02/23/2006
GRANTS
WECHE MOKADHO
;
Big money games that run Kenya’s politics
EXCLUSIVE
By Kamau
Ngotho
After a brief tactical retreat
in the wake of the expose on Anglo-Leasing scandal mid last year, key figures
in the Narc administration are back in the money games partly to enhance their
business portfolio as well as to create a war chest ready for 2007 elections.
The renewed boardroom shifts
and intrigues have given rise to rival camps right inside State House competing
for new business turfs or fighting to preserve existing ones.
But a most interesting twist
to it is the new-found working relationship between top money men of the Moi
era and key members of the Kibaki administration.
A most talked about illustration
of the new business friendship is the deal that saw leading electrical instruments
manufacturer East African Cables change hands from business magnate Naushad
Merali to associates of President Kibaki.
Equally interesting was the
sale of the life-insurance portfolio of Alico Insurance Company to Heritage
AII Insurance Company and the change of ownership of shares in the former
mobile phone firm KenCell Communications Ltd, now Celtel Ltd.
In the first deal in October
last year, Merali, a business associate of retired President Moi, sold East
African Cables to a little known company, Trans-Century Ltd. The board of
the new company is chaired by a Mr Zephania Maina.
A check at the registrar
of companies showed that the new company is a subsidiary of Affiliated Business
Contacts (ABCON), owned by Mr Eddy Njoroge, the managing director of the Kenya
Electricity Generating Company (KenGen). Mr Njoroge is a long time associate
of President Kibaki and key financier of Kibaki presidential campaigns since
the 1992 election.
The Sh300 million sale of
the cable company could raise questions of conflict of interest as East African
Cables is the leading manufacturer of electric cables, whose biggest consumer
is KenGen and the sister company, Kenya Power and Lighting.
Quick on the heels of the
East African Cables deal was another where Alico Insurance Company sold its
life-insurance portfolio worth Sh6 billion to Heritage AII Insurance.
It is also around the same
time when Merali purchased Vivendi Telecom International shares in KenCell
at $230 million and sold them to Celtel the very same day for $250 million,
making a cool profit of $20 million. It was followed by an announcement that
Celtel would extend its reach in a roll-out project to be financed by a local
consortium of financers, with the CFC Bank at the forefront.
Absolutely nothing fishy
in all that. However, it was not lost on pundits in business circles that
the lists of shareholders and directors of Alico, Heritage AII, Celtel, and
CFC Bank read almost the same.
Two directors of Alico, P.K.
Jani and H. Da Gama Rose, are also directors of Heritage AII and CFC Bank.
Others in CFC Bank and Heritage AII, but not in Alico, are Mr Charles Njonjo
and Mr J.C. Kulei.
In Celtel, the principal
shareholder is Sameer Investments where Naushad Merali and H. Da Gama Rose
are directors. Jani, Kulei and Da Gama Rose are widely believed to represent
business interests of retired President Moi.
Sources contend that at the
end of the day, money was quite probably changing hands from the left to the
right.
Local interests acquired
the East African Cables from a London-based electric cable manufacturer,
Delta Engineering Company, in October 2000. The new owner was a hurriedly
constituted subsidiary of Sameer Investments Group called Yana Trading Company.
At the time of the purchase, East African Cables assets were valued at Sh274
million. Yana Trading bought the company at a grossly undervalued price of
Sh110 million.
Business and political associations
in Kenya have a long history. They began in early 1970s when key members of
the Kenyatta government registered a private company by the name African Liason
and Consulting Services.
The new company’s shareholding
read like a roll of who was who in Kenya at the time. Among the top names
in the privately-owned company were then Vice-President Moi and Finance minister
Mwai Kibaki. Moi appeared in the shareholder register in his own name while
Kibaki had his shares held in trust by an old friend, Mr Nick Mugwandia Muriuki.
Muriuki and President Kibaki
had known each other since the early 1960s when they worked at the BP/Shell
company on leaving college. So close were they that they double-dated two
girls at Kambui Teachers College in Kiambu, and who ended up as their respective
spouses. Kibaki’s date was Miss Lucy Muthoni whom he married in 1960.
