It has been found that two significant dam projects in east Africa cost the Kenyan government £80 million even though they were never completed.
The Arror and Kimwarer dams, which were intended to provide power and water to 500,000 people, were the subject of the insurance law. A building company from Italy received a commission. Around 800 people were informed that they would be relocated out of the flooded region, and trees were designated for removal. Six years later, with relatively modest advantages from new infrastructure, the proposed dams are symbolic of Kenya’s descent into debt.
Unanswered questions about why insurance was paid on the loans associated with the dam debacle have led to worries that corruption still permeates the governmental and commercial life of the east African nation.
President William Ruto, who took over as Uhuru Kenyatta’s deputy and was a strong supporter when the dam contracts were signed, was one of those involved in the projects.
Ruto contends that any payments related to the dams are itself insured and is interested in reviving the dams as part of initiatives to improve Kenya’s infrastructure and combat climate change. He stated earlier this year, “We have a bank guarantee that no money will be lost for every dollar that has been paid.”
He hired debt expert and Nairobi economist David Ndii to assist him in coming up with strategies for reviving dormant infrastructure projects without further ballooning debt.
But the government’s finances are still being negatively impacted by debt payments related to the post-2012 infrastructure boom. Compared to the UK’s 9.6%, debt servicing alone accounted for 57% of government income in 2022–2023.
A £1.6 billion loan backed by the London bond market is scheduled for refinancing the following year. Since the loan was obtained while interest rates were low, it is unclear how Ruto will be able to secure a new loan at the higher rates of today while still funding brand-new infrastructure projects.
In order to raise tax collections, a contentious financial measure was passed in June. The additional funds were utilized to reduce debt and increase investment on infrastructure. Ruto’s budget for the first year of the plan was £19.6 billion, with £3.9 billion coming from additional borrowing.
“At least a decade of mismanagement of Kenya’s loans, shocking corruption, and debt dependency as told by auditors, analysts, and insiders,” according to Africa Uncensored and Finance Uncovered. The series of four short films, which covers the time when Kenyatta and Ruto were in charge of the nation, contains senior politicians and analysts revealing the methods used to conceal documents and transfer money without inspections.
The winning bid for the construction of the dams was filed by the Italian-registered companies CMC di Ravenna and Itinera, according to Africa Uncensored. They attempted to recover 12.4 billion Kenyan shillings (about £65 million) in damages from the Kerio Valley Development Authority (KVDA) in 2019.
When CMC declared bankruptcy in 2019, it cited the stagnant project as the reason. According to the original concept, CMC would have financed, built, and operated the dams before turning them over to the KVDA. A group of banks led by Intesa Sanpaulo would lend money to CMC, and SACE, Italy’s export credit agency, would guarantee the loan. With a mission to support Italian companies around the world, SACE is wholly owned and operated by Italy’s ministry of economy and finance.