Henry Rotich has denied claims that Sh21 billion had been paid for construction of the dams before commencement of works.
“Once the work commences, the advance payment is recovered from subsequent interim payment certificate raised by service provider. It is important to note that the advance payment is backed by advanced/insurance guarantee. If the contractor is unable to deliver the service to the government or runs bankrupt, the guarantee will be called away,” Rotich said.
Treasury says that like any other standard loan facility signed by the government, there are several conditions to be met before funds are made available to the borrower and the contractor to start work.
Rotich said Sh545.9 million and Sh359.5 million were paid as commitment fee, Sh3.5 million agency fee and a Sh11.1 billion insurance premium paid to the contractor.
Italian firm Servizi Assicurativi del Commercio Estero was paid a Sh7.8 billion advance fee representing 15 per cent of the contract amount.
Defending the deal, Rotich said that the Sh7.8 billion advance payment was in line with Section 147 (1) the Public Procurement and Asset Disposal Act.
Rotich termed claims that financing for the projects was done without submission of designs as baseless saying the Ministry of East African Community and Regional Development, which was the procuring agent, adopted a design-build model which he argued had been proved to be cheaper and effective.
The Italian contractor, SACE will control 85 per cent of the Sh52 billion contract amount with a consortium of banks funding the remaining 15 per cent.
An Italian banking group, Intesa Sanpaolo, signed the facility agreement on behalf of three other banks – Paribas Fortis S.AIN.V, UniCredit S.P.A, and UniCredit Bank.
Deputy President William Ruto has dismissed the alleged loss of Sh21 billion in the two projects saying that to the contrary Sh7 billion had been spent.
“The money in question is about Sh7 billion and for every coin that has been paid, we have a bank guarantee. What you have been hearing is just but a flat lie, no money will be lost because we’re a responsible government; we’ve engaged every arm of government to ensure public resources are safe,” Ruto said last week.
The National Treasury yesterday moved to defend advance payments for two dam projects saying Sh12 billion was spent to secure funding for the projects under a government-to-government arrangement.
Treasury Cabinet Secretary Henry Rotich said this was a prerequisite before the government could access the funding and the facility risked being cancelled if the government did not make advance payments.
The Attorney General had approved the financing agreement before it was signed on April 18, 2017, he said.
In a paid for statement published in newspapers yesterday, Rotich said the money was paid to meet conditions before funding for the dams, Arror and Kimwarer, could be okayed.