The idea to form the company
was conceived at the Cabinet level in 1970 at the height of the government’s
Africanisation project. It was to serve as a local competitor for government
supply tenders and contracts. Before this, all contracts and tenders went
to European and Asian companies.
It is significant that interviews
for the first chief executive of Africa Liason were conducted by a committee
of the Cabinet, chaired by Moi. The company’s first chief executive was Mr
Julius Gecau.
He was poached from BAT where
he was the personnel manager. He later became chief executive of the Kenya
Power and Lighting Company.
After that there was no looking
back for Alico as it massively invested through purchase of shares in banks,
insurance companies, car dealerships, real estate, manufacturing and farming.
Other main shareholders in
African Liason Company were then Attorney-General Charles Njonjo, head of
civil service Geoffrey Kareithi and GSU commandant Ben Gethi. Others were
the PS in charge of Defence, Mr Jeremiah Kiereini, and Central Bank Governor
Duncan Ndegwa.
In the footsteps of African
Liason Company came Heri Limited, a publicly-owned company but whose shareholding
read like a duplicate of African Liason’s. While Kibaki was listed by name
in Heri’s shareholding, this time Moi preferred to remain in the shadows with
his shares held in trust by a Mr Richard Khemoli.
While the principal mover
in the formation of the African Liason Company was the Cabinet itself, for
Heri Limited the idea came from the family of car dealers D.T. Dobie. It is
believed the Dobie family felt the need to form the company and invite into
it the big names of the day as a way to ensure they got a piece of the cake
from lucrative government contracts.
Heri’s breakthrough came
when it was awarded a contract to supply the Kenya Armed forces with Mercedes
lorries in 1973.
It is significant that next
to the DT Dobie family, then PS in the Ministry of Defence, Mr Jeremiah Kiereini,
now the chairman, Kenya Breweries, had the largest number of shareholding
in Heri.
If Africa Liason and Heri
acted as the business cord that tied together different political operatives
of the day, Naushad Merali appears to be the latter day cord that runs through
the Kenyatta, Moi and now Kibaki business connections.
Merali is with the Kenyatta
family at the Commercial Bank of Africa where the later has majority shareholding,
and at the First-American Bank.
Merali is also the founder
and main shareholder in the Equatorial Commercial Bank. Confidential sources
at the Nairobi Stock Exchange have confirmed to The Standard that two senior
Cabinet ministers in the Kibaki government bought substantive share-holding
in Equatorial Bank mid last year.
Reports that could not be
independently confirmed are that late last year, Mr Merali sold to the Kibaki
family a 500-hectare piece of land on the Nanyuki-Timau road. The land is
next to Lewa ranch. A group associated with Cabinet ministers Christopher
Murungaru and Kiraitu Murungi is also reported to has acquired significant
interest in the 45,000 Lewa Conservancy from Mr Ian Craig. The later has for
long fought behind curtains to have influence over the Kenya Wildlife Services.
A signal that Merali, a formidable
business feature of the Moi era, was not in the bad books of the big guns
in Narc came in September last year when he was pictured at State House, Nairobi,
handing over a Sh500,000 cheque to President Kibaki for the National Famine
Relief Fund.
It did not escape observers’
notice that whereas many donors to the fund – including those with bigger
cheques than Merali’s – had been trooping to the Harambe House office of the
Special Programmes minister Njenga Karume to hand in their donations, Merali
went to State House.
It was even more remarkable,
given the fact that Kibaki, unlike his predecessor, has no time for cheque
receiving, that Merali be the very first to be so honoured.
Merali’s door to the corridors
of power opened in 1983. At the time he was working as an accountant with
Ryce Motors, when he registered a company by the name Sameer Investments,
with himself as the managing director.
The new company hit town
with a storm when it immediately acquired majority shareholding in the then
Firestone East Africa (1969) Ltd and re-named it Firestone Kenya Ltd.
Besides Merali, the other
two directors of Firestone were listed as James Kanyotu, then director of
Security Intelligence and Mr F.J. Addley, then working for the law firm, Stratton
and Kaplan. Lawyer Addley was retired President Moi’s nominee in many companies.
