Sunday, September 11, 2016

MPs summon Githae over KRA’s disputed e-tax deal

Former Finance minister Njeru Githae. PHOTO | FILE
Kenya’s ambassador to the US and former Finance minister Robinson Githae. PHOTO | FILE  
By EDWIN MUTAI
In Summary
  • The summonses appear to have sparked a war among SICPA officials after the Kenya representatives wrote to the committee stating that they were not privy to the contract signed between SICPA SA and KRA.

Parliament last Thursday made clear its intention to have Kenya’s ambassador to the US and former Finance minister Robinson Githae testify in ongoing investigations into the Kenya Revenue Authority’s controversial award of a Sh17.7 billion e-tax system contract to a Swiss firm.
Adan Keynan, who chairs PIC, asked the committee clerk to invite Mr Githae to explain how the Exercisable Goods Management System (EGMS), which manufacturers have opposed, was procured.
Mr Githae, who was Finance minister at the time of the procurement, is particularly expected to explain whether the controversial contract that has set the Swiss firm on course to earning billions of shillings from Kenya every year, met the set legal and procedural requirements.
His involvement in the investigations is hinged on the fact that though KRA operates as an independent State agency, it nominally report to the National Treasury – giving the minister a say in its affairs.
KRA and SICPA Solutions SA originally signed the e-tax contract in December 2012 at a cost that was later renegotiated and increased after a June 2013 legal notice that expanded the scope of goods that would be required to use it.
The five-year contract worth Euros 20,341,464 (approximately Sh4.8 billion) was originally to provide 3.55 billion stamps a year but this was later increased to Euros 158,213,898 (Sh17.7 billion at current exchange rates) for 12.87 billion stamps.
The original contract was to produce excise stamps for tobacco products, wines and spirits but the Treasury, through a legal notice number 110 of June 2013 increased the scope to cover beer, bottled water and soft drinks.
KRA entered into a third procurement round in respect of EGMS in January 2015 – this time choosing to directly negotiate with SICPA.
Last Thursday, KRA’s deputy commissioner for procurement and supplies services Grace Kariuki submitted documents to Parliament showing the negotiations sought to expand the scope of the contract awarded in December 2012 on account of the change in law.
“When the first contract was awarded to SICPA (December 2012), only three products, tobacco, spirits and wines, were subject of stamping and that required about 3.55 billion stamps,” Ms Kariuki said, adding that the amendment of the law in June 2013 required more products to be affixed with the stamps.
“The total estimated stamp consumption was then revised to an estimated 12.8 billion over a five-year period,” she said.
John Munge, a Treasury official, who offers technical advice to the PIC refuted claims that the Treasury exerted undue pressure on the KRA to use the EGMS system.
“The Treasury does not micro manage the affairs of State agencies, including KRA. The tendering was done by the KRA and not the Treasury,” he said in response to KRA’s claim that it rushed to procure the service under undue pressure.
The renegotiated contract set the cost per stamp at Sh1.50
Bruno Fretzel, Giovanni Zucchetu, Matthieu Cousteau, Christopher York, Marcos Ponc Soares, Brian Ligale and Christopher Essendi represented SICPA in the negotiations with KRA that increased the contract price to Euros 158,213,898 or Sh15.9 billion according to the then prevailing May 2015 exchange rate.
A breakdown of the Sh1.50 charge shows that KRA would remit Sh1.40 of the total to SICPA Security Solutions SA despite the fact that the real cost of the stamp stood at Sh0.61.
The breakdown also showed that Sh0.31 would go to meet the cost of software platform while Sh0.58 would be set aside for production line accounting.
Sparked a war
The summonses appear to have sparked a war among SICPA officials after the Kenya representatives wrote to the committee stating that they were not privy to the contract signed between SICPA SA and KRA.
The Kenyan office said SICPA South Africa is the entity that signed the contract and that its directors are willing to appear before the House in two weeks’ time. SICPA is the Swiss security printing company at the centre of an alleged bribery scandal involving cigarette maker BAT and former Justice minister Martha Karua.
Ms Karua was named in a BBC investigative programme as having benefited from the proceeds of corrupt payments said to have influenced the Kenya Revenue Authority’s award of the lucrative tender to supply excise duty stamps.
Paul Hopkins, a former BAT employee and whistleblower in the scandal, last year claimed that he paid Ms Karua £50,000 (about Sh7.5 million) bribe to access confidential information on the procurement of the excise tax stamps, which the tobacco firm used to block a rival firm from winning the lucrative tender.
Ms Karua has denied the claims even as she admitted receiving Sh2 million from Mr Hopkins — which she supposedly understood to have been a personal donation for her 2013 presidential campaign.
“If BAT, as alleged, attempted to influence the tendering process in Kenya on behalf of a favoured provider, then SICPA as an independent provider is also a victim of their action,” the Swiss company, SICPA, said last year in a response to the Business Daily queries.
emutai@ke.nationmedia.com

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