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December 4, 2023

Kitui government under scrutiny over allocation of sh1bn into ambiguous water company

Kitui County Governor Julius Malombe

The Kitui government is under scrutiny for investing nearly Sh1 billion into a water company whose ownership is ambiguous and is currently facing insolvency. A Senate watchdog panel has ordered the Ethics and Anti-Corruption Commission (EACC) to investigate a non-water loss of Sh173.9 million at the company, which also carries a debt of close to Sh500 million.

During the interrogation of Governor Julius Malombe by the Senate’s Public Investments and Special Funds Committee regarding the utility firm’s operations, it was revealed that the devolved unit has been providing monthly injections of between Sh8 million and Sh10 million to the Kitui Water and Sanitation Company (Kitwasco). Over the course of eight years, this expenditure amounts to approximately Sh960 million, or Sh120 million annually.

However, the committee questioned why such significant sums were being spent when the county does not have full ownership of the company. The Auditor General’s report for the financial year ending June 2021 highlighted several issues, including the county’s failure to provide details of subscribers to the company and a statement of guarantee as required by the Companies Act, 2015. Additionally, there was no documentation demonstrating a change in ownership from limited by guarantee to limited by shares and transfer to the county government as mandated by the Water Act, 2016.

Governor Malombe defended the administration’s actions by emphasizing the value residents receive in terms of access to water. He stated that the county government owns the company through a guarantee, not shares, as required by law. However, the committee pointed out that the county had not provided sufficient evidence to support its ownership claims, including an updated CR12 to indicate the company’s directors.

Senator Enock Wambua of Kitui questioned why the county government was financially supporting a company it did not legally own and urged expedited efforts to address the ownership issue. Governor Malombe clarified that the county government would comply with the ownership requirement by September 30, 2023.

The company is facing audit queries related to trade receivables amounting to Sh240.9 million, with a substantial portion outstanding for more than 120 days, raising doubts about their collectability. The financial position of the company also reveals trade and other payables of Sh144.4 million, with only a portion supported by evidence, indicating difficulty in meeting obligations as they arise.

In addition, the report indicates a loss of Sh173.9 million in non-revenue water, revenue shortfall of Sh20.7 million, and unauthorised over-expenditure of over Sh14 million during the review period. The committee has directed the restructuring of the board, appointment of a substantive managing director, implementation of performance contracts for all staff, and ensuring the transfer of full ownership within specified timeframes.

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