Kenya, a failed state, now headed to the dogs

Unfortunately for Kenya, all that holds the coalition together now is mutual greed and pressure from abroad.

From The Economist


AFTER the horrendous violence that followed Kenya’s flawed general election in 2007, the mediation of Kofi Annan, a former secretary-general of the United Nations, was acclaimed for pushing the two main political parties into a coalition government. This at least stopped the bloodshed. Now, however, the deal is unraveling—fast. At a recent summit feuding government ministers could not even agree on what to discuss in order to find common ground. The Orange Democratic Movement (ODM) of the prime minister, Raila Odinga, stomped out before the meeting had even begun, accusing President Mwai Kibaki’s Party of National Unity (PNU) of blocking the agenda.

Among the foreign diplomats looking on, optimists refer to the squabbling coalition as an “unconsummated marriage”. The less charitable say Kenya does not have a functioning executive at all, just an unholy alliance of fierce rivals. A schedule of constitutional, electoral, judicial, security, land and economic reforms was laid out in the original agreement between the two parties. A domestic tribunal to judge those responsible for the post-election mayhem was supposed to be set up and a truth commission established. Yet more than a year later the ODM and PNU have failed to agree on any of these issues.

New corruption scandals, confined to no party, are regularly revealed by Kenya’s papers. With so many senior figures from the main parties co-opted into the government—which has 94 ministers and deputies, each earning over $15,000 a month—Kenya has become almost a one-party state. Ministers constantly squabble over pay, protocol, seniority and even who gets the best rooms at government get-togethers. The churches, NGOs and foreign diplomats are left to play the role of opposition, cajoling and threatening from the sidelines.

The infighting and bickering have also confounded hopes for measures to tackle the causes of the post-election violence, or even the country’s increasing gang violence. For example, Mr Odinga backed calls for the resignation of the soldier turned chief of the police, Major-General Hussein Ali, after he had been heavily criticised by human-rights groups and the UN over the activities of police death-squads. But Mr Kibaki, who appointed Mr Ali, has refused to let him go, despite an agreement to have a civilian head of the police. This week clashes in central Kenya between villagers and gang members of a criminal sect known as the Mungiki, who belong to the Kikuyu group, Kenya’s biggest, left another 40 or so people dead.

Parliament reconvened this week. The next elections are not due until 2012, but so grave is the impasse that politicians are already attending to their political futures rather than present troubles. Martha Karua, who resigned as justice minister on April 6th in protest at Mr Kibaki’s decision to appoint judges without consulting her, has said she will run for president. She gives press interviews, addresses crowds and lambasts the government she so recently abandoned as if a national poll were due for next week. Ms Karua is popular because she gives voice to the disgust felt by ordinary Kenyans towards their politicians. Her resignation is seen as a rare display of principle.

Unfortunately for Kenya, all that holds the coalition together now is mutual greed and pressure from abroad. Despite everything, foreign donor governments are nonetheless determined that the coalition should not collapse entirely. They believe any government is better than none, fearing yet more violence.

Mr Annan may intervene again. Within a few months, unless the domestic courts deal with the matter properly, he promises to hand over to the International Criminal Court the names of ten people considered by a special Kenyan commission to be responsible for the post-election violence. The removal of these figures from Kenya’s politics, and even from the cabinet itself, might give a useful jolt to the country’s dysfunctional political system.

How to ruin a country

John Githongo fought the corruption that is destroying Kenya but was defeated

From The Economist print edition



THIS is the tale of the tragic failure of a brave and honest man appointed to expose corruption by a new Kenyan president who came to power on a wave of high-minded enthusiasm in late 2002, claiming to be a clean-handed reformer. Within a few years the brave man, John Githongo, is betrayed by the president, Mwai Kibaki, and by most of the big man’s closest colleagues, many of whom prove themselves to be patently corrupt. Mr Githongo is at first intensely loyal to Mr Kibaki, who gives him an office down the corridor in State House. But the whistleblower comes to realise that the president acquiesces in corruption of the grossest kind, and flees for his life into exile.

There is far more to this gripping saga than that. It is a down-to-earth yet sophisticated exposé of how an entire country can be munched in the clammy claws of corruption. It is also a devastating account of how corruption and tribalism—the author prefers the grander term ethno-nationalism—reinforce each other, as clannish elites exploit collective feelings of jealousy or superiority in an effort to ensure that their lot wins a fat, or the fattest, share of the cake. Hence the book’s title: “It’s our turn to eat”.

