A Swiss firm hired by the Kenya Revenue Authority (KRA) for a lucrative venture has been indicted over corruption, including bribing public officials in countries it operates and fined Sh12.5 billion by authorities in Switzerland.
Sicpa Security Solutions SA was contracted by KRA to collect stamp duty on excisable goods in Kenya for five years, a deal that runs out this year with bids for a new one closed on Wednesday.
Sicpa was found culpable of abetting corporate criminality in connection with acts of corruption and fined CHF81 million by Swiss authorities. The fine is about Sh12.5 billion as per the current exchange rate of CHF1 to Sh154.
The conviction came after Sicpa acknowledged that it failed to take all the necessary and reasonable precautions to prevent bribes to foreign public officials. The firm and its former employees have declared that they will not be appealing against the penalty order, which will now be legally binding.
The firm is currently in a five-year contract with KRA for the collection of the stamp duties, which is ending in the next few months. The company’s request to have the tender renewed failed and it is among those that have submitted expressions of interest for the tender, which is likely to cost the taxpayer Sh162 billion.
Opposition MPs have warned KRA against awarding the tender as “proper disclosures have not been made.”
The contract involves printing, supply, and delivery of security revenue stamps complete with a track-and-trace system and an integrated production accounting system.
Yesterday, KRA chairman Anthony Maina said that the awarding of the contract will be guided by procurement laws.
A press release posted on the Swiss website www.bundesanwaltschaft.ch on Friday last week indicates that the Office of Attorney-General in Switzerland sanctioned Sicpa after its employees were found culpable of bribing foreign public officials in the conduct of business in Brazil, Colombia and Venezuela.
A former sales manager was handed a conditional prison sentence of 170 days. However, the proceedings against the firm’s CEO, its major shareholder, were discontinued.
“The proceedings identified organisational deficiencies that made it possible for employees of Sicpa to bribe public officials in the conduct of business. The organisational deficiencies were particularly evident in the areas of corporate governance, risk management and compliance,” the statement reads in part.
It further notes that the penalty order was issued in line with the laws of the country. The fine the firm has been ordered to pay includes CHF1 million, even as it imposed an equivalent claim for compensation of CHF80 million.
“In the penalty order, the Office of Attorney-General finds the former manager of Sicpa, who took advantage of the deficiencies, guilty of bribery of foreign public officials,” the statement says, adding that the order states that “he paid bribes to high-ranking officials in the Colombian and Venezuelan markets between 2009 and 2011.”
The claims of embezzlement and money laundering against the former sales manager were discontinued “because suspicions justifying an indictment have not been corroborated.”
Sicpa has been mentioned in over 13 countries on allegations of questionable dealings. For instance, in May 2019, Mr Charles Nelson Finkel, who was an agent of Sicpa, was found guilty and sentenced to prison for 11 years and 6 months linked to obtaining and executing Sicpa's contract with the Brazil Federal Revenue.
In June 2021, Sicpa agreed to pay 135 million francs in a “settlement agreement” with local authorities. MNr Fikel notes that the Attorney-General's Office in Switzerland has been interested in the activities of Sicpa in 13 other countries among them Egypt, India, Venezuela, Vietnam and Ukraine and Malawi.
National Assembly Minority Leader Opiyo Wandayi (Ugunja), has raised fears about the possibility of Sicpa winning the award, noting that he has raised the matter on the floor of the House through a request for statement directed at National Treasury Cabinet Secretary Njuguna Ndung’u, who is yet to respond.
“These are grave issues that need to be addressed by the National Treasury before it balloons into something else,” said Mr Wandayi adding; “a lot of mystery surrounds the contract.”
In his request to the House, Mr Wandayi also wants Auditor-General Nancy Gathungu to “immediately” commence an audit of all funds paid to KRA by manufacturers of excisable goods and account for how the funds have been utilised and who the beneficiaries were and report the findings to parliament.
KRA has invited Kenyans to submit their views on the draft Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 before they are tabled in the National Assembly.
The draft regulations propose to amend the pricing of excise stamps for alcoholic beverages and other products, a review that, if implemented, may increase the cost of the stamps by over 100 per cent.
The Excisable Goods Management System (EGMS) was introduced by KRA in 2012 in a bid to improve excise revenue collection through a track-and-trace solution.
Its implementation started with tobacco, wines and spirits, but was later expanded to cover soft drinks, juices, water and cosmetics. Over time, the EGMS system has been implemented through Sicpa.
Passage of the regulations in their current form will see the cost of tobacco, wines and spirits, beer, non-alcoholic drinks and cosmetics increase up to Sh5 per stamp.
For instance, stamps on tobacco and wines and spirits will increase from the current Sh2.8 to Sh5, beer from Sh1.5 to Sh3, non-alcoholic beverages from Sh0.6 to Sh2.2 and cosmetics from Sh0.6 to Sh2.5.
Mr Wanday estimates that, based on the previous contract that put the contract proceeds to be Sh81 billion in five years, these new costs will translate to Sh162 billion in five years.
He adds that the cost was arbitrarily created by KRA and Sicpa and will be borne by the Kenyan taxpayers since the cost will be passed on by the manufacturers.
The equipment that Sicpa has been managing, says the Opposition lawmaker, is now fully owned by KRA and fully paid for by taxpayers and that the agreement with the Swiss company, if any, should, therefore, be transitioning from a maintenance contract to a service one.
This is so as to cater for consumables that consist of software upgrades, ink and paper stamps.
“With the cost of the equipment being catered for, the costs of the stamps should be going down considering that the initial stamp prices catered for sourcing of the equipment,” Mr Wandayi told Nation.
Documents submitted to parliament in 2018 indicate that the reason for failing to budget for the project prior to commencing the procurement, which was in violation of the Public Procurement and Assets Disposal Act, was because the project was self-financing.
Mr Wandayi, while wondering who stands to benefit from the over Sh162 billion contract over the next five years, was also reluctant to rule out incidences of counterfeiting with the roll-out of the new contract.
He said that KRA tax stamps have been abused by unscrupulous individuals with thousands of reels being used by fraudsters “especially of tobacco and alcoholic products.”
“In fact, there are more counterfeit tax stamps in Kenya than the counterfeit goods they are supposed to be controlling. The enforcement agencies have been unable to control this crime and the EGMS has proven ineffective in dealing with issues of counterfeiting and manufacturing of substandard goods.”
This, he said, has endangered the lives and health of unsuspecting Kenyans.
He called on KRA to publish the number of counterfeit stamps confiscated, the companies and individuals involved and a detailed impact assessment of the efficiency of the EGMS after the five years.
While the contract has never been made available to the public, previous submissions by KRA contained in the adopted report of the Public Investment Committee (PIC) of the last parliament raised some questions.
The PIC report, Mr Wandayi said, indicated that the previous contract started on April 18, 2013 for a duration of five years.
The current contract started on October 1, 2015 for a period of five years at the cost of a minimum of Sh15 billion and a maximum of Sh17 billion and expires on October 30, 2022.
During the PIC deliberations in the 12th parliament, it was revealed that the EGMS system was collecting Sh42 million a day, an amount that would translate to Sh81 billion in five years.
Mr Wandayi noted that, given that the cost of the contract was Sh17 billion, Sicpa would therefore be making a profit of Sh64 billion in five years after fully recovering the cost of supplying the equipment to KRA.
