National Assembly's Finance and Planning Committee led by its chairman Kuria Kimani (in pink shirt) on a fact-finding mission at the alternative Data Recovery Centre in Naivasha, Nakuru County on December 4, 2023.
Delays by the National Treasury to pay awards in a contract breach case will see the government cough up more than Sh1.6 billion in interest and penalties, with the debt the Treasury owes a contractor amounting to Sh4.9 billion.
This follows a 2021 High Court decision awarding Sh3.87 billion to Misort Africa Limited after the company sued Treasury for contract breach in the construction of a data recovery centre in Naivasha.
Misort Africa sued the Treasury in 2019 for taking over the project before its completion which culminated in a ruling directing Treasury to pay the company Sh3.68 billion for loss of profit, Sh167.7 million described as idle resources and Sh57.4 million as cost of the suit.
In total, the Treasury was slapped with a Sh3.94 billion bill, but official documents show that Treasury had only settled Sh725.8 million of the debt by the end of August last year, leaving a balance of Sh4.9 billion including interest and penalties.
“The National Treasury has so far paid Sh25,792,371 being retention fees and Sh700,000,000 to reduce the debt in the matter of an arbitration between Misort Africa Limited and the National Treasury,” reads the budget documents with an update on the matter.
On top of the court awards and fees since 2021, the budget documents show, unpaid debt has since accrued interest and penalties exceeding Sh1.6 billion, which passes more burden to Treasury.
By end of July 2024 –just two years since the High Court delivered its decision— accrued interest on the unpaid debt to Misort Africa hit Sh1.45 billion.
The documents also show that the High Court award to Misort Africa for loss of profit increased by Sh193 million from the Sh3.68 billion that was initially awarded to Sh3.87 billion.
“However, due to the interest that has accrued over time, the following is owed as at 30th August, 2024: Sh167,748,234 idle resources, Sh3,874,450,575 loss of profit, Sh57,438,038 as cost of the suit, Sh11,579,869 arbitrator’s fees, Sh1,447,598,828 accrued interest 03/08/2021-30/07/2024, Sh200,000 costs awarded in Nairobi High Court and Sh43,419 interest on the Sh200,000 award,” the budget documents state.
Unpaid debts attracted interest at annual rates of 12 and 14 per cent and failure by the Treasury to settle the debt continues to grow the burden even as it struggles with cash flow challenges that have left it delaying to disburse money to fund key government operations and a further accumulation of pending bills.
The debt Treasury owes Misort Africa is despite another payment of Sh354 million made to the company in another contract dispute that was adjudicated by the High Court in 2019.
Construction of the data recovery centre which was the subject of the case leading to the award started in 2009 and was initially targeted to cost Sh782.5 million, before it was later revised to Sh899.5 million.