Mr Githongo, who reported for The Economist (among other journals) in the 1990s, is portrayed by the author, an outstanding former Financial Times journalist, to whose house in London he fled, as a complex character: jovial, moody, dogged, ingenious and understandably obsessive. Through his prism, the author describes Kenya’s history over the past two decades, “probing the roots of a dysfunctional African nation”.

After independence in 1963, Jomo Kenyatta and his mainly Kikuyu inner circle steadily plundered the country, ensuring that their fellow Kikuyus and closely related Meru and Embu groups, together comprising some 28% of Kenya’s people, acquired an ever-larger slice of the land. After his death in 1978, his successor, Daniel arap Moi, who hailed from the much smaller Kalenjin-speaking group of tribes, reckoned it was their turn to eat—and how. Eventually, in 2002, in what looked like a pan-ethnic revolt against Mr Moi’s lot, Mr Kibaki, another Kikuyu, won a multiparty election amid hopes that Kenya would at last have a decent, reasonably clean administration in which merit rather than tribe would be the way to advancement. Mr Githongo’s appointment as the government’s anti-corruption tsar was hailed as a happy sign of intent.

No such luck. Mr Githongo almost immediately spotted a massive scam, to be known after a murky company called Anglo-Leasing, that creamed off some $750m mainly by overbilling the state—with ministerial connivance—in some 18 projects. He noted that more than half of these scams had originated in Mr Moi’s era but had deftly been carried over into the new and supposedly clean one. It soon became clear that not only were some of the most senior ministers in the government involved but also that the president was unwilling to do anything about it.

Moreover, as Mr Githongo made secret tapes of conversations with these villains, two more things became equally clear. The main perpetrators, bound by a tight code of ethnic solidarity, flagrantly appealed to him, as a fellow Kikuyu, to be loyal to his tribe. He also realised, even after he had fled into exile, that this so-called “Mount Kenya Mafia” was determined to use some of its ill-gotten gains to fill its party’s coffers in an effort to win the general and presidential elections due at the end of 2007. This group would stop at nothing to hold on to power.

In the event, when it seemed that Raila Odinga, the populist presidential candidate whose campaign was full of anti-Kikuyu innuendo, was winning the race in late 2007, the old guard around Mr Kibaki set about fiddling the result, prompting riots and ethnic massacres around the country in which some 1,500 perished and at least 300,000 were displaced. After two months of turmoil and political paralysis, a shabby and unwieldy compromise was reached under the aegis of the UN’s former secretary-general, Kofi Annan, whereby Mr Kibaki held on to the presidency while Mr Odinga became prime minister.

Kenya, meanwhile, had been torn apart as never before. Mr Odinga, like President Barack Obama’s father, is a Luo, Kenya’s third-most-populous group, which fiercely considered that it was its “turn to eat”. It had grievously missed out under two Kikuyu-dominated administrations and under Mr Moi’s Kalenjin one.

One of the most disturbing aspects of the book is the dismal performance both of the World Bank and of Britain’s Department for International Development (DFID). The bank has been indulgent towards Kenya’s leaders and inept when it tried to do something about their corruption. There was a “dangerous cosiness” between the bank and Kenya’s government.

For the current British government, the book is even more disturbing. A flagship of Tony Blair’s New Labour, DFID was a new ministry no longer subordinate, as its predecessors had been, to the Foreign Office. It disbursed cash for aid far more abundantly than ever before and with fewer strings, betokening a determination to “end poverty”. As Michela Wrong puts it, the amount of money which it disbursed became “the only solid yardstick of progress, hardly a situation likely to encourage discrimination amongst officials responsible for approving projects”. When Britain’s then high commissioner to Kenya, Sir Edward Clay, one of a small band of righteous heroes in the book, spoke out courageously against corruption, his DFID counterparts did their best to undermine him.

A year after the corrupt election fiasco of late 2007 and early 2008, nothing fundamentally has changed. Almost all the top ministers and civil servants fingered by Mr Githongo are still in office; so is Mr Kibaki. Even if Mr Odinga were president, as the majority of voters almost certainly intended him to be, few Kenya-watchers would be confident that the basics would have changed, except that a new elite would be “eating” better. The mixture of greed and ethnic exploitation is as potent and combustible as ever: a sorry state of affairs.

MPs pass vote of no-confidence against Kimunya - as details of other dirtier, fishy and corrupt deals emerge

From East African


Kenyan Parliament has passed a vote of no-confidence against rougue and corrupt Finance minister Amos Kimunya (above: pictured) over his role in the controversial sale of the Grand Regency Hotel.

