Ex-government auditor alleges massive irregularities and fraud in SGR funding

July 13, 2023

A former government auditor has alleged massive irregularities and fraud in the financing of Kenya’s Standard Gauge Railway (SGR) – including a possible overpayment of Ksh 777 billion.

The claims were made in a petition submitted to Kenya’s Senate by Bernard Muchere, a fraud risk management consultant with extensive experience in the public sector. The petition is based on a detailed analysis of government expenditures drawn from available public records. Its most explosive allegation is that Kenya spent a total of Ksh 1.184 trillion to develop the SGR, far more than the roughly Ksh 407 billion previously claimed by the government.

“I can conclusively state that China Roads and Bridges and the suppliers of facilities and rolling stocks were overpaid by Ksh 777,018,125,192,” Muchere writes in the petition.

The petition also alleges that China’s loans to the Kenyan government were never actually deposited in Kenya. Instead, based on the documentation available, Muchere believes that the SGR was constructed entirely with existing government revenue.

“This is evidenced by the GOK SGR grants of approximately Ksh 645 billion recorded in KRC’s financial statements for 2014/2015 to 2019/2020 financial years,” the petition states.

The petition also points out a range of other issues with SGR financing, including:

  • That National Treasury records show that roughly Ksh 64 billion was spent between 2021-23 on the supposed construction of the Nairobi-Naivasha SGR line, despite the line being completed in December 2019.
  • That the 2023-24 budget includes an expenditure of Ksh 37 billion for “development” of the Nairobi-Mombasa SGR line, despite that section being completed in 2017. Similar estimates exist for 2024-25 and 2025-26.
  • That there are serious inconsistencies relating to the SGR loan amounts when comparing the records of the National Treasury, the State Department of Transport and Kenya Railways Corporation.
  • That the money due to China “should not be considered public debt” because the commercial loan contract taken to finance the SGR does not meet the definition of a public contract.

The petition closes with a list of nine demands, including that the Senate begin an inquiry into the financial irregularities and attempt to recover overpaid funds.

Okoa Mombasa has reviewed the petition and finds its allegations disturbing and credible, given the available evidence. We therefore support the petition’s call for a full-scale inquiry into Kenya’s financing of the SGR and the resulting debt.

We further believe that the inquiry should be public, transparent, and include the release of all contracts, agreements studies and other relevant documents related to the financing and construction of the SGR. Okoa Mombasa obtained a court order requiring the government to release these records in May 2022, but the government has so far failed to comply.

The petition could be formally considered as early as next week, when the Senate returns from recess.

A copy of the petition is available here.

Update (Feb. 19, 2024): Eight months after submitting his petition to Parliament, Bernard Muchere has yet to receive a response or any sort of rebuttal to his allegations. As a result, he sent a letter to the Speakers of the Senate and National Assembly renewing his demand for an investigation. Read it here

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