• Communication between the agency board and the Health ministry has laid bare the extent of the mess at the parastatal.
• The Kemsa management says it is unable to fund critical operations and emergencies
Cash-strapped state medical supplier Kemsa wants the government to write off the Sh2.3 billion loss it incurred in the messy procurement of Covid-19 items.
The agency, which is under EACC investigation, is broke. Its management says it is unable to fund critical operations and emergencies.
Communication between Kemsa board and the Health ministry has laid bare the extent of the mess at the parastatal.
So dire is the situation that the board is seeking Sh5 billion bailout from the National Treasury to cushion the entity from "serious effects of the loss write-off".
Kemsa finance director Waiganjo Karanja said the situation is dire as there is no provision to spend on emergencies.
The agency is stuck with Sh6.4 billion stock of supplies whose procurement is subject of investigations by the anti-graft agency and the National Assembly’s Public Investments Committee.
Kemsa board chairman Kembi Gitura, in a letter to Health Cabinet Secretary Mutahi Kagwe, said they can only raise Sh4 billion if the goods are sold at a throwaway price.
“Nine of the items are hard to sell because of the procurement prices compared to the prevailing market prices,” Gitura said.
The former Murang'a senator warned that if the items are not sold, the agency risks holding on to the overpriced goods to the expiry date.
The board further wants Kagwe to help it unlock Sh6.7 billion debts owed by the Health ministry and county governments.
Counties owe Kemsa Sh2.8 billion while development partners are yet to disburse Sh1.6 billion and GoK facilities Sh595 million. Private facilities owe the agency Sh310,825, MoH parallel programmes Sh1.4 billion and supply services customers Sh292 million.
Its rent arrears total Sh1.8 million.
In what is spiraling into a fight between the board and the management, Gitura accused the corner office team of brewing the cash-flow crisis.
“The burden of liabilities came from procurement of PPEs and other Covid-19 response items, which were procured using UHC budget.”
Three top officials - CEO Jonah Manjari, commercial director Eliud Muriithi, and procurement director Maurice Juma - were suspended.
Gitura said the extra expenditure was committed without the knowledge and requisite approval of the board and MoH.
“I assure you that the board will hold the management responsible for the loss by subjecting all officers linked to disciplinary process as necessary,” he told Kagwe in a letter.
The PIC, which is chaired by Mvita MP Abdulswamad Nassir, has raised the red flag that taxpayers risk losing more billions in the face of the flaws.
In its deliberations on a special audit of the Covid-19 procurement, details emerged of how Kemsa officials threw caution to the wind in the bid to source PPEs.
Acting CEO Edward Njoroge was hard-pressed to explain how they identified the suppliers.
PIC wants answers on how companies that were not prequalified learned of the tender and whether the purchases were authorised by the Health ministry.
Kagwe and Principal Secretary Susan Mochache are scheduled to meet the PIC next week to respond to the queries.
The committee was shocked by the disclosure that the agency bypassed the ministry in the procurement.
Supplies of close to Sh4 billion were dished out on the phone to companies whose eligibility is questionable.
MPs were told that the said companies knocked Kemsa doors to negotiate the purchases.
PIC further heard that there was no needs assessment, no budget approval, and that the board was not aware of the events that culminated in the dead stock.
Before any approval was granted, Kemsa managers went ahead to spend UHC funds to source some of the items.
Whereas the acting CEO denied this claim, the letter by the Kemsa board showed otherwise.
Ruaraka MP T.J. Kajwang’ asked: “Under what circumstances did Kilig Ltd, which was five months old, Shop 'n Buy, which was four months old, and Nanopay, which is less than a year-old know of the tender?
“How did they know? Was there reliance on the law? Doesn't it provide for objective structure, budget, and approval?”
Nassir, for his part, added: “You not only needed approval but also told not to buy. The PS in her letter stated that UHC funds should not be utilised.
“You have told us that the purchases were demand-driven. Would you call a 97% stock base demand-driven?” the Mvita MP asked.
PIC was concerned that the agency went ahead to procure despite knowing that counties were already procuring their own PPEs.
Acting Kemsa procurement director Edward Buluma confirmed that the agency did not advertise.
“Most of the suppliers knew the government would be procuring PPEs and other protective devices,” he said.
The officials could not explain why they failed to engage prequalified suppliers before settling on the controversial companies.