This means the President can (should) sack him or appoint a commission of inquiry into his conduct. However, the President is not bound by law to take any action against the minister. But Mr Kimunya can choose to resign as minister or await the President’s decision. This is just the first scandle.

Fresh details have emerged of how Finance Minister Amos Kimunya, in a Cabinet paper he tabled at a meeting in May last year, sought to justify a joint venture with the local subsidiary of British currency printer De La Rue Security Company Ltd.

In the paper, a copy of which has been seen by The EastAfrican, Mr Kimunya argued with some vehemence that Kenya needed to secure a strategic long-term relationship with De La Rue.

Such a stable relationship with De La Rue, he argued, would encourage the company to invest in new technology and materials and thereby boost the quality of the currency......Continues Below

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As it turned out, that Cabinet paper is what set the stage for the derailment and final cancellation of $51 million contract under which Kenya was to acquire new generation tamper proof bank notes, now the subject of a row in parliament where the minister is accused of having acted imprudently.

Under the contract, Kenya was to acquire the new generation notes at far more competitive prices than in the existing contract.

In a statement he made to parliament last week, Mr Kimunya argued that the country did not lose any money by cancelling the contract for new generation bank notes.

Opinion is, however, unanimous — including among technical staff of the Central Bank of Kenya — that the country would have saved billions of shilling had it opted for the second-generation bank notes.

Indeed, the tender for the banknotes was the first to be competitively procured in the country’s history.

Until that tender was floated, De La Rue had been supplying Kenya with bank notes under 10-year, opaquely procured deals handed to it without any competition.

Available documents show how a former head of legal affairs at the CBK, J.M.Gikonyo, had in a letter to Central Bank Governor Prof Njuguna Ndungu questioned the whole arrangement.

“It is not clear why the joint venture has to bind Kenya to continue with the existing generation banknotes, which are more expensive compared with the new generation banknotes,” he said in the letter.

The letter continued: “The international tender demonstrated that international procurement of bank notes through competitive tendering is able to provide the bank with bank notes at lower prices.”

De La Rue’s first contract with Kenya was an exclusive 10-year contract signed in January 1993.

It was a lucrative deal that committed Kenya to a minimum order of 170 million bank notes in a year. The notes were to be produced in De La Rue’s Ruaraka factory.

In December 2002, just a few days before the new administration of President Mwai Kibaki took the reins of power, Del La Rue hurriedly signed another 10-year agreement.

The date on the contract was December 5, 2002. It was to come into effect on January 1, 2003.

In March 2003, then minister for finance David Mwiraria wrote to the former governor of the Central Bank of Kenya directing him to cancel the contract with De La Rue.

The minister gave three reasons: First, that the contract was single-sourced. Second, that the contract period was extended to 10 years instead of the normal five years. Third, that since the contract became effective on January 1, 2003, when the new government was in power, the Narc government should have been consulted.

Consequently, the government decided to float an initial tender for the new generation bank notes in which several international currency printers participated.

In May 2006, De La Rue emerged the winner in the competitive bid and was contracted to print 1.71 billion pieces of the new generation bank notes at a cost of $51 million.

The plan was that the bank notes were to be issued beginning, July 2007.

This background explains why the derailment of implementation of the contract for the second-generation bank notes was clearly a step backwards in efforts by the government to bring transparency to the procurement of bank notes.

In the Cabinet paper, Mr Kimunya stated that De La Rue’s Ruaraka plant did not have the technology to manufacture the new look notes and that the company had all along planned to produce the new look bank notes in plants located in Europe.

He said De La Rue was planning to close the Kenya plant because the advent of the new generation notes would render it redundant.

Thus, once the Cabinet paper was passed, the death of the new generation bank notes contract was a foregone conclusion because, having committed itself into purchasing 25 per cent shares in the Ruaraka plant, the government was now going to be compelled to make sure that it did not close down.

Following the Cabinet approval, negotiations for the joint venture were set in motion. The Treasury put out advertisements inviting transaction advisers. Consequently, CBA Capital Partners Ltd were appointed to advise the government on the deal.

In the meantime, a parallel process was set in motion to negotiate another long-term currency production agreement between the Central Bank of Kenya and De La Rue.

On September 28, 2007 , the Treasury wrote to the Central Bank requesting it to review a draft long-term currency production agreement.

The Central Bank was informed that De La Rue was keen on making the new agreement an integral component of the proposed joint-venture agreement.

In the draft deal, De La Rue proposed, “The bank shall purchase all its bank notes requirements from the De La Rue factory in Ruaraka.”

When the draft currency agreement was presented to the top management of the Central Bank for review, it was met with stiff opposition.

