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Kenyan and Italy have agreed to restart the construction of Arror, Kimwarer and Itare dams in a deal that will also see the government exempted from paying in excess of Sh12 billion to Italian firms for breach of contract.

The deal was agreed on during yesterday’s meeting between President William Ruto and Italian President Sergio Mattarella, who is on a State visit to Kenya.

As part of the agreement, the government will be required to drop charges against Italian companies that had won tenders to construct the dams which were mired in controversy and whose construction was stopped in September 2019 under a cloud of graft allegations.

Making the disclosure yesterday, President Ruto said both the Kenya government and the Italian contractors will withdraw the cases they filed against each other in various courts. This will also include petitions filed for arbitration over the matter after all parties agreed to resolve any outstanding matters out of the courts.

The President disclosed that all the parties had already agreed on a framework to settle all outstanding court cases revolving around the stoppage of works on the three dams.

That could mean that high-ranking government officials who were charged in relation to the dam projects are likely to have the charges against them dropped.

Construction of the dams in Nakuru and Elgeyo Marakwet counties was suspended by the Jubilee administration after a report questioned their technical and financially feasibility. An Italian company, CMC di Ravenna had won the tender to construct the Arror and Kimwarer dams, both of which were halted over allegations of financial impropriety on the part of government officials, including the then Treasury Cabinet Secretary Henry Rotich and then Permanent Secretary for Treasury Kamau Thugge. The two, together with others, were accused of conspiracy to defraud and abuse of office that led to the loss of over Sh60 billion.

At the start of the prosecutions, the Director of Public Prosecutions had put 24 individuals on trial but later dropped charges against 15 including Thugge. Some of those whose cases were dropped agreed to become prosecution witnesses. Rotich’s case is still ongoing although two of the charges against him were dropped.

Yesterday, President Ruto said the loans that had been agreed on to fund the projects would be renegotiated. That could mean the projects will be restarted in the next few months.

“We have further committed to re-establish co-operation on the construction of Arror, Kimwarer and Itare dams and other water and sanitation projects, which are critical to our agenda on food security and climate action,” said Ruto during a joint communiqué with Mattarella.

Abuse of office

The government intends to clear pending court cases within one month after which it will start the process of negotiating the restructuring of the loans.

“Hopefully, we should be able to go on with construction of these dams in a matter of months,” said Ruto.

With all the parties agreeing to drop court cases, Kenyan tax payers could be saved from paying Sh12.4 billion to CMC Di Ravenna. The company had filed an arbitration case at the International Chamber of Commerce, seeking compensation for irregular cancellation of the tender.

The government had charged several top State officials with abuse of office and corruption over the three dams.

Kenya Revenue Authority (KRA) had also moved to the High Court demanding over Sh333 million on account of VAT from CMC Di Ravenna on Itare dam. The Italian firm had also counter sued the government, demanding a refund of over Sh166 million from the taxman.

Yesterday, Ruto said he made a commitment to Kenyans that his government would resolve the issues surrounding Itare, Arror and Kimwarer dams, whose construction had stalled for almost three years.

“I am happy to report to the nation that the Kenyan and Italian governments have agreed to jumpstart the projects and in fact the process of sorting out the matters in court has already started in earnest,” he said. “We have agreed the restart of these projects is not only urgent but also a priority and necessary because it is going to supply water to many towns in Nakuru, Kericho and many other areas in Baringo and Elgeyo Marakwet.”

In 2019, the then President Uhuru Kenyatta cancelled the multi-billion dam projects in the wake of the findings of a technical committee he had formed to assess the two projects after it emerged that billions of shillings had vanished yet no work had been done.

The controversy surrounding the dam saw Rotich, Thugge and four others accused of conspiracy to defraud and abuse of office that led to the loss of over Sh60 billion.  In November 2021, the court dropped charges against Rotich in the Sh63 billion Arror and Kimwarer dams graft cases. The court found that the prosecution had failed to demonstrate charges associated with Rotich to specific breaches under procurement and public finance management laws.

Rotich accused the government of applying double standards in charging him over his role in the dams, saying other multi billion projects like the Standard Gauge Railway followed a similar procurement process.

A year ago, Rotich and eight others were charged afresh after the Anti-Corruption Court allowed the Director of Public Prosecutions to consolidate two files related to the two dams and to withdraw charges of nine accused persons who then became State witnesses.

Rotich and the eight others were accused of jointly conspiring to defraud the government of $501,829,769, by entering into a deal to construct the two dams without approval. They allegedly committed the offence between December 17, 2014 and January 31, 2019.

Sh14 billion grant

In a related development, three Italian firms involved in the dams projects sued Kenya at the International Court of Arbitration in April 2021 and demanded over Sh11 billion over the cancellation of the tenders. The firms also wanted the court to declare that the cancellation of the contracts was irregular and unlawful.

The Directorate of Criminal Investigations said in 2019 it would question 11 people over the Sh38 billion Itare dam scandal. 

The then Water Cabinet Secretary Simon Chelugui was questioned over the failed project but absolved himself from any wrongdoing. Chelugui explained that he was not in office when the procurement processes were undertaken

Meanwhile, Mattarella said Kenya and Italy had  agreed to remove non-tariff barriers to stimulate trade and investment between the two nations. They will also embark on negotiations on the avoidance of double-taxation. Once the agreement is signed, it is expected to usher in higher levels of foreign direct investments.

Mattarella said Italy had committed to advance Kenya Sh14 billion in grants and soft loans covering projects in agriculture, small businesses, housing and urban settlement, health, the digital super highway and the creative economy.