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Riddle of loan bigger than water firm income

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By WALTER MENYA
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How a water service provider that collects an average of Sh240 million a year entered into a deal with a consortium of foreign private investors worth billions of shillings, is now the subject of an investigation by the Ethics and Anti-Corruption Commission (EACC).

Tavevo Water Company of Taita Taveta County got into a deal with the consortium led by Miraadi Ltd for the Njoro Kubwa Bulk Water Project to supply water to Jipe Settlement Scheme in Taveta and several ranchers in the county, with 10 percent of the water meant for household use in other parts of the county.

The Kenya Innovative Finance Facility for Water (Kiffwa) was listed as a co-developer and financial adviser of the project.

The consortium was to contribute Sh6.2 billion, which was to be converted to a loan repayable by Tavevo in equal amounts for six years.

This translates to more than Sh1 billion a year, yet Tavevo’s annual revenue collection is way short of that, according to reports by the Auditor General.

The company has been receiving adverse opinions from the Auditor General due to various audit queries and liquidity issues.

The questionable deal was entered into by former Governor John Mruttu’s administration just months to the August 2017 General Election.

The EACC’s investigations follow a complaint by the current county administration. “We have formed a team to investigate the allegations. That is all we can say for now,” EACC’s communications officer Yassin Ayila said.

Of interest is that, except for a few correspondences and a memorandum of understanding, there are no documents to prove that procurement procedures were followed and the input of the County Assembly, National Treasury and the parent water ministry obtained.

Correspondences seen by Sunday Nation show that the county first wrote to EACC on February 21 and a follow-up letter on June 7 inviting the commission to initiate investigations into the matter.

“Your expedient action will be greatly appreciated, paving the way to prosecution of those culpable,” the county’s legal adviser Edwin Chahilu said in the letter of June 7.

The EACC acknowledged receipt of the complaint, including audit reports, on July 5.

“The commission will institute an investigation into Tavevo company to ascertain the veracity of the allegations,” EACC deputy director in charge of investigations, Mr Humphrey Mahiva, said in the letter.

Attempts to get the former governor to shed light on the matter did not bear fruit as Mr Mruttu declined to answer our questions. “This being a private investment, please talk to the investors,” he said.

Tavevo managing director Habel Mwagha, now on suspension, did not respond to our messages for his side of the story.

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Mr Tony Mwaruwa, managing director of Miraadi Ltd, which is the lead developer of the project, promised to give a response but had not done so by the time of going to press.

“We have a legal advisory on the project. We prefer to have a formal request to which we will respond in writing,” he said, and requested that we send him our specific queries through e-mail.

Later, he sent the reporter a threatening text message: “Your actions in the last 24 hours amount to harassment. It has been reported to Kilimani Police Station. Our lawyers will pick it up from here. Publish the unsubstantiated story at your own risk.”

Tavevo entered into the deal on January 30, 2017, just seven months to the elections and had the backing of Mr Mruttu, who in a letter dated June 28, 2017, said the county government “affirms our full support of the project”.

“The county executive has been actively involved with Miraadi since January 2015 vide a memorandum of understanding with them to develop the same project,” the governor noted in the letter.

Before the award was made, Tavevo is alleged to have spent Sh536,329 on project design by Amiantit Ltd, a company based in South Africa, and on benchmarking trips to different countries.

In the complaint to EACC, the current county administration claims that despite the huge amounts of money involved, “Tavevo does not have any records of transactions or documentation to qualify the journey towards this “flagship project’”.

Except for letters of award and acceptance and the memorandum of understanding, the complainants say they have found no minutes of public participation and of tender committee of county assembly approval, or input from the National Treasury and the Ministry of Water.

Moreover, there is no contract with the consortium on what the project entails and the obligations of the parties to the deal.

Mr Chahilu says the deal was never mentioned during the handover by the former governor to the current administration and no documents on it were given.

“The whole project was planned in an extremely casual way. All orderly, legal and regular ways of handling projects were avoided.

“The process of acquiring the loan is defective in that although the loan was sourced from outside the county, the governments both at national and county levels, were not appropriately done. This raises questions on guarantees of the loan. How was this aspect taken care of?” Mr Chahilu posed.



