Corruption in Kenya

From: George Obare

Kenya Corruption - The role of Kibaki

When John Githongo complained about high-level corruption, a senior Cabinet Minister allegedly reminded him that President Mwai Kibaki was too experienced a politician to be worried about the Anglo Leasing scandal. Little did Githongo know that Kibaki was not new to witnessing, or being at the centre of, Anglo-Leasing style financial deals. These involve phantom project proposals and tendering processes that later leave the public coffers empty and the public yawning for answers.

Although most projects initiated by the Government over the last three decades were aimed at finding lasting solutions to poverty, most of them ended up being white elephants after huge sums were paid out. In the early 1970s when President Kibaki was the Finance and Planning minister, two of the most prominent scandals of the time, were recorded and are yet to be resolved. In 1972, Kenya faced a crippling drought and a serious shortage of foreign currency, which as it was later to emerge, became the cash cow for some well-placed government officials, mostly in the Treasury. When the Government hived-off 11.5 acres of land from the Kenya Veterinary Department and allocated it to a private company called Halal Meat Processing Products Limited in 1973, parliamentarians raised hue and cry.

"This land has been given away to a few individuals who are only out to enrich themselves and without consultations with the Maasai. This is tribalism being done with the Governments knowledge," said John Konchellah, who was the Narok West MP at the time. The land transfer from the Veterinary Department to the private holder in 1973, which took only 21 days, was the first step in the multi-million shillings scandal. Mohammed Ali Modha, a butcher, who operated a joint business with the late Abdul Habib Adam at Adams Arcade, Nairobi, wanted to expand his business but said he did not have enough money to finance the expansion.

Treasury Permanent Secretary Leonard Kibinge then assigned an assistant secretary to study Modhas proposal. Modhas story, reminds one of Kamlesh Pattni, whose project to raise $50 million annually, through the Goldenberg International, flopped.

The butcher told Treasury that he had Sh1.5m and wished to get Sh5m from the EADB to invest in his abattoir. The Treasury passed the plan to the Ministry of Agriculture then headed by Jeremiah Nyagah for further feasibility studies, to determine whether the project was viable. The Ministry of Agriculture inflated the cost of the project to Sh9.6m.

The country was at the time experiencing meat shortage and drought. The minister revoked a waiver of the Kenya Meat Commission (KMC) Act. When the Ministry of Agriculture finished evaluating the Modha blueprint and gave its findings to the Treasury, the Government immediately signaled that funds were available for the project. The money came from the Danish Foreign Aid Agency. In August 1974, Treasury drafted a loan agreement and a State counsel, who is said to have overlooked flaws in the loan agreement, approved it. Modhas Sh27m project got the nod. Treasury gave out £500,000.

"I think the time has come for Kenyans to be told the truth. What happened was the result of nothing else other than corruption, which has now matured into destruction," says former Butere MP Martin Shikuku, named the President of the poor in his heydays. Shikuku recalls that the Halal scandal unfolded under the watch of the Finance minister, who was deemed the fittest for the job, having taught economics at Makerere. Halal Meat Factory, situated in Ngong, was to remain mysterious despite pressure from Parliament. MPs recall that the issue became hotter in 1978 when the Controller and Auditor General Mr Gico Njoroge revealed the case in Parliament. Investigations into the scandal, which saw the Government guarantee payments of Sh27.5 million to the private company, plus a free 11.5 acres of land, focused on how the ministry of land issued the lease. Parliamentarians also questioned details of the signatories of the loans and the names of the investors, who were listed as Modha and his wife Fatuma. The company ownership structure was also a mystery, as it was not known who owned how many shares.

Halals mystery continued to haunt the Government as Nyagah, when hard-pressed in Parliament to explain the acquisition of the 11.5 acres, said that the Commissioner of Lands James Oloughlin, who was said to be interested in the case, pushed the deal. Witnesses said the lands boss initially sought 20 acres from the Veterinary Department but he met stiff resistance as he was told the land he wanted was infested with animal diseases and if Modha was to be allowed to use it, he would need a buffer zone for checking against the spread of the diseases.

The Halal Meat Products ended up with a slaughterhouse with the capacity for 400 cows, 400 goats and 400 sheep. KMC immediately began to feel its impact as it faced a shortage of animals for slaughter. A war of words erupted between the Ministry of Agriculture and KMC Managing Commissioner, who accused Nyagah of failing to protect the firm, in which the Government had invested up to Sh140m from cutthroat competition. "This factory would kill KMC where the Government has invested Sh140m," argued GG Kariuki during a parliamentary debate on the Halal scandal in June 1978.

"The truth should be revealed. The company is hidden somewhere in Ngong and the Government has been advancing it loans amounting to £1,253,590 since 1974," said Kariuki, who was then a Health Assistant minister. The Laikipia MP suggested that the people behind Halal, just like Anglo-Leasing, could have been Treasury officials who were working for the downfall of KMC. But when asked, said KMC should leave domestic markets and seek the export markets. Halals mysteries or its close links to the Government officials, came to the public limelight when despite pressure from Parliament, the Government, through the Ministry of Agriculture, set aside £801,300, which was approved in the 1974/75 to 1977/78 budgets in Parliament.

