Kenya to lose Sh20bn investments in Health tender cancellation

The government could lose about Sh20 billion in Foreign Direct Investments (FDI) following the controversial cancellation of the Health Care […]

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Kenya to lose Sh20bn investments in Health tender cancellation

- December 8, 2019

The government could lose about Sh20 billion in Foreign Direct Investments (FDI) following the controversial cancellation of the Health Care Information Technology (HCIT) solutions project by the Ministry of Health.

The Sh4.9 billion project was on October 2, 2017, awarded to SevenSeas Technology Limited, which was required to roll it out in five years under the Managed Equipment Services (MES), a critical component of the Universal Health Coverage (UHC), one of components of President Uhuru Kenyatta’s Big 4 Agenda.

DATA CENTRE

Generally, the project entails use of ICT to connect 98 county, sub-county and referral health facilities — including 47 level four, five and six hospitals, and the four national referral facilities — to a central data hub. SevenSeas had already implemented phase one of the project, which entailed construction of the data and network operation centre, radiology hub and training room, and reporting room.

However, a terse letter from Health Permanent Secretary Susan Mochache dated November 18, 2019, to Seven Seas Technologies Limited chief executive Michael Macharia, put paid to the project.

Ms Mochache did not disclose whether the ministry would advertise for the multibillion shilling project afresh. The move has already seen the Senate ad hoc committee on MES summon Health Cabinet Secretary Sicily Kariuki to shed light on the circumstances surrounding the project’s termination.

EQUITY INVESTMENTS

Documents submitted in Parliament show that the FDI was to be injected through equity investments as several foreign firms had shown interest in partnering with SevenSeas on the project.

Among, the documents is a letter from the Competition Authority of Kenya (CAK) dated June 26, 2019, approving Africa Healthcare Master Fund PTE Limited, a Japanese firm to invest Sh250 million in SevenSeas for the project.

Another Sh2.5 billion was to come from a Japanese fund, which is over and above the investment by Toyota of Sh310 million, Abraaj, a Dutch company and other Kenyan individual investors.

There was also a commitment from another Japanese company for Sh240 million, with discussions for other investments underway.

However, the final condition to unlock these investments was that the Government of Kenya, through the National Treasury, issues a Support Letter to SevenSeas.

TENDER DOCUMENTS

The purpose of the letter was to ring-fence the government’s budgetary allocation for the project, in essence acting as a government guarantee over its commitment to the realisation of the project.

The support letter is among the requirements the government was required to comply with, according to the tender document it signed through the Ministry of Health and SevenSeas.

But Ms Mochache, in the termination letter, states that the requirement does not feature anywhere in the tender documents.

“The requirement for an original copy of the GoK Support Letter to be given to your firm does not feature anywhere in the tender documents. It is overtly clear to the ministry that your firm lacks the requisite financial capacity to execute the HCIT contract and has been unable to mobilise any funding without a GoK Support Letter,” Ms Mochache stated.

It is important to note that the government promptly issued the original copy of the Support Letter to multinational firms General Electric (GE) East Africa Services Limited and Philips Medical Systems that were contracted for other segments of the MES project.

“The Ministry of Health has on several occasions undertaken to ensure the Support Letter is issued to us as provided for in the tender documents. How then does the PS turn around and say that it is not a requirement in the tender document?” Mr Macharia posed.

SENATE COMMITTEE
He said his company will challenge the cancellation in court, a move that could see the country lose billions in compensation should the government fail to reverse its decision within 14 days from November 25, when the company responded to Ms Mochache’s letter.

“How does this government intend to achieve UHC when it is frustrating us? It was our undertaking to implement the project so that it serves the people of Kenya,” Mr Macharia says.

The CS, who declined to respond to our inquiries, is required by the Senate committee to “provide the reasons for the hurried termination of the contract, a day after SevenSeas provided its evidence, and the cost to the taxpayer,” a brief from the committee chaired by Isiolo Senator Fatuma Dullo, reads.

It is believed that wheeler-dealers in government want a foreign firm, preferably Chinese, to get the tender.

 

By David Mwere