This archive report was first published on 8 September 2019.
On July 15, 2016, the High Court found Allied East Africa in default of a Sh135 million debt owed to First Community Bank, a situation that led to its subsidiary Midland Energy being put under administration two years later.
The company, which was already broke by the time it won the tender in late 2016, was awarded a Sh3 billion contract to supply National Oil Corporation of Kenya (NOCK) with 500,000 gas cylinders.
However, nearly all the cylinders delivered by Allied East Africa became defective, resulting in the collapse of Project Mwananchi, which aimed to supply cheap cooking gas to millions of Kenyan households.
According to a source privy to the Mwananchi Project deal, the decision to hand the tender to Allied East Africa was orchestrated by a senior member of the Executive and a vocal MP who created a company that became part of four firms that were to supply NOCK with the gas cylinders.
‘Somebody very high up in government said to Allied East Africa: ‘Let us give you the initial contract of 500,000 cylinders but we are going to build our own LPG manufacturing plant called Surge Energy,’” said the source.
However, it has become clear that Allied East Africa, which had requested the court to bar First Community from listing it with the Credit Reference Bureau (CRB), was also being sought by ABC Bank and I&M Bank.
Principal Secretary Andrew Kamau reckoned that just because the manufacturer had a problem with one bank, it did not mean they were in problems with other lenders.
But after being put in liquidation, it has become clear that Allied East Africa was unable to manufacture and supply gas cylinders worth Sh300 million, despite being awarded the tender.
‘They delivered the goods, the rest is irrelevant,’ said Kamau, noting that the government did not pay a single cent for the defective cylinders.
It is not the first time the government has awarded a major project to a bankrupt company, with the latest case being the multi-billion shilling construction of Arror and Kimwarer dams which were awarded to a broke Italian firm.
Official figures show that 83 per cent of rural households use firewood, which pollute the environment and has been blamed for respiratory problems.
Only three per cent of households in rural areas reported using clean sources of energy for cooking.
As of August, a litre of kerosene critical for cooking and lighting by the poor was more expensive than a litre of diesel which powers posh cars popular with CEOs and politicians.
Official data indicates that as of 2015, Liquefied Petroleum Gas (LPG) was used by 13.4 per cent of Kenyan households as the main source of energy for cooking, an improvement from 3.5 per cent recorded in 2006.
Principal Secretary Kamau insisted that the project will be re-tendered once the court case by Consumer Federation of Kenya (Cofek) is settled.
He also said the government had not lost any money, even though most of the cylinders delivered had been rejected.
The cylinders, he said, had a one year warranty from the manufacturers, which means they will be replaced.
‘It is not easy to supply defective gas cylinders and get paid,’ said Kamau.
