Sh20 billion Chinese fiber optic project loan shrouded in mystery, auditor says
Auditor General claims that the state-owned National Optic Fiber Backbone Infrastructure (Nofbi) was financed and contractors were hired without proper authorization and loan agreements for a debt of Sh21 billion owed to a Chinese lender were missing.
According to Nancy Gathungu, the selection of the Chinese government and Exim Bank of China as financiers, was done in secret.
The method by which the Chinese government and Exim Bank of China were chosen and appointed to finance the fiber optic project, which provides telecommunications access in all 47 counties, was not made clear by a forensic audit.
The absence of loan agreements, a lack of an asset registry, and missing records of the billions paid to the contractors make it difficult to determine the cost of the (NOFBi) which is expected to cost billions of dollars.
According to a report written by the auditor to the Parliament, the framework and concession loan agreements for Nofbi phase 1 were not made available for audit and was impossible to determine the total funding from Exim Bank of China.
Githungu claims she was unable to obtain an explanation as for how three contractors, Huawei, ZTE, and Sagem were chosen to construct the multibillion-shilling infrastructure.
Additionally, the ZTE Corporation commercial contract did not include an audit clause, making it impossible to calculate the total cost of the Nofbi phase 1 project.
The three contractors finished the project’s first phase in 2009 by laying 4,300 kilometers of fiber optic cable to provide all users with high-speed Internet access.
Phase Two, which was carried out between 2012 and 2017, involved the installation of an additional 1,600 kilometers of fiber optic cable throughout 46 counties, plus an additional 500 kilometers specifically designated for military usage.
The third, 2,500-kilometer phase involved connecting the sub counties to the county offices.
On October 8, 2012, and May 9, 2016, the Treasury signed concessional loan agreements with the Exim Bank for Nofbi Phase II and Nofbi Phase IIE, respectively, totaling Sh6 billion and Sh10 billion.
The ICT Principal Secretary is also charged with signing the commercial agreement prior to the signing of the framework and concessional loan agreements for Nofbi Phase II and Nofbi Phase IIE in the special audit.
According to reports, Huawei Technologies Co. Ltd. owed Sh20.5 billion ($213,150,000) for Nofbi Phase I, Phase II, and Phase IIE.
Githungu stated that documents worth $106,828,026 (Sh10.95 billion) were supplied for audit, leaving $106,321.974 (Sh9.5 billion) unaccounted for.
Additionally, the project’s assets were not registered, making it impossible to estimate the overall cost of ICT assets purchased and installed.
An assessment of the equipments in 22 counties showed that a sizable portion was defective, unusable, disconnected from the power source, and the termination of the fiber optics outside of government buildings.
The legislative Public Accounts Committee approved the forensic audit of the Nofbi project (PAC).
The audit revealed that the contractor was automatically given later extensions to the Nofbi project’s scope and geographic coverage without a formal procurement process.
The government was required to pay Exim Bank Sh7.2 billion for Phase II of the Nofbi contract and another Sh9.8 billion for its extension.
Later, loans of over Sh10 billion were obtained for Nofbi, despite repeated requests.
The state ICT Department has however not made this information public.
Phase II Expansion (IIE) was completed between 2016 and 2020.
The project’s original Phase One was expected to last 5,000 kilometers and cost Sh5.8 billion ($80 million), with supplier credits, grants, concessions, and loans serving as funding sources.
Gathungu noted in the forensic audit report that all the approved budgets for Nofbi Phase I and Nofbi Phase II for the financial years 2012/13 to 2014/15 were not supplied for audit review.
