Financially troubled Moi University has suffered a major blow after the High Court ordered the attachment of the institution’s key accounts over a debt that has ballooned to more than Sh1 billion, arising from interest on Sh185 million owed to a contractor in a botched construction deal more than 20 years ago.
Justice Wananda Anuro ordered the freezing of more than 10 of the 69 accounts as penalties arising from accumulated interest on an initial Sh185 million owed to Vishva Builders Ltd for the construction of the Faculty of Science Complex almost three decades ago.
The frozen accounts are spread across several banks, including National Bank of Kenya, Kenya Commercial Bank, Co-operative Bank, Access Bank, Equity Bank, and Absa Bank.
According to evidence placed before the court, Moi University entered into a construction deal with Vishva Builders on November 13, 1990, to build the Faculty of Science at the institution. The works included ancillary external works at the university’s main campus in Eldoret.
Drawings, bills of quantities and the tender form indicated that the contract was Sh476.3 million. The tender submitted by Moi University was Sh547.7 million, but the parties negotiated and the price was reduced to Sh476.3 million.
The university asked for the works to be stopped after seven certificates had been issued by the contractor due to financial constraints. The contractor obliged, and the works were stopped in April 1991. The parties mutually wound up the contract in November 1999.
The university agreed to pay for the works when funds were available and after verification by a government task force on pending bills. The institution submitted that the contractor was paid Sh57.2 million plus a retention sum of Sh6.3 million under interim certificates.
It was unable to raise funds to complete the project, and the works were halted when it was about 9 per cent complete.
The contractor later moved to court to demand payment, and the university was directed to pay Sh185.3 million for the botched contract. The university failed to pay the Sh185 million, resulting in accrued interest amounting to over Sh1 billion over almost 25 years.
The High Court delivered judgment on February 2, 2024, ordering Moi University to pay a claim amounting to Sh1.2 billion when interest was applied at prevailing bank rates.
On 2 February 2025, Vishva Builders Ltd, represented by Nelson Havi and company, obtained a decree for Sh1.08 billion as computation of the interest amount.
The High Court last month gave Moi University 30 days to come up with a plan to settle the debt, failure of which its 69 bank accounts would be attached.
Yesterday, Justice Wananda ordered the freezing of the university’s critical accounts after it failed to present a clear payment plan, a move that is likely to throw day-to-day operations at the institution into uncertainty.
Justice Wananda, however, excluded accounts opened for specific purposes such as research and student scholarships.
“Having already found in the earlier ruling that the excluded accounts were opened for specific purposes such as research and student scholarships, good order dictates that I uphold that decision, as I so do,” ruled Justice Wananda.
He further directed Moi University to meet the cost of the suit and awarded each of the affected banks Sh45,000 to be paid out of any of the bank accounts operated by the institution, save for those exempted by the orders.
The judge said it was unacceptable that a commercial suit of such magnitude should be held up in court for almost 25 years.
Moi University is faced with numerous financial challenges, ranging from a Sh25 million tender for a new gate project to the diversion of Sh7.7 million in student fees by dishonest employees into a private account.
Other debt burdens include a Sh3 billion loan to modernise New Rivatex after spending Sh600 million to acquire it, declining student enrolment from 50,000 in 2015 to 27,000 in 2021, and the closure of non-viable campuses.
Reduced exchequer funding due to the implementation of the Differentiated Unit Cost (DUC) model in computing recurrent capitation, and rising personnel costs due to National Collective Bargaining Agreements (CBAs) that have not been fully funded, are among other factors contributing to the institution’s financial difficulties.
The newly installed Moi University Council is working on a turnaround strategy focusing on infrastructural reorganisation, revenue diversification and staff redundancy as part of cost-cutting measures.
“The university has, over time, been constrained by a range of historical challenges that have undermined its ability to sustain its standing as a premier institution of higher learning in Kenya. These challenges, if left unaddressed, pose a serious risk to the institution’s long-term viability,” disclosed Prof Noah Midamba, Council Chairperson, in an earlier interview.
He admitted that the university is facing financial constraints despite the increase in student enrolment from 4,500 to 6,750 last academic year, among other strategies meant to restore staff confidence by inculcating proper governance, transparency and accountability.
“The council is working on a five-pillar comprehensive strategy to guide the recovery of the university, which has long faced financial crisis, debt burden and administrative mismanagement,” said Prof Midamba.
According to the Acting Vice-Chancellor, Prof Kotut, student numbers have dropped from 48,000 in 2015 to the current 21,000, making it difficult for the university to meet its financial obligations, including payment of staff emoluments.
The university has been grappling with significant financial issues, including certified outstanding debts of Sh8 billion, with Auditor-General Nancy Gathungu ordering a forensic audit of the institution’s books of accounts.
“We have put in place strategies that will ensure the university does not collapse. The refurbishment of student hostels is ongoing, staff are receiving salaries on time, and the university will soon reclaim its glory,” said Dr Edwin Sambili, council member.
Several public institutions are grappling with salary arrears, pension obligations and stalled development projects.
