SevenSeas Technologies: Michael Macharia Wins Sh1.6bn Against Kenyan Government in Cancelled IT Tender

Businessman Michael Macharia, Co-Founder of IT firm SevenSeas Technologies, has won a Sh1.6 billion award against the Kenyan government following a cancelled contract to wire 98 State hospitals.

Retired judge and now arbitrator Aaron Ringera found the State at fault in terminating the Sh4.7 billion contract that demanded SevenSeas Technologies provide the technology component of the Managed Equipment Service (MES) plan, an innovative healthcare programme initiated by the Government of Kenya in 2014.

Under the MES programme, equipment manufacturers were contracted to supply, install, train users and provide maintenance, repair and replacement services for the specialized medical equipment for the duration of the MES contract. A total of 98 hospitals (2 hospitals in each of the 47 counties and 4 national hospitals) would benefit from the specialized medical equipment provided under the MES programme.

The tender invitation for the provision of healthcare information technology solutions for the MES was issued by the Ministry of Health in July 2017. SevenSeas Technologies was awarded the contract and part of the agreement was to provide teleradiology to allow doctors in top hospitals like Kenyatta National Hospital (KNH) to read X-rays, CT scans, MRIs, and other medical images for the treatment of patients in remote facilities.

SevenSeas Technologies was expected to digitise the 98 hospitals, including the national referral facilities (KNH and Eldoret-based Moi Teaching and Referral Hospital), in order to allow remote hospitals in places like Turkana to tap expertise from well-staffed hospitals like KNH through telemedicine. Teleradiologists in KNH could read X-rays, CT scans, MRIs and other medical images of patients in Turkana for treatment in the less staffed facilities, which was ideal for hospitals facing ballooning costs and a shortage of radiologists.

In an unexpected turn of events, the tech firm received a termination letter from the Ministry of Health in 2019, indicating that the contract contained several clauses, including the requirement for a government Letter of Support, that was not in the original tender documents. The Ministry said the firm lacked the financial muscle to shepherd the deal, despite the company having sunk more than Sh1.32 billion.

SevenSeas Technologies protested the cancellation, insisting that the State declined to offer the required security document that gives banks comfort to lend project money to firms or individuals, which is customary in a majority of State projects. The IT firm argued that the letter of support hitch made it difficult to secure a loan from KCB Group, triggering the two-year legal suit that underlined the torturous journey of entrepreneurs working on State projects.

Aaron Ringera found that the Ministry of Health was in breach of both payment obligations under the contract, as well as the obligation to provide a government letter of support, and ruled that those defaults were material breaches of the Second respondent’s contractual obligations. “It was the Ministry of Health’s default in providing the claimant with a government letter of support that prevented SevenSeas from achieving completion of the project,” he added.

He awarded the firm Sh1.6bn for breach of contract, loss of profits and costs incurred after the cancellation. The tech firm received an additional Sh52 million for costs related to the suit.

SevenSeas was betting on the health sector, especially State deals, to make it a driver of its revenues, as now is a good time to be looking at health. With an expanding middle-class that is simultaneously plagued by a growing number of lifestyle diseases and communicable illnesses, analysts predicted that Africa would have one of the fastest global growths in healthcare spending in coming years.

The ordeal hasn’t deterred serial tech entrepreneur Michael Macharia, who has since launched Ponea, a global 3-sided marketplace connecting patients, healthcare professionals and partners. Ponea provides an online healthcare marketplace that offers convenience, discretion and lower cost of healthcare to africans living in urban areas, and targets to consolidate 70% of private healthcare providers online to provide greater choice and access for patients, and more cost-efficient operations for providers from the marketplace enablers.

In a recent interview with MarcoPolis, Macharia shared his views on the recent events and talked about his vision for the future of SevenSeas Technologies (see video below).

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