State dropped the ball on mega railway project

By Charles Kanjama
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A probe, according to the dictionary definition, is a long thin instrument used to conduct an intrusive search. As a verb, to probe means to search or examine intrusively. ‘Probe’ comes from the Latin word, ‘probare’, meaning to test or to search for proof. And so we commonly understand ‘probe’ as referring to a careful and thorough inquiry, a penetrating investigation.

The word ‘probity’ has a related etymology. It is derived from the Latin word ‘probitatem’ or ‘probitas’, meaning uprightness or honesty, which is itself formed from the root ‘probus’, meaning worthy or good. And so probity means unimpeachable honesty, or the quality of being honourable and trustworthy. Since probity and proof are derived from related Latin words, probity also means the ability to stand up to scrutiny.

A classic Roman illustration of probity arose in the case of Pompeia, whom Julius Caesar married one year after the death of his first wife. Caesar was later elected Pontifex Maximus, meaning chief priest of the Roman state religion. Pompeia then hosted a women’s only festival. A young man disguised as a woman reportedly gained admittance, causing a scandal. Ceasar then divorced Pompeia, arguing that Caesar’s wife must be above suspicion.

A key quality of Kenya’s new legal dispensation is the demand for probity in matters of public finance. This demand is captured in four key constitutional principles (art 201). First is the principle of openness and accountability, which also implies public participation. Second is the demand for intra-generational and inter-generational equity. Third is the appeal for prudence and responsibility in use of public funds. And fourth is the necessity for clear and responsible financial reporting.

These four principles have been concretised in various ways. One key constitutional device for accountability is the requirement for parliamentary oversight. Mining or natural resource exploitation contracts must be ratified by Parliament (art 71). Borrowing and loan guarantees by national government must be reported to Parliament (art 211, 213). In addition, expenditure of public funds is subject to control, transparency and audit (art 225, 226). Finally, public entities shall seek best value for expenditure by using procurement processes that are fair, equitable, transparent, competitive and cost-effective (art 227).

To support these principles, the Public Finance Management Act requires the Cabinet Secretary of Finance to submit to Parliament a regular report of all loans made to the national government or its entities. He should also report on national government guarantees and projects that require government funding. The Public Procurement and Disposal Act then comes in to regulate how public bodies may procure goods or services. It penalises procurement-related offences of corruption, fraud, collusion and conflict of interest.

Keeping in mind these directives on financial probity, it is becoming clear that the government dropped the ball on the standard gauge railway project.

The project itself is worthwhile and necessary, but the Chinese deal is looking less and less attractive. Some cynics say that no major public project can be totally immune from corruption or conflict of interest. I disagree. But I also recognise that a low level of corruption or incompetence is sometimes tolerable so long as its overall impact on a project’s cost-benefit analysis and the quality of execution is kept to a minimum.

So as Parliament’s Committees conduct the necessary inquiry into the standard gauge project, this is the test to be kept in mind in determining whether to sustain the deal or recommend its cancellation. Parliament must also consider the financial and legal cost of stopping the project. If material corruption is proved, it constitutes fraudulent misrepresentation or breach of contract that would allow an existing contract to be terminated without liability for damages to the other party.

Clear questions that need to be answered include the following: What is the actual direct cost of the project, including the financial cost element? Is it cheaper for government to facilitate the financing through loan guarantee so as to avoid the substantial so-called ‘insurance charge’? Is the overall financing cost competitive or should the deal be restructured or abandoned?

The ongoing probe must establish whether the deal’s two aspects, railway construction and financing, can be unbundled and renegotiated. It must also establish whether, despite repeated government denial, there was abuse of office in the deal-making process, and if so, who is responsible.

The shaky procurement method used, and the questionable decision to avoid a tender after the feasibility study, must come up for scrutiny. Unless Jubilee’s top duo ensure the financial probity of the standard gauge railway project, their anti-corruption agenda will be dead before it even gets started.