The Africa Development Bank (AfDB) has fined Kenya Sh119 million for delays in the construction of a kidney hospital, exposing taxpayers to avoidable financial pain.
The AfDB loaned Kenya Sh3.34 billion in 2015 to construct East Africa's Kidney Institute Centre of Excellence, a facility that would see the country conduct at least 100 kidney transplants every year.
While the project was expected to be completed by the end of 2019, delays by the government have seen it stuck under construction for over a decade, as commitment fees on unused loans hit Sh119 million by June 2024.
“A trend analysis for nine years from 2015/2016 financial year indicated commitment charges of Sh119,093,103 due to huge undisbursed balances which could have been avoided had management adhered to the project timelines,” the Auditor-General Nancy Gathungu notes.
Under the project agreement, AfDB was to finance Sh3.34 billion through a facility by the African Development Fund while Kenya would provide Sh334 million in counterpart funding.
By the end of June last year, Sh2.79 billion had been spent on the project, leaving Sh777 million (23 percent) of the funding unused. “However, as at June 30, 2024 four years later than the completion date, the project was incomplete despite the government having started loan repayments and the project's benefits are yet to be realised,” Ms Gathungu says.
Under the loan agreement with the AfDB, Kenya is supposed to pay 0.5 percent in commitment charges for any undisbursed loan balances.
By the end of June 2024, Sh2.56 billion had been disbursed, leaving Sh777 million undisbursed. Noting that the delays have denied Kenyans the benefit of better health services and value for the billions of shillings put into the project, Ms Gathungu faulted the government for delays.
The commitment fee continues to pile even as the Ministry of Health signed an additional Sh2.18 billion loan with the lender to meet cost overruns, which raises the total cost of the project to Sh5.5 billion.
Ms Gathungu also noted that the government has not been adhering to an agreement to channel counterpart funding on the project through a project account, instead paying it directly to the Health ministry.
The funding from AfDB is part of a program running across East Africa to support the creation of a network of Centers of Excellence (CoEs) in biomedical sciences and engineering.
Kenya is to benefit through the establishment of Nephrology and Urology facilities, Uganda to get a centre for Oncology treatment, Tanzania (Cardiovascular), Biomedical Engineering, eHealth in Rwanda, and nutrition in Burundi.
“This additional financing will support the Kenyan component of the CoE Project to meet cost overruns and to scale up physical facilities for the East Africa Kidney Institute (EAKI) in Nephrology and Urology, increasing the equipment scope and enhancing more training for medical personnel required for operationalizing the EAKI to a state-of-the-art specialized medical institution,” the AfDB says in a brief after approving the additional Sh2.43 billion financing.
During the year ending June 2024, the project was funded Sh231.29 million out of an expected funding of Sh622.5 million, leading to an underfunding of 63 percent, the Auditor-General pointed out.
“The under-funding affected the planned activities and may have impacted negatively on service delivery to the public,” Ms Gathungu said.
