelled over the reasons cited - even though the Parliamentary Budget Office (PBO) did not make specific reference to it.

There is little chance that any of the funds already paid out to contractors for the various projects will be recovered, with the possibility of even more losses should the tenders be cancelled.

PBO indicates that the collective budget for the projects was Sh363 billion, highlighting the level of wastage occasioned by greed.

“A review of stalled projects indicates that critical components to the framework of project life cycle such as feasibility studies, appraisal documents and implementation support such as quarterly monitoring and mitigating challenges during budget execution are not available or not well aligned,” PBO said in its report.

Adding little value

PBO is an independent advisory arm of Parliament whose main role is to inform the legislators on technical issues relating to budgeting.

Stalled projects are tying up resources while adding little value to economic development, the office reported.

Itare Dam in Nakuru County is the biggest single project to have stalled after the contractor, CMC di Ravenna filed for bankruptcy protection back home in Italy.

CMC di Ravenna had been paid Sh11 billion for the project worth Sh29 billion but had only completed less than a fifth of the work.

Among the concerns is that the contractor was paid more than the work already delivered, while the protection sought effectively blocks Kenya from seeking any refunds.

PBO also faulted the financing approach for most of the mega dams, either ongoing or planned. Apart from being more expensive, the dam projects’ engineering, procurement, construction and financing model is prone to abuse.

Contractors have the power and incentive to mis-declare the full extent of the costs including concealing material information such as insurance from the onset.

The economists have also warned that there are several other similar projects that are likely to be initiated in the financial year through supplementary budgets, yet they have not been approved in the main spending plans.

Among the other projects fingered to be a waste of public funds is the Kenanie Leather Park, which has been touted as critical to the development of the leather industry.

“It is likely that the Kenanie Industrial Leather Park may not take off as was envisaged and may actually be unviable,” PBO’s report reads.

The park was started five years ago and has so far accumulated expenditure Sh1.7 billion yet there is no tangible output.

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