Treasury: Millions paid for ecitizen services ended in private accounts

Principal Secretary for National treasury Kamau Thugge

NAIROBI, KENYA: After a disputed and tense General Election in 2013, President Uhuru Kenyatta, eager to fulfill his campaign promises, directed the fast-tracking of projects involving the digitisation of government payments.

This marked the origin of the dispute currently unfolding over the eCitizen services. Details emerging from a legal suit filed at the High Court in recent weeks and confirmed by National Treasury insiders and sources close to the case reveal an intricate plot that created a lucrative revenue stream from monies paid by oblivious Kenyans seeking convenient public services through the State’s digital portal.

Late last year, National Treasury Principal Secretary Kamau Thugge shockingly revealed that hundreds of millions of shillings in payments made by Kenyans through the M-Pesa PayBill 206206 for services obtained through eCitizen ended up in private bank accounts.  

Dr Thugge was responding to a suit filed by a little-known company, Goldrock Capital Ltd, which is suing the National Treasury and Safaricom for more than Sh127 million in transaction fees allegedly owed to it.

Through its Chief Executive Officer Sidney Wachira, Goldrock Capital is accusing Treasury of forcefully wresting control of the 206206 paybill number despite a sub-contracting agreement the latter claims gives it the mandate to collect convenience fees paid on eCitizen.

“I am aware that the Government has not authorised Goldrock Capital to collect the convenience fee or otherwise derive any remunerative benefit from any transaction carried out through the eCitizenportal,” says Dr Thugge in a sworn affidavit.

This has raised questions, including how Goldrock Capital controversially came to handle Government revenue, how much has been collected in convenience fees since the launch of the platform in June 2014 and who is behind the fight for control of the convenience fees that run into the hundreds of millions?

President Uhuru’s directive in 2013 that digitisation of Government services be fast-tracked caused panic in Government departments that were ill-prepared and had little expertise.

The Jubilee administration had intensely campaigned on a platform of a digital wave in Government affairs, promising that the digitisation of payments and processes that had earlier stalled or was too fragmented across State departments and ministries would finally become a reality.

Sources at the National Treasury say shortly after the new administration came into office, there was intense pressure to develop a centralised Government payments portal that would be ready to launch by July 1, 2014.  

A task force drawn from the State-owned ICT Authority, National Treasury and Office of the President was quickly scrambled, gazetted in March 2014 and requested bids for proposals.

This is where Webmasters Kenya entered the scene.

Formed in 2008 and headquartered in Nairobi, Webmasters Kenya had previously done work in digitising workflow systems for governments in Uganda, Rwanda, Zambia and Iraq.

From ‘Malipo’ to ‘eCitizen’

Webmasters Kenya eventually won the tender to deploy the eCitizen portal.

According to sources, the firm even proposed the name “eCitizen” instead of Malipo that had been suggested by the Government.

The World Bank’s International Finance Corporation (IFC) provided a grant for a pilot run covering implementation and training for the first six months of the portal’s existence.

“The Government did not pay for the development or deployment of eCitizen since this was during the end of the financial year and there was no money budgeted for the portal,” explained a source close to the case who cannot be named.

According to the source, eCitizen was presented as a workflow engine already built by Webmasters Kenya Ltd and just needed minor customisation to meet the specifications of the various State ministries and departments.

Curiously, the portal was never officially launched and the government is yet to pay Webmasters Kenya for the technology. Instead, all individual ministries and State departments did their own rollouts with each new addition.

The eCitizen portal works simply as a gate through which users are then directed to the platforms of various State departments and ministries.

In exchange for the convenience of accessing all these services through one gate, users had to pay a new convenience fee on top of the payments being made to access the services.

This means that if the payment made for renewing a driving licence was Sh1,250, for example, Sh1,200 would go into the revenue account for the National Transport and Safety Authority (NTSA) while Sh50, would be collected as convenience fees. 

According to sources, the convenience fee was supposed to cater for overheads associated with operational and support costs during the pilot period such as hosting on Amazon’s cloud service, subscriptions to SMS short codes and operations for support staff.

According to the Public Financial Management Act, no new charges can be introduced on public services without the accompanying legislative amendments. In addition to this, no private agency is mandated to collect revenue on behalf of the government.

On December 30th, 2014, six months after eCitizen had gone live, a gazette notice by the National Treasury that went largely unnoticed by many Kenyans introduced the Government Services Digital Payments Programme.

The programme would have eCitizen as its flagship project through the official web address ecitizen.co.ke and official Pay Bill number 206206 as well as official Unstructured Supplementary Service Data (USSD) number 206.

