On December 16, 2015, as most government operations were slowing down with the festive season inching closer, Treasury Principal Secretary (PS) Kamau Thugge was a man under pressure to ensure seamless digitisation of government services.
This was one of the key pillars of President Uhuru Kenyatta’s 2013 General Election campaign, and it was time to deliver. President Kenyatta formed a task force to oversee the transition and placed it under the National Treasury where Mr Thugge was expected to deliver results.
After successfully sourcing funding from International Finance Corporation (IFC), the World Bank’s lending arm, Webmasters Kenya Limited was hired to develop an online portal on which an initial 10 government institutions would offer their services to the public. Thus, in July 2016, eCitizen was born.
Nearly a year-and-a-half later Mr Thugge needed to know whether eCitizen was operating efficiently, economically and in line with the Constitution, so he ordered an audit of the project. Treasury’s chief internal auditor, Mr Willis Odhiambo Okwacho, was placed in charge of the probe that would spark a series of events that have now culminated into a cold war between the government and Webmasters Kenya.
Intellectual property rights claim
Court proceedings have revealed that both the government and Webmasters are staking claim to eCitizen’s intellectual property rights, a war that could grind several government services to a halt and potentially trigger an economic crisis.
Mr Okwacho’s audit revealed that Webmasters had secretly and illegally subcontracted another private firm, Goldrock Capital, to manage billions of shillings paid through eCitizen. Goldrock had been managing funds collection for close to three years when Treasury locked it out in 2017.
Interestingly, the fight over convenience fees could turn out to be a battle for dirty loot, as Mr Okwacho’s team found that the original eCitizen portal design was to see the government pay for miscellaneous costs such as aggregation of payments. There is no documentation to show how the convenience fee was introduced, meaning, it may be an illegal charge that has seen eCitizen users part with billions over the eight years of service provision.
There was also no government permission to charge eCitizen users for digital services despite the fact that the law requires such charges to be introduced only after approval from Treasury.
Kenyans seek services at a Huduma centre. Regularisation of the eCitizen project, which has been in operation since December 2014, has threatened to crumble everything.
“Further, it is worth noting that, at the design stage of the portal, the system was to be without any cost to the citizens. The system was to be supported through budgetary provisions. There was no documentation to show that citizens would be charged for the service, over and above the normal transactions charged by service providers integrated into the system,” Mr Okwacho says in court papers.
“This introduction of the convenience fee was not done … in accordance with the laid down procedures. The same was not approved by the National Treasury, neither was it approved as AIA [appropriation-in-aid] or revenue through the Appropriation Act,” Mr Okwacho adds.
The firm sued the National Treasury, Webmasters Kenya and its sister company Webmasters Africa seeking Sh127.8 million in convenience fees collected from hundreds of eCitizen users.
Goldrock’s suit was filed at the commercial and admiralty division of the High Court. The case has now become a full-blown war. Goldrock is fighting the government and the two Webmasters entities for control of the mobile money wallets that service seekers deposit funds into, the Sh127.8 million in transaction fees collected at the time Treasury locked it out, and compensation for alleged illegal contract termination.
Webmasters Kenya developed the portal. But it was Webmasters Africa that contracted Goldrock Capital on behalf of Webmasters Kenya. Both Webmasters companies have James Ayugi as the principal shareholder, director and CEO. Webmasters are multitasking in the war as it tries to disown Goldrock’s demands while taking on the government over compensation for its intellectual property, arguing that it has continued to upgrade and improve the eCitizen portal over the years.
Petition filed
Busia Senator Okiya Omtatah has also joined the fray, seeking a court declaration that the payment services for eCitizen were procured outside the law. He also wants the government ordered to regularise the process and Treasury compelled to make public the amount of money raised through eCitizen.
The activist-turned-politician had initially filed a petition at the Constitutional and Human Rights division of the High Court, but his suit has now been merged with Goldrock’s case. When the case came up in court on December 5, 2022, for directions, Justice Enock Chacha Mwita was forced to adjourn proceedings after it emerged that all documents Mr Omtatah filed in the suit were missing. The matter comes up for mention tomorrow when Justice Chacha will give directions on how parties will proceed.
Documents filed by the parties offer an insight into the trouble brewing for millions of Kenyans should the fight between Webmasters and the government become protracted. Webmasters Kenya argues that eCitizen is still running as a pilot project and that there has never been a formal handover of the portal to the government.
Webmasters Kenya Communications Director Kiprono Kalya (left) and Managing Director James Ayugi, address journalists during a press briefing at the Hilton Hotel in Nairobi in March 2019.