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19-year-old boy charged with defiling girl three years younger

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[Courtesy]

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A 19-year-old teenager is in trouble with authorities for allegedly defiling a 16-year-old girl.
Tyson Ongaki has been charged before a Kisumu Chief Magistrate’s court and accused of intentionally defiling the minor on various dates. The crime was allegedly committed in Bomet.
The teenager who appeared before Chief Magistrate Peter Gesora however denied the offence and has been released on a Sh100,000 bond.
The court heard that after committing the offense on diverse dates between March 26, 2021 and May 14, 2021, the teenager moved to Kisumu.
He has also been charged with committing an indecent act with a minor.
An investigating officer handling the matter told the court that the suspect was arrested in Kisumu.
The magistrate directed that the matter be heard on June 15, 2021.

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KRA must ease tax filing to boost revenues

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Nikhil Hira Independent tax consultant and Director Bowmans Coulson Harney (law firm). [Courtesy]

Anyone who has been following Kenya’s budgets over the last few years will recall headlines each year saying that the country has set its largest-ever budget. 
The upcoming 2021/22 fiscal year is no exception, with Treasury Cabinet Secretary Ukur Yatani announcing a budget of Sh3.6 trillion – yes, the biggest ever! A little over Sh2 trillion will come from government revenues, with approximately Sh1.8 trillion of this from tax revenues. 
The balance will be borrowed – another common feature of the last few years. 
This year’s budget comes amidst an economic crisis brought on by the Covid-19 pandemic, with the inherent assumption that the pandemic will come to an end before the start of the next financial year. 
Given surges in infections that are being seen globally, and indeed in Kenya, this assumption may well be the deal-breaker. 
The Ministry of Health has already said that Kenya may see another wave of infections in July, fuelled by the Indian variant. This could result in more lockdowns with the associated impact on the economy and indeed revenue collections. The lack of vaccines is an issue that the government must address as a matter of great urgency if the country is to get through the pandemic without further economic woes. 
While deficits in government budgets are not uncommon, Kenya seems to be annually widening the gap between expenditure and revenues. 
If one applies this model to their household budget, the upshot will almost certainly be bankruptcy. 

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What is actually required is curtailing recurring government expenditures, which is something that the government has acknowledged in the past with proposed austerity measures. 
The reality is that Kenya has not succeeded in doing this, and the pressure on revenue collection is exacerbated. 
When you add to the high level of wastage and corruption we are witnessing, the deficit will almost certainly continue to widen. 
The responsibility for tax collection and enforcement lies with the Kenya Revenue Authority better (KRA). 
There is no doubt that the authority has improved significantly in this task since it was set up in 1995. 
The taxman estimates that 4.4 million tax returns were filed by June 30 last year, up from 3.6 million in the previous year.  While this is a significant improvement, when compared to the country’s population, this number of returns seems unusually low. 
The increase in the number of tax returns, is to a large extent, due to the online reporting system, iTax, and a major push by KRA through taxpayer education.
There is no doubt that the online system has made filing tax returns significantly easier and gone are the large queues of people witnessed at Times Tower on deadline day. 
That said, there is still much to be done to make filing returns a seamless and painless exercise. 
System downtime during filing periods is something that all of us will have experienced, although, in typical Kenyan fashion, we inevitably wait until the last day to file our returns as we do with most things! 
The spreadsheet that one uses to file a return is by no means the simplest to use.  One key issue seems to be that taxpayers are not alerted to changes in the model until they try to upload a return. 
The spreadsheet does not allow one to make it more relevant to their sources of income – in essence, it is too rigid and inflexible. KRA should be able to rectify this without too much effort.
Last year was unusual in that different rates of tax were applicable in the first quarter as compared to the rest of the year.  This followed the Covid-19 relief measures that were introduced in April 2020. 
There was much debate about whether the changes were meant to apply for the whole year or whether some form of apportionment was needed. 
In the end, the decision was made for apportionment. One can argue about what the correct treatment should be, but the issue was how long it took for the decision to be made and, indeed, to amend the iTax system. 
The age-old notion has always been that the more complex and difficult it is to file a tax return, the more likely it will be that taxpayers simply won’t file their returns. While the issue with the system has been resolved, there is an inherent administrative issue here that must be addressed. 
KRA has to be significantly more proactive in dealing with changes in rates and law to ensure the least inconvenience to taxpayers. 
The writer, Nikhil Hira, is the Director of Bowmans Kenya.
The views expressed in this article are the author’s and not necessarily those of Bowmans Kenya  

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BBI ruling: Nakuru MCAs criticise judges

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The leadership of Nakuru County Assembly has faulted the five-judge bench for declaring Building Bridges Initiative (BBI) Bill illegal. Speaking at the assembly Monday, the ward reps said the verdict was contrary to the wishes of the residents.

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