Treasury further said the services on eCitizen shall “charge a nominal administrative fee per transaction which shall be a pro-rated percentage of the payment made.”

Convenience fees

According to Mr Wachira, Goldrock Capital was contracted by the developers of the eCitizen portal, Webmasters Kenya to collect the convenience fees and remit the same to the National Treasury.  In his sworn affidavit, Mr Wachira accuses the National Treasury of malicious intent in the move to take over the 206206 Pay Bill number despite being a “stranger” to the agreement made between Webmasters Kenya and Goldrock capital.  A source close to the deliberations says Webmasters Kenya sub-contracted Goldrock, but only to set up the M-Pesa paybill number with a collection account at the Kenya Commercial Bank and push the same to a Government collections account.

 “Once payment has been done, they were to attach the confirmations receipts and the settlement IDs and for this, they got a cut of the transaction fees as per the contract signed between the two parties,” explains the source.

 This transaction fee is what is at the heart of the dispute. It has been made more lucrative and raised the stakes as more Kenyans get on board eCitizen.

In the initial months after going live, eCitizen was collecting Sh700,000 daily. After just one year, the money collected was more than Sh174 million daily.

 More than Sh20 billion in government payments have since been collected through the eCitizen platform, by over seven million Kenyans through eight million applications as at last year.   A percentage of this windfall collected as convenience fees each day means a tidy profit of tens of millions of shillings each month. Early last year, Treasury wrote to Safaricom stating that the ownership and management of the 206206 paybill number be transferred to the newly formed Government Digital Payments Programme.

 This is what prompted Goldrock Capital to sue Treasury, Safaricom and Webmasters, accusing them of denying it access to some Sh127 million in outstanding convenience fees. In August last year, the High Court ruled in favour of Mr Wachira and instructed the National Treasury, Safaricom and Webmasters to release the funds to Goldrock Capital.

However, the three parties appealed the order, saying that Goldrock had misled the court in its submissions.

Both Webmasters Africa- the entity that allegedly sub-contracted Goldrock- and the National Treasury deny having signed any revenue management pacts with the firm.  “The terms of the contract required Webmasters to build the capacity of Government officials to administer the payment portal, not sub-contract the service,” says Dr Kamau Thugge in court filings. “Funds collected through the eCitizen portal were required to be finally deposited into the consolidated fund’s National Exchequer Account held at Central Bank by the National Treasury,” he says. Webmasters Chief Executive and founder James Ayugi (pictured, left) also denies having a relationship with Goldrock.

“Webmasters is the sole owner and operator of the integrated Government service platform eCitizen on behalf of the Government of Kenya through its contract with IFC,” he says, adding that Goldrock Capital is a “stranger to the agreement.”  

This has left Kenyans with several questions. First, what is the exact amount of money in convenience fees that Webmasters or Goldrock Capital have earned from the eCitizen portal since the service went live?  Another curious question is how a private company collected hundreds of millions in payments from public services rendered by the Government for years without adding any value to the service?

 Another concern is that millions of Kenyans private data, including ID and PIN numbers, bank account details, home and business addresses and phone numbers could have fallen into private hands.

 By its very nature, the eCitizen portal is a giant receptacle of granular demographic data collected from millions of Kenyans.  Functions such as the NTSA vehicle registration portal allowed the State to generate a wide database of every private and commercial motor vehicle in the country over the past three years.

 “To date, there has been a major increase in the accuracy of data held by the authority as well as a marked reduction in administrative costs,” explained NTSA boss Francis Meja in December last year.  “The uptake of the service since its launch has been encouraging and consistent. Currently, the number of citizens registered with NTSA is over 2.5 million, with an average of 9,600 transactions daily.”

 Timothy Oriedo, a data scientist with a data analytics firm in Nairobi argues that Kenyans could be unwittingly providing a treasure trove of data worth millions - possibly billions of shillings to private firms on a silver platter.

 “If you look at the privacy terms and conditions on the eCitizen website, there does not seem to be an assurance that the information will be kept secure, which is the norm with such services, so I do not know if this was deliberate or an oversight,” explains Oriedo.

 “The absence of such a commitment on the part of the Government shields the custodians of the platform should Kenyans who feel their private information has been collected arbitrarily decide to institute a class action suit.”

Several State departments such as immigration, transport, lands and the Registrar of Companies, among others, have plugged into the portal with more set to be integrated in the coming months.  

It remains unclear how much the digitisation of State services will cost Kenyans, who draw most value from the deal and if they are getting value for their money.