Kenya’s $ 1 billion Covid-19 deal under SEC review – Quartz Africa
The Covid-19 pandemic has further highlighted corruption in African governments, as numerous reports emerge of procurement deals made under shady circumstances. In South Africa there are accusations the misappropriation of $ 900 million of public funds intended to fight the pandemic. In Uganda, four senior officials were stopped suspected of inflating the prices of Covid-19 food relief, costing the government at least $ 528,000.
In Kenya, citizens have protested allegations corruption in the purchase and supply of Covid-19 equipment worth $ 71.96 million by a government agency. But the latest scandal to envelop the country has had international implications, attracting a Canadian company and US regulators.
In March, the news broke that the Kenyan government hired a Canadian company called Kallo in a billion dollar contract to build mobile clinics and modernize hospitals across the country to control Covid-19. The US Securities Exchange Commission is reportedly continuing to temporarily suspend trading in the company’s shares, citing concerns about the accuracy of this information.
The alleged deal raised questions about the lack of transparency in the East African country’s procurement processes, especially during emergencies.
Kallo makes claims in regulatory filing
In a recent filing of Form 10-K, an annual report by state-owned companies to the SEC on their financial performance, Kallo reported that Kenya’s finance and health ministries had contracted with Kallo and a company registered in Spain called Techno-Investment Module in June of last year to strengthen the health infrastructure in the country. and build a strong and sustainable healthcare ecosystem. This would be done through the implementation of “Kallo Integrated Delivery Systems”, which include mobile clinics, prefabricated modular healthcare units, and clinical and administrative command centers.
A Contract for this project, attached to a previous deposit, notes that the first of the three sections of the project will be to fight Covid-19. Kallo would implement the project while Techno-Investment Module would provide financing in the form of a € 1.07 billion ($ 1.3 billion) loan to Kenya for the first phase.
After news of the alleged deal broke, Kenya’s Finance Minister Ukur Yatani refuse that the country had entered into a contract with Kallo, calling the media report “flawed and alarming”. He mentionned he had written a formal complaint to the SEC, and a few days later the commission suspended trading in Kallo shares for 10 business days. He spoke about questions about the accuracy of statements the company made in documents filed with the committee, including deals it said it has made regarding healthcare infrastructure projects in several African countries. . (In the filing, the company also announced similar deals with Eswatini, Ethiopia, Mozambique, and Eritrea during the Covid-19 pandemic.)
“The Commission has serious concerns, for example, about the accuracy of the company’s claim that it has contracted with the Republic of Kenya to establish a comprehensive healthcare structure,” the SEC said. .
Kallo did not respond to a request for comment from Quartz.
The suspension ended on April 7 and trading in Kallo’s shares resumed. The SEC did not release any results from its investigation into Kallo’s allegations to Quartz because it does not comment publicly on the status of a company after its suspension.
Questions about purchasing transparency
The controversy over whether or not Kenya actually entered into the multi-million dollar deal has raised questions about the lack of transparency of Covid-era government contracts in Kenya and other African countries. With troubled procurement processes and broad emergency procurement mechanisms, some African countries risk entering into suspicious deals under the guise of responding to a health emergency.
Sheila Masinde, Executive Director of Transparency International Kenya, says Kenya needs to implement an open procurement system.defined as publish and use open, accessible and timely information on public procurement – to enable citizens to follow the information.
“The fact that we do not have up-to-date information on all these contracts that have been concluded for the management of Covid-19, then of course the citizens will not be able to take [the government’s] word, that “Of course you know the guys are resting quietly”, that there is no such commitment that has been made. “” she says.
She calls on the government to adopt open procurement processes and establish specific regulations governing emergency procurement.
Since 2018, Kenya has an entrance for government ministries, departments and agencies to publish purchasing information on a monthly basis, but it is not timely and conclusive as it offers little information about the actual purchasing process, such as how a call of bids has been evaluated and how participants bid. Additionally, more than 40% government agencies do not publish their public procurement information on the portal, according to a report by the Public Procurement Regulatory Authority. The alleged deal with Kallo does not appear on the portal.
Last year, following public outcry over the alleged misuse of Covid-19 funds intended to purchase medical supplies, President Uhuru Kenyatta directed the Ministry of Health should develop a mechanism to make information about purchases available online, including details on the supply chain, how a tender was evaluated and which participants bid. Other ministries, he said, would follow. This is still ongoing.
Kenyan law prescribes direct supply when there is an “urgent need”, that is, when there is an imminent or actual threat to public health, welfare, safety or property damage, so that it would not be practical to resort to normal methods of supply. Masinde calls for rules regarding “urgent” purchases to ensure that due process is followed and that it is done with transparency and accountability.
The Public Procurement Regulatory Authority did not respond to a request for comment.
Kenya reported its first case of Covid-19 in March 2020. So far, the country has experienced three waves of the virus, reporting 163,976 cases and nearly 3,000 deaths.
“[Procurement is] a high risk function and we are also in a high risk period as a country and as a world, ”says Masinde. “So it was obvious that there would be people who would take advantage of this particular crisis to make questionable deals.”
Rich countries, including Great Britain and Germany have also faced backlash for using emergency shopping with little transparency according to guides to the coronavirus pandemic. However, this is a particularly sensitive issue in Kenya, where protests continue against the country’s indebtedness and corruption.
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