Nairobi, March 4- The Kenyan government’s Ksh 104.8 billion Social Health Authority (SHA) initiative is facing intense scrutiny after Auditor General Nancy Gathungu revealed that, despite heavy public investment, the state neither owns nor controls the system.
A major concern raised in the Auditor General’s report is that the government proceeded with the project without first securing ownership of the system’s infrastructure and intellectual property.
According to Gathungu, “the ownership of the system, its components, and all intellectual property rights shall remain with the consortium,” meaning the government has limited authority and oversight.
This arrangement implies that funds collected through SHA contributions and health facility claims will finance a system the state does not own. The Auditor General warns that this poses a significant financial risk and could undermine healthcare service delivery.
Adding to the controversy, the project was awarded through a Specially Permitted Procurement Procedure rather than a competitive bidding process, which directly violates Article 227(1) of the Kenyan Constitution. This article mandates that public procurement should be fair, equitable, transparent, competitive, and cost-effective.
Furthermore, the project was not factored into the national procurement plan or the medium-term budgetary expenditure framework, contravening Section 53(7) of the Public Procurement and Asset Disposal Act of 2015.
The project anticipates generating Ksh 111 billion over a decade from SHA member contributions, health facility claims, and track-and-trace solution charges. However, the report highlights the lack of a supporting baseline survey, raising doubts about the model’s viability.
One major concern is that 5% will be deducted from health facility claims, effectively increasing healthcare costs for citizens. “This effectively translates into a 5% service charge every time citizens seek medical services,” Gathungu noted.
Clause 12.4 of the contract mandates that all revenue must be transferred to an escrow account on a daily or weekly basis. However, the contract does not disclose the signatories of this account, further raising transparency and accountability concerns.
Additionally, the contract restricts the government from developing a similar system in the future, limiting Kenya’s ability to innovate or adapt to technological advancements. “The procuring entity shall ensure that neither it nor government health agencies can access the system to create a competing product or service,” the report states. Gathungu warns that this could place the government at a disadvantage if future healthcare needs change.
Another contentious provision states that any disputes arising from the contract will be resolved by the London Court of International Arbitration, bypassing Kenya’s legal system.
Beyond procurement and financial concerns, the Auditor General’s report also highlights major management failures within the SHA project. A payroll review found that 386 employees earned less than a third of their basic salary, violating Section 19(3) of the Employment Act, 2007.
Moreover, the government has failed to meet the minimum staffing requirement for people with disabilities. Only 2.3% of employees fall under this category—far below the 5% mandated by public service policies.
The Auditor General’s findings paint a worrying picture of the SHA project, raising red flags on ownership, procurement irregularities, financial sustainability, and management failures. With billions of taxpayer shillings at stake, the report underscores the need for urgent reforms to safeguard public funds and ensure the long-term success of Kenya’s healthcare system.
