The Kenyan government has invested Ksh.104.8 billion in the Social Health Authority (SHA) system—a project that, according to Auditor General Nancy Gathungu, the state neither owns nor controls. The report raises serious questions about the decision to commit such a large public investment without securing ownership of the system’s infrastructure and intellectual property.
Ownership and Control Concerns
Auditor General Gathungu noted in her report that all system components and intellectual property rights remain with the consortium managing the SHA. This arrangement means that funds contributed by the government and health facilities are used to support a system over which the state has little oversight. Gathungu warned that this lack of control poses significant risks to public funds and the effective delivery of healthcare services.
Flawed Procurement Process
The report also criticizes the procurement process, highlighting that the contractor was chosen through a Specially Permitted Procurement Procedure rather than through competitive bidding. This method, Gathungu explains, violates Article 227(1) of the 2010 Kenya Constitution, which mandates a fair, equitable, transparent, and cost-effective acquisition process. Additionally, the project was not included in the county’s procurement plan or the medium-term budgetary expenditure framework, breaching Section 53(7) of the Public Procurement and Asset Disposal Act of 2015.
Revenue Model and Escrow Account Issues
The SHA system’s financing model anticipates generating Ksh.111 billion over the next ten years through contributions from SHA members, health facility claims, and charges for track and trace solutions. However, the model lacks a baseline survey to support these projections. The report points out that a 5% deduction from claims made by health facilities could effectively raise healthcare costs for citizens, acting as a service fee. Furthermore, while clause 12.4 of the contract requires that revenues be transferred to an escrow account on a daily or weekly basis, details about the escrow account’s signatories remain undisclosed, raising further transparency concerns.
Restrictions on Future Innovation
Another troubling aspect of the contract is a clause that prohibits the government and its health agencies from accessing any part of the system to develop a competing product or service. This restriction could limit Kenya’s ability to innovate and adapt to future technological needs. Additionally, any disputes under the contract will be resolved by the London Court of International Arbitration, bypassing local legal channels.
Additional Management Failures
Beyond the SHA project, the Auditor General’s report highlights broader issues in government management. It reveals that 386 employees earned a net salary of less than one-third of their basic salary, violating Section 19(3) of the Employment Act, 2007. The report also criticizes the government for failing to meet the mandated 5% staffing requirement for people with disabilities, with only 2.3% of staff meeting this criterion.
The Auditor General’s findings cast a long shadow over the SHA project, revealing critical gaps in ownership, procurement, revenue management, and overall governance. As public funds continue to be invested in a system beyond state control, concerns mount about the potential impact on healthcare delivery and the effective use of taxpayer money. The government now faces increasing pressure to address these shortcomings and ensure greater accountability and transparency in future projects.