The acquisition was not without
controversy. It began with an April 1983 visit to Kenya by then vice-president
of the US-based Firestone Tyre and Rubber company, Mr A.G. Kraemer. At the
time the US based firm owned 51 per cent equity in Firestone East Africa.
The rest of the shares (49 per cent) were owned by the Industrial Commercial
Development Corporation (ICDC).
While in Kenya, Kraemer made
an announcement that his firm intended to sell its entire stake in Firestone
East Africa to indigenous tyre dealers. Subsequently, then Firestone East
Africa managing director Steve Fabian arranged for a consortium of five leading
indigenous tyre dealers to purchase the shares from the US company.
The consortium included Mutaratara
tyres, Buckley Tyres, Kirinyaga African Rubber, Kenya Tyre Enterprises and
New Tyre Enterprises.
Upon negotiating the sale
agreement with the American industrialist, the local consortium applied for
foreign exchange from the Central Bank of Kenya in those days of controlled
money regime.
CBK rejected the forex application
without giving any reasons as was required by law. Recalling the incident,
the managing director of one of the bidding companies, Buckley tyres, Mr Samuel
Magua says: "There was a strong reason to believe the CBK was ordered not
to allocate us forex to buy Firestone. Our worst fears were confirmed when
we learnt that the visiting American CEO had been to State House with Mr
James Kanyotu, who ended up as a director in the new Firestone company."
The consortium of five was
just about to head for the courts when the American firm announced it was
selling its shares to Sameer, who already had the forex and a higher offer.
Sameer’s acquisition of the
49 per cent shareholding by ICDC was to come in 1995 and in similar controversial
circumstances. According to the 1995 report of the Auditor-General, Corporations,
the now defunct Parastatal Reform Committee had demanded that ICDC offload
its shares at the Nairobi Stock Exchange at Sh100 million, a fifth of their
true value.
Prior to the sale, Sameer
Investments had placed pre-emptive rights on the ICDC shares to lock out competition.
It acquired them and three years down the line, Sameer re-floated the same
shares at the Nairobi Stock Exchange for Sh1.5 billion, effectively making
a 1,500 per cent profit.
That is the genius of Naushad
Merali, who is described in the company website as the "Seer behind Sameer".
Perhaps that would partly
explain why none of Kenya’s First families, past and present, wants to keep
him far away from their business stables.
The groups fighting for control
of the money bags in Kibaki’s State House roughly fall into two groups: The
Young Turks — an eager beaver generation spoiling for riches — and the Moustache
Petes, the veterans of the old money group.
The new money group comprises
youthful sons of privilege also known as the St Mary’s Group as most of them
are alumni of Nairobi’s Saint Mary’s School. The most high profile member
of the group is long-serving private secretary to Kibaki, Mr Alfred Getonga.
He is the son of a former
Nairobi Town clerk, the late Simeon Getonga. Others in the group, but operating
in the background, are two sons of the President, Jimmy and David, and their
sister Judy Wanjiku.
Away from State House, the
foot soldiers of the new money group are Mr John Macharia, the managing director
of Triple-A-Capital and son of businessman and media tycoon S.K. Macharia
of Citizen Media Group, the chief executive of the City Hoppa bus company,
Mr George Thuo, and Mr Francis Michuki, a director of the Windsor Golf and
Country Club and son of Transport minister John Michuki.
Acting as the shadowy point-men
to the group are businessman Jimmy Wanjigi, a son of former Cabinet minister
Maina Wanjigi, and a former top executive at Commercial Bank of Africa, Mr
Victor Gitobu.
Also believed to be allied
to the Young Turks is National Security minister, Dr Chris Murungaru, and
his PS, Mr David Mwangi. Transport minister John Michuki has also been playing
ball from their side as can be deduced from the fact that he had given duty
exemption to a company associated with his son in the cranes project which
was to be financed through Triple-A-Capital.
On the other hand, the old
money Moustache Petes consist of old friends of the President, some going
back to their days at Makerere in the late 1950s. Others in this category
are golfing buddies from Muthaiga and all-time royals from the President’s
Othaya home.
