Controversy behind Ksh.104B SHA technology deal awarded to Safaricom and Apeiro Limited

There is immense controversy surrounding the launch of the Social Health Insurance Fund (SHIF).

Issues such as low registration rates among Kenyans, a budgetary allocation of less than 5 percent by the government and concerns about transparency in the tender process for the crucial technological system have raised serious concerns about the vital programme.

Telecommunications giant Safaricom Limited is leading a three-member consortium in a project that was awarded through direct procurement.

The Social Health Authority (SHA) has been structured to manage three funds: the Primary Healthcare Fund, which will receive Ksh. 50 billion from the government; the Social Health Insurance Fund, which aims to raise at least Ksh. 148 billion annually through member contributions; and the Emergency, Chronic, and Critical Illnesses Fund, which requires at least Ksh.75 billion each year.

However, this year’s budget allocates only Ksh.6.1 billion for the government-funded funds: Ksh.4.1 billion for the Primary Healthcare Fund and Ksh.2 billion for the Emergency, Chronic, and Critical Care Fund.

As the government rolls out the fund on Tuesday next week, SHA is starting off with a budget deficit of Ksh.119 billion and there are no details on how much the fund will raise, given the low registration uptake.

The means-testing instrument intended to determine how much households without formal employment will contribute is not ready, as it reportedly contains serious errors that overstate the amounts families should pay.

The desired integrated healthcare information technology system is also not ready. Additionally, SHA currently has no employees, with the law specifying that NHIF staff can only be enlisted through a competitive recruitment process.

Just last week, President William Ruto made changes to the SHA, dropping Dr. Timothy Olweny, who had been leading the preparatory phase since November 2023. In his place, Dr. Abdi Mohamed, a former board member,was appointed Chairman. Dr. Olweny is now the board chair at the National Cancer Institute.

The Ministry of Health reports that nearly 2 million Kenyans have registered or applied for registration, with a target of reaching 50 million Kenyans or 12 million households. Additionally, details have emerged about a plan to develop a new healthcare information management system under a consortium that will cost Ksh.104 billion.

The consortium comprises of Safaricom Limited, Apeiro Limited, and Konvergenz Network Solutions Limited. Details from the Registrar of Companies indicate that Apeiro Limited was registered on July 5, several months after the search for a system began.

"Apeiro is registered in Dubai. If it wants to do business in Kenya, it has to be registered locally," Medical Services PS Harry Kimtai said.

In a statement, Safaricom Chief Executive Peter Ndegwa indicated that the integrated healthcare information technology system (IHTS) would cost Ksh.104 billion, recoverable over a period of ten years.

"Safaricom needed to work with Konvergenz limited, a Kenyan company, " said Kimtai.

Safaricom and the two companies are required to deliver a health information exchange,  a system that will allow health facilities to share patient records.

The consortium is required to develop and rollout standard based Integrated Hospital Management Information (IHMS) system I in partnership with the Ministry of Health and county governments.

The consortium will also deliver a technology to digitize the supply chain of health products that ensures visibility of both pharmaceutical and non-pharmaceutical products across the country. This is to enable traceability of medicine to patients.

The consortium will then support training of public health official on the system, project management and be involved in the on-ground rollout of various technologies.

Reports indicate that senior officials at some of the members of the consortium were opposed to venturing into the multi-billion project due to the procurement process followed, while also being cautious that it’s not a key competent area for the firms.

 The National Assembly’s Health Committees has so far been unable to access details of the deal or even the justification as to why it was secured through direct procurement.

"Sometimes when you are procuring service that has some challenges then you apply and once permission has been granted for direct procurement then you go through that method," said Kimtai.

The Public Procurement and Disposal Act emphasizes preference for competitive bidding of services, limiting direct procurement to instances of when only the said supplier has the said goods or services; due to war, invasion, disorder and other unique circumstances.

But it is the details of the ownership of the members of the consortium that is telling.

Safaricom limited is controlled by the government which owns 35 per cent of the telco. Vodafone Group has a 39.93 per cent stake. Other institutions share 0.83 per cent while other categories including individuals account for just over 24 per cent of the shareholding.

Apeiro limited the other member of the consortium is wholly owned by a company called SIH Africa Limited.

SIH Africa limited is owned by two persons of Indian descent, Aswanth Bindhu from India and Nishant Mishra from Kenya.

Rufus Maina is a director at SIH Africa without shares. Maina and Aswanth are also directors at Apeiro limited now working with Safaricom. The other directors are notable names: Indian Inder Deep Singh Virdi, and Kenyan Judy Mwende Gatabaki.

Konvergenz Network Solution limited is owned at 90 per cent majority by Konvergenz Holding company, a holding company that was registered in May 2023. The remaining ten  percent stake is split between Pitfield Auto Limited and Abdullahi Abdi Sheikh who also owns the holding company. Issa Sheikh Mohamed, a Kenyan, is the director at the May 2023 registered company.

A search at the registrar of companies reveals that Dorothy Kiprono owns Pitfield Auto limited which controls 5 percent stake at the Konvergenz Nework Solution limited.

At the Konvargenz Holding company two Kenyans Issa and Abdulla Abdi Sheikh own a combined 1,000 shares. Two other Kenyan firmS,  Commtech Consortium Limited and Galva Investments limited, own the remaining shares.

Two individuals, Nancy Waithera an alternate director to Peter Okaalet and Nuru Said Ahmed are directors at the holding company, a web of ownership that raises questions as to what forces are behind the deal.

Reports indicate highly placed politicians and business persons are pulling the strings behind the scene.

It also emerges that there has been friction among the Social Health Authority,  Ministry of Health and a section of senior government advisors as to what should happen to the information management system necessary to rollout Universal Health Coverage.

For a system valued at ksh.104 billion, there are questions as to how it will be financed, given that the government has not allocated the required resources, while SHIF contributions should ideally go towards financing members benefits in hospitals and not financing tenders.

Even then, the law allows SHA to spend up to 5 percent of resources on administrative costs.

Even if the authority were to access all the nearly Ksh.300 billion worth of resources annually, five per cent, at Ksh.15 billion, would not be sufficient to pay employees, finance operations and still pay Ksh.10 billion to the Safaricom consortium every year.