Whistleblower Report To EACC Seeks To Ouster Kenya Railways MD Mainga Over Multibillion Corrupt Deals

KR topped the list of State agencies and semi-autonomous entities whose losses crossed the Sh1 billion mark in the year ended June 2023, highlighting their increasing burden on taxpayers.

A Treasury report shows KRC made a loss of Sh33.5 billion in the review period followed by the Roads Annuity Fund at Sh12.8 billion, Kenyatta National Hospital at Sh3.5 billion and Kenya Power Sh3.4 billion.

The report highlights the dire financial state of the majority of the 510 entities which are majority-owned by the State and have turned into a burden to taxpayers amid calls for their privatisation.

Accusations against Mainga and why he’s unfit for office

Mainga is alleged to have executed a flawed deal with Africa Star Railways (Afristar), the Chinese operator for the SGR line, which ran largely unchecked where Kenya Railways lost up to Sh.1.4m daily. The contract was signed during Athanas Maina’s tenure and was initiated by Mainga himself.

Abuse of office

In the whistleblower report seen by Kenya Insights, Mainga is accused of abusing his office during his tenure as the acting MD.

On 21″ March, 2019, hes alleged to have unilaterally leased Kenya Railways facilities (container yards and buildings) at Makongeni Nairobi for ten (10) years without any internal procedures or reporting to the board for approval as expected. The report says that Mainga did this while with the full knowledge that KPA had actually taken over the property in October 2018 without formal handing over and also that the property was being used by Kenya Railways to earn twenty tree million (23,000,000.00) a month and to date Railways have lost over four hundred million shillings (400,000,000.00) in form of transport of containers of ICDN and storage charges.

As a result of his action, Kenya Ports Authority uplifted the railway lines without authority and resorted to the use of road transport which was allegedly a corruption scheme designed to benefit specific road transporter. The whistleblower says the corporation will have to incur additional costs to reinstate the line to its original use.

It also states that through the letter of offer dated 14* September, 2018, Mr. Mainga indicated that the board in its 394th meeting held on 26 January, 2018 approved the lease of KR reserve land along Bunyala road to Taff International while in the full knowledge that out of the 7 leases approved by the board on that day none of them related to Taff International.

That through a letter of offer dated 2nd October 2018, he indicated that the board in their 410th meeting held on 26th September 2018 recommended that the corporation leases five (5) acres in Thika for 15 years to Harvest International from 1st November, 2018 while in the full Knowledge that the lease was not part of those which were approved during the 410th special board meeting. Given that the land was in an operation zone, he failed or ignored to check with relevant department whether leasing of the land will conflict with the current or future railway operations as is normally a policy when leasing land designed for operation.

That On10′ July, 2019, Mainga wrote letters indicating that during 430′ special board meeting dated 9th July, 2019, the board recommended the leasing of the land to Kokotoni Investments Ltd and Mapset Maritime Ltd for 3oyears while in full knowledge that the board did not approve leasing of the land to the two companies.

That on 22″ March 2018, Mr. Mainga without any reasonable cause evicted Kristaline Salt Ltd from corporation go down in Malaba and coinvestigated their goods. He then leased the property to a tenant of his choice, Multiple Solutions Ltd. Through his actions, the corporation is facing unnecessary claim of USD 10,315.50 and Ksh. 395,400.00 apart from general damages, costs of suits and damages.

Lack of Transparency and Accountability

The report says the MD failed to showcase transparency and fairness during leading processes. “Sub division & leasing of Siwani Estate Nakuru- Mr. Mainga sub divided the said land into twenty-two (22) plots and presented a lease of exactly twenty-two (22) to the board for approval without demonstrating how they were transparently identified and thus giving room for corrupt activities.” It states.

“sub division & leasing of Sleeper press land, Nairobi – Mr. Mainga sub divided the said land into eight (8) plots and presented a lease of exactly eight (8) to the board for approval without demonstrating how the they were transparently identified and thus giving room for corrupt activities.”

“Leasing of Nairobi South Hub and its Environs _ Kenya Railway land that was recently acquired for SGR has been leased to a few known companies without any demonstration that the exercise was undertaken transparently and fairly” claims the report seen by Kenya Insights.

Projects without Plans

According to the report, Mr. Mainga allegedly disregarded the need for planning before engaging the corporation resources.

A case in hand is the leasing of Athi River logistics hub – Mr. Mainga is alleged to have allowed Grain Bulk Handling Limited (GBHL) to take over the proposed KR Athi River Logistics Hub before physical planning for the area was undertaken.

As a result of this preferential access; GHBL blocked a would be access road to Athi River SGR railway station. GBHL acquire sixty-two (62) acres instead of fifty (5o) acres they were allocated. Planners were forced to plan around GBHL.

GBHL is associated with Mombasa tycoon Mohamed Jaffer who at the time enjoyed the backing of handshake and is currently trying to get his grip back with Ruto who appears to be going after his businesses monopoly.

It goes further to poke holes into leasing and extension of leases within Nairobi Railway city, “Mr. Mainga recommended for leasing and extension of leases for Kenya Railway land with a full knowledge that there was ongoing development Nairobi Railway City master plan by Kenya Railway and Nairobi County Government.” It states.

Leasing of SGR Nairobi Station area, Syokimau Station, and adjoining areas, “Mr. Maingi recommended for leasing of over hundred (100) acres of Kenya Railway land with the full knowledge that there was ongoing development plan which was being undertaken by Kenya Railways, Ministry of Lands, County Government of Nairobi and Machakos County.”

Sh150M Nairobi-Nanyuki Line Murram Tender

The whistleblower wants the anti-graft commission to revisit and investigate the rehabilitation 240-kilometre Nairobi-Nanyuki tender that started in August 2020.