Here we have University of
Narobi chancellor Joe Wanjui, businessmen Eddy Njoroge, Nat Kang’ethe, Peter
Kanyago, John Murenga, FTJ Nyamu, Duncan Ndegwa and Robert Gacheche, among
others.
Working harmoniously with
this group are the old money chiefs of the Moi era, including, Merali, the
newly appointed PS in the office of the President, Mr Stanley Murage, businessmen
Karanja Kabage and Mr Manga Mugwe.
Each man in the later group
has a strong Moi-link. Murage is former PS for Transport in the Moi government.
He is also a principal shareholder in the Kenya Bus Company alongside Mr Samuel
Gichuru, Mr Kabage and a key figure in Moi’s State House, Mr Hoseah Kiplagat.
Kabage is a player in his
own right, having been chairman of the strategic Communication Commission
of Kenya during the Moi administration. He was appointed to the position at
the time when the commission had to draw up rules as well as referee entry
into the immensely lucrative telecommunication sector.
It is he who supervised the
controversial licensing of a second mobile phone operator in 1999 and in which
various factions in Moi’s State House were pitted against one another. Unable
to decide which faction to grant the licence, Kabage eventually settled on
a company associated with President Moi himself, Sameer Investments.
Mr Manga Mugwe was another
significant key player of the Moi era. He is the chief executive of the steel
manufacturing firm, Morris & Co. An interesting name in the firm’s share-holding
is lawyer H. Da Gama Rose.
Mugwe had joined the company
in the 1970s as a nominee of Ms Margaret Kenyattta, then Nairobi mayor. Ms
Kenyatta later sold her stake to Mugwe. Throughout last year, Mugwe was in
the news as the leader of the local consortium bidding for the third mobile
telephone operator. Mugwe’s bid through the Econet Wireless company hit a
snag when the licence granted was withdrawn three months after it was issued.
It is believed that Mugwe, whose firm Morris & Co. has had trouble servicing
its loans with both Kenya Commercial bank and the National Bank of Kenya,
could have been acting on behalf of more financially stable operatives in
both the Moi and Kibaki governments.
It is significant that Mugwe
had incorporated the government-associated Kenya Union of Co-operatives in
his bid, which is the same group Mr Hoseah Kiplagat intended to use to bid
for the second mobile operator six years ago.
A Cabinet minister and an
assistant minister are believed to have been among the influential names behind
Mugwe’s intended venture into the cellphone industry.
The controversy clouding
the licensing of the City Hoppa bus company to compete with the Kenya Bus
Services in Nairobi’s Central Business District is the best example of the
bitter rivalry between the old and new money groups.
On the side of City Hoppa
company is Alfred Getonga, a close friend of Thuo, the bus company’s managing
director. Thuo and Getonga certainly see each other on many other fronts.
On the side of Kenya Bus
company is of course, Stanley Murage, a major share-holder in the 70-year-old
transporter.
The old money group has always
held the new entrants with some measure of contempt. It is perhaps not without
some history. For instance, in May 1982, a company associated with member
of the old money group, Peter Kanyago, Unichem Ltd, took the extraordinary
step of putting a newspaper disclaimer on its former employee, one Christopher
Ndarathi Murungaru, on a disagreement over a small matter of Sh30,000.
The younger wheeler-dealers
have also not helped their cause, having been caught in a series of scandals,
some which might result in prosecution.
Their first major setback
was when their key point man, businessman Jimmy Wanjigi was made to record
a lengthy statement with the Kenya anti-Corruption Commission on the matter
of the Anglo-Leasing Scandal.
The second embarrassment
came when information leaked that Transport and Communications minister Michuki
had given an unqualified duty exemption to a company associated with his son,
Francis, to import telecommunication equipment. Michuki was forced to make
a hasty retreat.
Months later, President Kibaki
took away the communication docket from the larger ministry of Transport and
Communication.
At about the same time, the
Triple-A-Capital of John Macharia was caught up in a murky Sh70 million insurance
deal with the Nairobi City Council. The deal was cancelled when city councillors
and the media screamed foul.
Still in the same haste,
the Triple-A-capital, which, in the words of it’s chief executive Macharia,
was angling itself as "Kenya’s top finance-arranger" got into two more equally
disastrous adventures.