Additional credit from the Treasury to the Ministry of Agriculture brought the Halals rip-off to some Sh27.7 million, a huge sum of money at the current valuation of the shilling, yet the Ministry of Finance would not volunteer a word about the project. When pressed hard to give a ministerial statement in Parliament, Nyagah described the Halal scandal, as "an iceberg with only a third of its body exposed while two thirds remained submerged." But even before the Halal heat could cool down, the Treasury was involved in a bigger scandal involving over Sh453 million in late July 1978, involving an American company, which also appeared to replicate the Anglo-Leasing or Goldenberg.

In the same style that the grandmasters of the Anglo Leasing scandal left the country, never to be traced, Modha and his wife quietly left the country for what was described as a "world tour of the Far East, China and Japan, Europe and Arabia." Analysts predicted that the Government was keen to deflect the Halal fiasco in Parliament, where MPs had set up a Select Committee to probe the scandal in 1978, saying Nyagahs statement was unsatisfactory.

Veteran politician John Keen says the Halal scandal and what was later to be known as the Ken-Ren scandal were shadowy projects aimed at siphoning public funds. "These are thieves. They stole from us in Ken-Ren and Halal. Not a single cow was slaughtered in Ngong then. And now they are shamelessly stealing through Anglo Leasing," Keen said.

Shikuku says the onset of corruption in Kenya was because of a complex process where politicians sought money to buy popularity and has been fuelled by the culture of Harambee, which he said was used to silence critics. "Corruption actually started in 1963 when the late Sir Michael Blundel introduced the late Bruce Mackenzie to the late President Jomo Kenyatta during a show in Eldoret," Shikuku recalled in an interview.

Mackenzie later gave Kenyatta six heifers. "I remember Mzee was impressed after seeing fattened heifers and Mackenzie said to him, those are yours. Gatundu Hospital was built on harambee, with the big bosses visiting Kenyatta and giving him money for the hospital. The money received for Gatundu Hospital could have easily built two hospitals like the Kenyatta National Hospital," he said. Efforts by Parliament to probe corruption were nipped in the bud before it went further in the 1970s. When the Ken-Ren scandal broke out in July of 1978, little was known about the huge financial hemorrhage that the country had suffered over the past four years. Kenya, like most countries, was hit by the oil-induced inflation, which characterized the rise of the Tamil Tigers and propelled the Asian giants, leading to unprecedented worldwide shortage of oil and leading to inflation.

The country faced a huge shortage of fertilizers. The situation remained the same years on after the worldwide shortage of fertilizers. From 1974 when the shortage was at its height, the country was riddled with constant shortages. Private companies and cooperative societies, mostly the Kenya Farmers Association, imported fertilizers at the time when the shortage was at its peak. Government officials saw an opportunity to make quick funds and sought to have fertilizers produced in Kenya. Traditionally, the Government sent out invitations to firms that it believed could manufacture fertilizers to avert the shortage. But by the time an American company, N-Ren Corporation applied among a group of others, the country had a fertilizers influx.

The Government had taken the importation of the fertilizers and revoked permits awarded to the private firms, Mackenzie (Kenya) Limited, KFA, Sapa Chemical Industries and Intag Ltd. Mackenzie and KFA were the leading importers of fertilizers. But then the Government claimed these firms were swindling farmers and decided to tender for the project. N-Ren Corporation offered to complete the fertilizer factory the Government dreamed of in about three years time. Treasury was impressed by the fact that N-Ren had offered the lowest price and pledged to help supply fertilizers at prices below the prevailing market prices at the world markets. N-Ren also said it would supply fertilizers through soft-loans.

The two partners, then continued to the next stage and signed an agreement, setting up a new company, Ken-Ren Chemicals and Fertilizers Company, that was intended to be built in Mombasa. It never took off in 1975 when it was registered. The Government set aside Sh428m budget for the project. Kenyans had fallen victim of an Anglo-Leasing style fraud. Critics blamed it on the lack of technical know-how on project administration but MPs said it was a scheme to defraud the taxpayer.

Kenyans realized that they had been duped through a properly planned cartel, which supplied second-hand machinery. Experts said these were not compatible to the ideals of the intended project. Moreover, investigations revealed that the American firm duped the Government into accepting machinery that had earlier been rejected in Ireland. The Government is yet to clear the mist in the project. Government documents and press reports showed the fertilizer manufacturing and blending plant, which was expected to manufacture seven different types of fertilizers to suit various types of crops was a fraud.

The Government had 65 per cent stake in Ken-Ren while the American firm owned 35 per cent, but the firm mysteriously won the management tender and later twisted the agreement, leaving the financial burden of the project to the Government. When the Government awarded the firm the management contract, again a State counsel who worked on the deal turned a blind eye on the flawed deal. But during the three years, the firm squeezed Sh54m from the public coffers. But this did not stop the Government from declaring that it would still continue with the project.

Ken-Ren imported machinery valued at Sh8m, but experts described the machinery as "unwanted" for the intended use. The machinery, whose origin still remains unknown, is still lying unclaimed at the Kilindini Harbour. In 1975 when the Government finalized administrative arrangements with the firm it emerged that N-Ren was a subsidiary of a firm registered in Bermuda, operating from Brussels, Belgium. N-Rens managing agent who was appointed the Managing Director of the defunct Ken-Ren, Kenneth Roy Slocum, was said to have swindled the Government and formed a new company. He was later deported in unclear circumstances. NA BADO!