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Ouko queries the viability of Galana project

Mercy Mwai @wangumarci

Auditor General Edward Ouko has raised queries over the viability of the multi-billion shilling  Galana/Kulalu food security project.

In a report tabled in the National Assembly yesterday, Ouko raised concerns that the government risks losing billions of shillings as the project has not served the purpose it was initiated for.

Part of the money that Ouko is questioning include Sh7.2 billion given as a loan for the construction of a model firm as well as another Sh14.5 billion that the government gave to National Irrigation Board (NIB) to facilitate the implementation of the project.

In regards to the Sh7.2 billion that the board took from the Bank of Leumi Israel for the construction works of the 10,000-acre model farm for the project, Ouko claimed that most of the loan terms are not to the best interest of Kenyan tax payers.

He regretted that the NIB and the government risks paying more money than they expected following the absence of clearly spelt out borrowing terms.

According to him, the bank that gave the loan is the one that will benefit as the loan interests will be determined from time to time by the bank  depending on the prevailing economic conditions.

He regretted that the borrower is the one that will suffer as it will pay additional costs the bank will incur while mobilising the funds for loan disbursement.

Terms and condition

In addition, he regretted that the borrower will not be entitled to contest any payment made by the bank and may not justify its failure to fulfill its obligation in accordance with the terms and conditions of the agreement.

Notes the report: “therefore the conditions of this loan are in favor of the bank and not the board. Also the repayment of the loan principle and interests are not clearly defined in the loan agreement.”

In regards to the Sh14.5 billion that NIB signed with Green Arava Ltd, Ouko said that examination of files correspondences and contract documents revealed that despite signing of the contract there are not only weaknesses but also delays in its completion.

Among the issues that Ouko raised include weakness of the contract, weakness of the contractor, challenges faced by the employer and time analysis.

According to Ouko while the project was signed in August 2014 between the board and Green Arava Limited and the site handed over in September 2014, a memo from the board written in February 2015 indicated the project was yet to be handed over.

Advance payment

Part of the weaknesses that Ouko highlighted include the fact that the contractor was single sourced, financing agreement tied to the contractor and thus all proceeds of the loan can only be channeled through the contractor as well as the contract provides for advance payment under operation and maintenance bill.

“In contract documents between the board and Green Arava, it was noted that a very key ingredient of such technologically advanced project there was no mention of transfer of knowledge of manning infrastructure installed after the contractor exits the site,” reads the report in part.

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