The tendering of supply and delivery of murram for use in the rehabilitation tender no. KR/SCM/FRC/003/2019-2020 was marred with irregularities according to intelligence report seen by Kenya Insights.

The report indicates that the procurement was carried out through restricted tendering and carried out in accordance with provisions of section 102(1)(b) of the PPAD Ac, 2015. Procurement requisition NO. 03753b indicated the amount available for use was Sh150 million.

Under the threshold matrix the public procurement and disposal regulation 2020, the maximum level of expenditure for use of restricted tendering for corporation was Sh30 million for construction works.

However, the report notes that the total budgeted expenditure for purchase of murram was Sh150 million which was above amount required for use of the restricted tendering based on the threshold matrix as per public procurement and disposal regulation 2020. There was no justification for use of restricted tendering as provided in section 102(1)b) of the Act either due to the proportionate cost involved in the evaluation of the tender documents or the time required to do the procurement. It was noted that the procurement started in the year 2019/2020 financial year.

First Choice General Suppliers Limited

A Sh88.2 million tender awarded to First Choice General Suppliers Limited was flagged in the report.  “First Choice General Suppliers Limited were awarded a contract of Murram supply of Kshs. 88,200,000.00. Tender documents were issued on 21* February 2020, closing date was 6th March 2020, evaluation was done on 10th March, 2020 while the contract was signed on 4* may, 2020 and backdated to commence on 31 March 2020. Therefore, the time spent between invitation to tender and signing of the contract was 2 months which was adequate to conduct procurement within the allowed procurement methods of open National Tender as per the threshold matrix.” Reads part of the report seen by Kenya Insights.

The tenders were then sent to the 12 firms through emails: Neral Holdings Limited, Wilfak Engineering Limited, Tradecoin Enterprise Co. Limited, Bismura General Merchants limited, Zescon Construction Limited, Apotach Technologies Limited, Pinnie Innovations Limited, Gilberson Trading Co. Limited, Mosrach Limited, Pkarizus Investment, Young Entrepreneurs Aiming Hinger Limited and Neral Holding Limited.

After evaluation, the tender was controversially awarded to two firms; Mosrach Limited and First Choice General Suppliers Limited. The report flags irregularities overseen by the Mainga led body in the procurement process:

The tender for the rehabilitation of Naromuro Railway Station was awarded to M/s Mosrach Ltd worth Sh34.5 million, it was noted that the Contract was signed on 15/04/2020 and backdated to commence on 31/03/2020. Delivery note No. 22 dated 10/04/2020 indicate that the work stated before the contract was signed.

Rehabilitation of Nanyuki Railway Station was also awarded to the same firm M/s Mosrach Ltd at a similar cost Sh34.5M. The report flagged it as well, “Contract was signed on 15/04/2020 and backdated to commence on 31/03/2020. Delivery note No. 22 dated 10/04/2020 indicate that the work stated before the contract was signed.” Reads the report.

Another questioned tender was the Mitubiri Railway Station rehabilitation project which was awarded to First Choice General Suppliers Limited at a cost of Sh29.55 million. The reflag being that the Contract was signed on 04/05/2020 and backdated to commence on 31/03/2020. Delivery note No. 4 and 22 dated 04/04/2020 and 23/04/2020 respectively indicated the work stated before the contract was signed.

The same firm was awarded the Makuyu Railway Station rehabilitation tender at Sh29.4 million. Similar flaw, contract was signed on 04/05/2020 and backdated to commence on 31/03/2020. Delivery note No. 4 and 22 dated 04/04/2020 and 23/04/2020 respectively indicated the work stated before the contract was signed.

First Choice was also awarded a third tender for tge rehabilitation of Kiganjo Railway Station at Sh29.25 million, “contract was signed on 04/05/2020 and backdated to commence on 31/03/2020. Delivery note No. 4 and 22 dated 04/04/2020 and 23/04/2020 respectively indicated the work stated before the contract was signed.” It reads.

The report concludes that Mainga and management breached the law. “There was no justification for use of restricted tendering as provided in section 102(1)(b) of the Act either due to the proportionate cost involved in the evaluation of the tender documents or the time required to do the procurement. It has been noted that the procurement started in the year 2019/2020 financial year.”

According to Institute of Economic Affairs (IEA), the country is losing the substantive amount of revenue that is worth addressing the fiscal deficits concern, through public procurement fraud.

The economic think-tank says public procurement fraud is a repeated ritual that has been hurting the country’s progress for over a decade now.

Staring at a fiscal space of Sh862.5 billion in the current financial year, the government could service the gap with sealed corruption loopholes instead of using debt to finance the gap.

The government instead is looking forward to financing the deficit using foreign financing worth Sh280.7 billion and domestic financing of Sh581.7 billion.

According to Ethics and Anti-Corruption Commission (EACC), the country is losing over Sh500 billion through corruption every year.

Back in 2021, former president Uhuru Kenyatta noted that the country was losing approximately Sh2 billion daily to corruption.

This was reiterated by ODM party leader Raila Odinga last year when he said the nation is losing Sh700 billion to corruption every year.

In the last financial year, Ethics and Anti-Corruption Commission (EACC) said that it averted a loss of Sh6 billion by disrupting corruption networks and recovering stolen assets worth Sh6.3 billion.

Procurement fraud is one major breeding ground for corruption in the country, according to IEA.

Open tendering is provided as the preferred procurement method for all public procurement on the consideration that its the most transparent to achieve value for money.

The murram project.

In the case of the Sh157.2 million Nairobi-Nanyuki railway line murram supply tender, the back rests with the MD to answer as to why they overlooked and breached the law in awarding the two firms the tenders. The awarding of this tender therefore ought to be investigated.

Will EACC stand up to its name this time or look away since this is a big issue and a big fish? We will be watching.