The State Department for Roads has withdrawn records indicating payments of Sh6.19 billion to an Israeli contractor, SBI International Holdings Kenya, for contract breaches, raising questions on the fate of taxpayers’ money.
The department had in budgetary report to the National Treasury last year said the money had been wired to the firm as at June 2023 after the Kenya National Highways Authority (KeNHA) lost court battles in London and Nairobi during the Uhuru Kenyatta presidency
Officials in the Roads ministry have now retreated from the position and restated the payouts in latest disclosures that shows significantly smaller compensation of Sh800 million paid to SBI by June 2024.
The change of position, without explanation raises questions on how much cash was actually wired to the Israeli outfit.
The international adjudicators in the UK and courts in Kenya awarded SBI Sh6.56 billion as compensation for breach of contracts by KeNHA, which terminated nine projects along the Mau Summit-Kisumu highway for prolonged delay in completion.
While the Roads department had reported last year that Kenya had cleared 94.35 per cent, or Sh6.19 billion, as at June 2023, this has been revised downwards to 12.19 per cent, or Sh800 million, in the latest disclosures for the period ended June 2024.
KeNHA Director-General Kung'u Ndung'u did not immediately respond to our calls and text messages sent to his cellphone number on Thursday, January 30 with reminders on Friday, January 31. We also contacted SBI for a comment but they were yet to respond to our enquiries by press time.
Court documents showed that some of the projects had stalled because of “delays in releasing project funds”.
KeNHA unsuccessfully pleaded with the High Court in 2021 to stop payments awarded to SBI by Dispute Adjudication Board (DAB) in the UK for cancelled road contracts.
“In FIDIC [International Federation of Consulting Engineers] contracts, the process of dispute resolution by adjudication is contractual in nature. The terms are contained in the agreement between the parties in the form of a dispute resolution clause,” Appellate judge John Mativo (then at High Court) ruled at the time.
“By submitting to the contract, the parties willingly agree to be bound by the terms of the agreement including the dispute resolution process. Courts cannot rewrite a contract validly entered between parties.”
The adjudication board ordered KeNHA to compensate SBI Sh2.18 billion for illegal termination of three projects related to dualling of the road between Kisumu Boys Roundabout and Mamboleo, nearly Sh1.59 billion for Kericho – Nyamasaria (Kisumu) project and Sh1.39 billion Mau Summit - Kericho project.
The highways authority is also required to pay Sh611.48 million for botched contract for roads running from Kisumu Airport through Kisian, Obote, Otieno Oyoo and Port and a further Sh522 million for two deals under the Ahero Interchange Project.
The relatively hefty court awards to the large infrastructure construction firm had earlier caught the attention of the taxman who had unsuccessfully demanded that KeNHA wires Sh3.6 billion from the compensation to Times Tower following a tax dispute with SBI.
The Kenya Revenue Authority had notified the State-run roads agency to seize the cash awarded to the Israeli contractor, but SBI successfully appealed against the decision.
“KRA without any colour of right and before the statutory timelines allowed under the law for the filing of a notice of objection could lapse, issued agency notices to KeNHA seeking to enforce the collection of the purported tax liability of Sh3.6 billion,” SBI argued before the Tax Appeals Tribunal.
“This was after KRA got wind that SBI had been awarded a sum of money by the high court in contractual related matters against KeNHA.”
The tax appeals tribunal in 2022 ruled that KRA overstepped its mandate and should have asked KeNHA instead to freeze the amounts due to SBI until the tax dispute is heard and determined.
The SBI pay accounts for half (52.3 per cent) of Sh12.55 billion total court awards against agencies under Roads department over the years. The department says it had settled a fifth (21.15 per cent), or Sh2.65 billion, of the compensation for breaches.
Road infrastructure was priority sector under Kenyatta’s regime although it came with the burden of debt load on taxpayers largely via Chinese loans.
