KENYA: Auditor General Raises Concern Over Accountability Of Ksh.104.8B Invested In Social Health Authority System

By Lisbeth Micheni, Kenya

The Kenyan government has spent Ksh.104.8 billion on the Social Health Authority (SHA) system, yet it does not own or control the infrastructure, raising major concerns about financial accountability.

According to a report by Auditor General Nancy Gathungu, the state proceeded with the investment without securing ownership rights to the system and its intellectual property.

As per the contract, these remain in the hands of the private partnership that developed the system, severely limiting the government’s oversight.

The procurement process has also come under scrutiny, as it bypassed competitive bidding and was awarded through a Specially Permitted Procurement Procedure.

This violates Article 227(1) of Kenya’s Constitution, which mandates fair and transparent acquisition of goods and services.

Additionally, the project was not included in the official procurement plan or the medium-term budget framework, contravening legal requirements under the Public Procurement and Asset Disposal Act of 2015.

The financing model anticipates generating Ksh.111 billion over ten years through SHA contributions, healthcare facility claims, and charges for tracking and tracing solutions.

However, the Auditor General warns that this model lacks a supporting baseline study, raising doubts about its sustainability.

Furthermore, a 5% deduction from hospital claims will effectively increase healthcare costs for citizens.

A clause in the contract mandates that all revenue be transferred to an escrow account regularly, but the report highlights that the agreement does not disclose who controls the account, raising transparency concerns.

Moreover, the contract prevents the Kenyan government from developing a competing system, restricting future innovation and adaptation to new technology.

Any disputes related to the agreement will be settled through the London Court of International Arbitration, sidelining local legal processes.

Beyond the procurement issues, the Auditor General also found noncompliance with labor laws, including cases where employees took home less than a third of their basic salary, violating the Employment Act. Additionally, only 2.3% of SHA employees are people with disabilities, far below the 5% threshold required by public service policies.

The revelations have sparked concerns about the accountability and long-term viability of the SHA system, as well as the financial burden it could place on both the government and Kenyan citizens.