National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u.
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Misort Africa Limited: How Treasury blunders gifted little-known firm Sh5bn
What you need to know:
- Misort Africa Limited got more than it had bargained for in a botched deal that brings into sharp focus the frivolous manner in which public projects are implemented in the country.
Blunders by National Treasury officials in designing and executing a project to construct an alternative data recovery centre in Naivasha might have gifted a little-known firm a Sh5 billion payout under controversial circumstances, the Nation has learnt.
Misort Africa Limited—a company with very little digital footprint and whose name does not pop up in a search of the Public Procurement and Information Portal despite having been around for 19 years—got more than it had bargained for in a botched deal that brings into sharp focus the frivolous manner in which public projects are implemented in the country.
A tender, which Misort Africa won, and which was initially estimated to cost around Sh800 million, has now ballooned to Sh5.17 billion, according to figures given by the National Assembly’s Finance and Planning Committee.
In December 2021, the High Court upheld an award of Sh3,874,450,575.55 to Misort Africa after a Sole Arbitrator earlier found that the National Treasury had breached the contract it had with the firm by taking over the project for the construction of data recovery centre in Naivasha before its completion.
Started in 2009 under the administration of the late President Mwai Kibaki, the construction of the data recovery centre was initially estimated to cost Sh782,499,814.30.
This was later revised upwards to a final cost of Sh899,560,074.91, a Treasury document shows. The end of the project was estimated to be December 2014.
While making its submissions before the Budget and Appropriations Committee on the first Supplementary Budget for the current Financial Year, the Departmental Committee on Finance & National Planning, singled out the award as one of the National Treasury’s largest pending bills.
“The State Department for the National Treasury has a pending bill of Kshs.5.174 billion owed to Misort Africa Limited who were contracted for the construction of a data recovery centre in Naivasha,” the committee is quoted in BAC’s Report on the Supplementary Estimates I for FY 2023/24.
“This is an arbitration award estimated at Kshs.5.174 billion including accrued interest that if not settled may accrue additional interests,” the finance committee, chaired by Kimani Kuria, the Member of Parliament for Molo Constituency, added.
When contacted to shed light on the company, Mr Kimani promised to call back. By the time of going to press the legislator had not contacted the Nation.
The company—majority-owned by a Mr Martin Ng’ang’a Kanyingi, according to records at the registrar of companies—also sued the National Treasury for yet another contract, bringing the total award to Sh4.1 billion. The ruling for the second case was also delivered by the High Court towards the end of last year.
In the second case, Misort Africa was in October last year awarded a total sum of Sh235,683,000 together with interest at court rates from the date of filing the suit until payment in full.
This is after the Treasury failed to pay the full contract amount of Sh504,710,200 for the supply of maintenance spares for air conditioning units in Herufi Treasury data centres. Misort told the court that Treasury only paid Sh235,683,000 of the invoices.
In the court hearing, the National Treasury noted one of the reasons for its failure to pay—although an internal committee had approved the payment—was because the case had been transmitted to the Ethics and Anti-Corruption Commission (EACC) for fraud.
The Herufi House Data Centre is a key part of the government’s digital infrastructure. It hosts information for such key government operations as the Integrated Financial Management System (Ifmis). The data centre was gutted during a 2013 fire, putting at risk sensitive government information.
But it is the ballooning of the award for the construction of the data recovery centre to a company that since its registration in 2004 does not have a functional website that is likely to raise eyebrows.
In October 13, 2009, Misort Africa and the Treasury entered into a contract for the former to construct an alternative Data Recovery Centre at Naivasha for a sum of Sh782,499,814.30.
The contract would involve Misort procuring electrical equipment for the centre. After sourcing for the equipment, Misort Africa was to make arrangements for the equipment to be inspected by Treasury’s officers before it could be brought into the country for installation.
Following a benchmarking tour to the USA in June 2011, it was agreed that the scope of the works of the project be expanded and the project implemented in three phases, according to the National Treasury.
The National Treasury insisted that Misort Africa was not to be given the contract for the third phase. On its part, Misort argued that it was never informed that the contract for the third phase was to be awarded through a competitive process.
Due to the disagreement, the two parties went before a Sole Arbitrator, Dr Kariuki Muigua, who on August 3, 2021, found the National Treasury at fault and asked it to pay Misort Africa Sh3,874,450,575.55.
This amount of money would also attract simple interest at the rate of 12 per cent per annum from the date of publishing the award, putting a huge strain on taxpayers at a time when they are grappling with fresh tax measures.
The amount to be paid to Misort included payment for idle resources and expenses amounting to Sh164,874,241.00. This after the firm’s equipment stayed on site from 2014 to 2018 without being utilised.
There was also Sh3,680,909,970 for loss of profits and another Sh25,792,371.55 that the Treasury had retained.
On December 21, last year, the High Court, through Justice David Majanja, upheld the arbitrator’s ruling, dismissing the Treasury’s argument that the award of the Sh3.68 billion for loss of profit to Misort was against public policy. The Treasury had insisted that works on the third phase had not been done and that awarding Misort the money was against public policy.
“Since the applicant did not flout any procurement law and procedure in being awarded the contract which provided that the applicant was to deliver a complete Disaster Data Recovery Centre, I fail to see how the award violates the public policy of Kenya. It is now clear that the respondent has failed to make a case for setting aside the award,” said Justice Majanja.
He agreed with the arbitrator who stated that the Treasury had not demonstrated that the parties varied the terms of the contract after the USA benchmark tour that called for the expansion of the scope of works.
Mr Ng’ang’a, the majority shareholder, has 950 ordinary shares while Catherine Njoki Kiburu has 50 ordinary shares. Lawyer John Kiumi Wambugu is also listed as the firm’s secretary.
The National Treasury had not responded to our queries two days after we sent them questions.