The first was an arrangement
to pay off the Kenya Pipeline Company’s Sh1.6 billion debt and recover the
same money from the parastatal at an exorbitant profit. The deal came a cropper
when Ntonyiri MP Maoka Maore blew the whistle on the scheme he called "modern
day shylocking." Worse, it cost the KPC chief executive, Dr Shem Ochuodho,
his job, a matter that has since been turned to the courts.
Without batting an eyelid,
Triple-A-Capital hopped into yet into another mega deal. This time it bid
to "arrange" financing of a Sh5 billion project to upgrade Mombasa port. By
now the company had overreached itself and the proposal was rejected outright.
But much as people around
President Kibaki may have a healthy appetite for the quick buck, many invariably
agree that Kibaki himself has never been greedy, neither has he ever shown
an inclination to use his position to amass property even though he has always
been in a position to do so having been minister for Commerce, Finance, Vice
President and now President.
That said, however, some
fault Kibaki for sometimes turning a blind eye when his friends are caught
with their little hands in the cookie jar.
A case in point was in 1980
when he was Vice President and minister for Finance. At the time, his friend
of many years, Mr. F.T.J. Nyamu was the managing director, Kenya Re-insurance
company, a parastatal under the ministry of Finance.
In April that year, the government
directed the Kenya Railways to put up decent houses for its workers living
in the shanties of Muthurwa and Landi-Mawe railway quarters.
Subsequently, the Kenya Railways
set aside the land next to the Railway Training School in Nairobi South-B
for the project. But hardly before the housing project could take off, a dummy
company, Tass Properties, was hurriedly formed.
The Kenya Railways, then
under another of Kibaki’s buddies, Mr Davidson Ngini, sold the land set aside
for the railway estate to a dummy company at only Sh690, 000. Two weeks later,
the dummy company sold the same land to Nyamu’s Kenya Re-insurance at Sh14
million.
Instead of the Kenya Railways
building low-cost houses for its workers as the government had directed, the
Kenya Re-insurance company constructed what is today Plainsview and Golden-gate
estates and purported to sell the houses to railway workers living at Muthurwa
and Landi-mawe.
Of course it was a crazy
joke as none of them could afford to buy the newly built houses. They ended
up in the hands of anybody who could afford to pay.
The ministry of Finance never
bothered to find out who made Sh13 million — buying railway land for Sh690,000
and selling it to another parastatal for Sh14 million in just a fortnight.
Nyamu and Kibaki own Finance
House, a prestigious address in the central business district. The family
company that manages Kibaki’s businesses, Lucia Limited, is housed at Finance
House.
Another of Kibaki’s friends,
businessman, Nat Kangethe of Saatchi & Saatchi Associates, was the finance
director at the Kenya Meat Commission when it collapsed.
During that time, KMC entered
into a queer contract with a dummy company called Halal Ltd to construct an
abbatoir for the company at Ngong. According to the 1978 Auditor-General’s
report, no abbatoir was constructed even after the government poured Sh50
million into the project.
The dummy company and its
sole director, one Mohamed Yusuf have never been heard of ever since.
Though Kibaki is not in the
same wealth league as his two predecessors, he too has had an interesting
motley of business associates: He is with Mr Nicholas Biwott in the Deacons
chain of clothes shops now re-named Woolsworth.
He is with Mr Charles Njonjo
in Heri Ltd and is with Dr Njoroge Mungai in a real estate firm that owns,
among others, the Union Towers Building on Moi Avenue, Paramount Plaza and
the Marple Courts in Milimani.
A curious shareholder in
the real estate company is Mr. P. Gidmooal who in some instances is a nominee
for retired President Moi. Kibaki is also with Mr Chris Kirubi in the International
Life House and Mr James Kanyotu in Dolphin Ltd, a real estate company with
prime investments at the coast.
The directors are listed
at Mr John Murenga and Ms. J W Kibaki.
In Kenyan politics and big
business, you get the strangest of bedfellows.
http://www.eastandard.net/hm_news/news.php?articleid=10174
The Standard,
Jan 8, 2005.
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