MPs flag Sh40b lawsuit against State broadcaster KBC in the UK

Joint parliamentary session in Nairobi on Wednesday, May 5 2021. [David Njaaga, Standard]

The Kenya Broadcasting Corporation (KBC) is facing a Sh40 billion lawsuit in the United Kingdom that could see the State corporation wound up over a breach of contract. 

This is according to the latest report by the National Assembly Budget and Appropriations Committee that cites the 15-year dispute as one of the biggest threats to the future of the struggling national broadcaster.  

“The committee further observed that the Kenya Broadcasting Corporation is facing a lawsuit estimated at Sh40 billion in London UK for termination of a contract it had with Amjam TV, which later incorporated the British Virgin Islands,” said the committee in the report. 

The dispute dates back to 2009 when KBC terminated a joint venture agreement with Dubai-based businessman Ajay Sheth, owner of Channel 2 group. 

According to court documents, KBC and Channel 2 entered a joint partnership in 2006, where the State broadcaster would provide technical equipment, while the latter was to supply the new digital station with staff, programming content and resources. 

However, Channel 2 and Sheth argue that the State broadcaster terminated the deal without notice in 2009, costing the businessman billions of shillings in foregone profits and other expenses sunk into the joint venture. 

The case is currently undergoing arbitration in London, with the State broadcaster staring at the possibility of having to fork out a Sh40 billion payout should the case go in favour of the businessman and Channel 2 group. 

The pending court case is the largest financial risk the Budget and Appropriations Committee flagged in the State Department for ICT and Innovation that is one of the biggest debtors to suppliers, with some debts dating back five years. 

“With regard to the State Department for ICT and Innovation, it is noted that there is a historical pending bill amounting to Sh771 million owed by the ICT Authority to Oracle, Microsoft and IBM for supply and licences of software for a World Bank project that was closed in 2016,” said the committee

“Further, the committee observed that the status of some ongoing projects indicates a likelihood that they will not be completed within the stipulated timelines and this may lead to cost overruns.” 

Earlier this year, the National Treasury Cabinet Secretary Ukur Yatani cited the value of publicly guaranteed debt made to State-owned enterprises as a key liability, particularly in several loss-making entities.  

According to the latest data from the National Treasury, Kenya spent Sh255 billion in servicing principal and interest on publicly guaranteed debt in the 2020/2021 financial year, up from Sh252 billion spent in the previous year.