While the government claims that IFC paid Webmasters Kenya over Sh70 million to develop the eCitizen portal, the firm’s CEO is now demanding payment from Treasury. Mr Ayugi wants the court to allow Webmasters Kenya to withdraw its services if the government does not pay for the development of the portal, a move that could bring the economy to its knees on account of the crucial services exclusively available on eCitizen.
Business Registration Services, the National Transport and Safety Authority, the Immigration department and several other government institutions depend on eCitizen to serve people and generate millions each day, which would be put at risk with Webmasters Kenya’s demands in court. Mr Ayugi also wants the government to surrender all convenience fees paid by service seekers since the portal went live on July 1, 2014.
“…A declaration that Webmasters is entitled to be compensated for its design and creation of the eCitizen platform, a declaration that Webmasters Kenya is entitled to convenience fee on all digital payment options used within the eCitizen portal as of April 20, 2017, and subsequently until payment in full and for the duration that the National Treasury continue using Webmasters Kenya’s services,” the orders Mr Ayugi is seeking state.
Mr Ayugi argues that the Sh50 convenience fee goes into the aggregation of payments for services into one master account, text messages sent to individuals paying for services and technical support for the portal. The fee, he says, is shared with other service providers and hence cannot be categorised as government revenue.
But the government insists that it owns the eCitizen portal based on permission from the IFC.
Mr Okwacho says in his affidavit that, after Treasury and IFC declared the pilot phase complete, the latter allowed the government to take possession, control and ownership of the portal.
“On August 2, 2017, IFC wrote to the National Treasury confirming the completion of eCitizen support to the Government of Kenya. Consequently, it granted the Government of Kenya a non-exclusive, perpetual and free license to use, copy, display, distribute, publish and create derivative works of all or part of such materials.”
“In other words, IFC was vesting the ownership of the portal to the Government of Kenya,” Mr Okwacho says in court papers. On September 19, 2019, Mr Okwacho filed his affidavit on behalf of the Treasury and revealed the findings of his audit of the eCitizen system.
Paybill number
Webmasters were to help Treasury set up a paybill number for funds collection, but it subcontracted the work to Goldrock. Safaricom and other money collection agents were aware that the paybill number belonged to Treasury, but somehow, in Safaricom’s official records, the mobile money wallet was registered to Goldrock Capital. Goldrock registered a second paybill number, 903550, codenamed ‘Mkwanja’ and was linked to the official 206206 eCitizen accounts, a relationship referred to as business-to-business (B2B) functionality in technical terms.
The Mkwanja wallet acted as a backdoor into the 206206 wallet.
“The access to utility and MMF accounts enables Goldrock Capital Limited to access convenient fees within the government paybill number 206206, and divert the convenience fees from paybill number 206206 to its paybill 903550.
Ultimately, Safaricom switched off the B2B and disconnected Goldrock Capital’s paybill number 903550 from the eCitizen system on July 26, 2016 without any prompting or instructions from the government,” Mr Okwacho says in court papers.
But by this time, Goldrock had already transferred to itself Sh142 million from the eCitizen paybill. The audit faulted Safaricom for allowing a private firm to register a paybill on behalf of the government without express and written permission from Treasury, and for giving conflicting information on the ownership of the 206206 mobile money wallet.
Initially, Safaricom claimed that the government had given it permission to link the two paybill numbers registered by Goldrock, but could not provide Treasury with any evidence of the approval. Goldrock, in its suit papers, argues that it was entitled to the convenience fees collected, having been contracted by Webmasters to manage the flow of funds from eCitizen to the government’s consolidated fund account at KCB Bank.
But Mr Okwacho argues that, aside from not being licensed to collect funds on behalf of the National Treasury, Goldrock violated government regulations in taking payment on its own before the money had gone into the consolidated fund account.
After registering the paybill numbers, Goldrock opened an account at Commercial Bank of Africa (now NCBA Bank).
On January 23, 2015, Goldrock switched accounts and moved to the National Bank of Kenya where funds paid by eCitizen users would be deposited. From here the funds for government services would be moved to the consolidated fund account while Goldrock would keep the convenience fee.
Six months later, the firm changed banks again, moving to KCB. National Bank and CBA declined to offer the audit team access to Goldrock’s accounts, citing client confidentiality. This blocked auditors from probing transactions to confirm whether there was any attempt to withdraw government funds. Under Kenyan law, only a court can allow investigators to probe bank accounts. BY DAILY NATION