This archive report was first published on 10 July 2020.
On July 10, 2020, Kenya's government paid over Sh7 billion in penalties to investors behind the Lake Turkana Wind Power project, sparking concerns about the country's investment negotiation skills.
The payment, which may be legal, has been described as a 'national scandal' due to the opportunity cost involved. According to reports, the government had agreed to pay the penalties as part of a deal with the investors, who had calculated that the building of the power line would be completed faster than the transmission line.
However, critics argue that the government's negotiating team failed to consider the risks involved in the project, including land acquisition and involuntary displacement of thousands of people. They also point out that the government had a policy of not providing sovereign guarantees to investors, yet the negotiating team agreed to cover the investors against delays in completion of the transmission line.
The African Development Bank (AFDB) had also provided an insurance policy to cover the investors against failure by the government to pay the penalty for delay in completion of the transmission line.
Experts have called for the government to strengthen its capacity in negotiations with investors, citing the need for better risk assessment and more effective contract management.