“We are opposed to a situation whereby the bank enters into the currency production agreement with an entity [the Ruaraka facility] which regrettably may continue to use old technology,” they said in a letter signed by Mr Gikonyo.

Last week, Mr Kimunya opposed the new generation bank notes, arguing that the concept of a new currency note had been comprehensively dissected and addressed by the Central Bank.

The minister also said the new-look notes were abandoned because the Central Bank would have had problems storing the old bank notes.

It is noteworthy that this was the first time Mr Kimunya was advancing these arguments. In the Cabinet paper where he presented a long narrative on how the currency contract had been handled, the minister did not oppose the new notes — suggesting that what he said in parliament was an after thought.

The only reason he gave for the delay in the implementation of the contract was that “ the government considered it imprudent to have a new generation currency in an election year.”

He said the government had directed the Central Bank to delay the commencement of the contract to January this year.

Aides to Rogue Kenyan Finance Minister in Shady deal Paraded in Shame (List Includes Kenya’s Central Bank Governor)

Report from The Standard and Daily Nation




Professional valuers Monday said the Grand Regency Hotel was worth at least Sh4.5 billion, but in a new bizarre twist, it emerged yesterday that the hotel did change hands at Sh1.85 billion and not Sh2.9 billion. Earlier reports by the finance minister Amos Kimunya were proved wrong yesterday by evidence produced by his cabinet colleague, the Minister for Lands, James Orengo who uncovered newer details about the shady deal.

Mr. Orengo, who first blew the whistle over the secret sale, opened a new dimension by claiming that the firm that bought the hotel is indeed Kenyan and not Libyan as earlier claimed. A Libyan embassy official, Mr Ahmed Mabrouk, said the mission (Libyan Embassy) was not involved in the (shady) transaction, adding that the matter was purely between investors from his country and the Central Bank of Kenya.

Former Trade minister Mukhisa Kituyi also stepped into the raging saga saying the sale was an unfortunate statement of impunity by Kimunya. He called for a revocation of the sale and the property returned to the public.

Addressing a press conference at Ardhi House, Lands Minister James Orengo also released pictures of the company directors one of whom is a well-known local contractor and has previously been involved in shady deals. The transfer was effected on June 20th this year and was witnessed by the CBK Governor Prof Njuguna Ndungu....Continues Below

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The minister said the company was incorporated and registered in Kenya. "Two characters are in the letters of transfer are indeed Kenyans," said Orengo.
The directors of Libyan Arab African Investments that bought the hotel, holder of Passport No 004428, holder of ID Card No 6104260, holder of Passport No 298071 and CBK Governor Njuguna Ndung’u who witnessed the sale agreement.

Orengo said it was clear from the documents that the deal was not between the Government of Kenya and the Libyan Government.
Orengo made the revelation against a backdrop of a flurry of activities at the Grand Regency Hotel as the new owners scrambled to formally take over the hotel. The hotel managers were kept busy the entire day and late into the night as they engaged in stocktaking.

Documents released last night by Orengo show that Central Bank of Kenya (CBK) sold the land and building to a locally registered company, Libyan Arab African Investments Company Kenya Limited.
Earlier, Mr Kimunya and his permanent secretary, Mr Joseph Kinyua, held talks with Prime Minister Raila Odinga ahead of the committee meeting over the controversial sale of the hotel.

The directors — whose names were not appended — had their Identification and Passport Numbers listed as 6104260, 298071 and 001428.
The minister also revealed in the registration of title, a registrar at the Lands office — a Mr Mulee — changed the sum of figure from Sh2.5 billion to Sh1.85 billion without endorsing the changes.

Interestingly, one firm of advocates handled the sale transaction for both Central Bank of Kenya and the Libya Arab African Investment Company Kenya Limited.
Orengo said the firm of Wetangula, Adan, Makokha and Company Advocates was the same for the CBK and the new owners.
He stated that Attorney General would have been the one to act on behalf of the CBK (read Government) and not a private firm.

In the documents the Libyan Arab African Investment Company Kenya Limited has its registered office in Nairobi.
The hotel’s new owners officially installed a new Libyan financial controller, Mr Cairo Makhzoun Gilani and a Ugandan Chief Engineer, Mr John Kubarigire who supervised the stock taking exercise of all the hotel’s assets.

The new financial manager had visited a local bank earlier in the day for details on the hotel’s financial position. The take-over and the stock taking was being executed in a hurry against fears that the Lands Minister would cancel the deal and revert the hotel to Kenyans.

The new managers walked into the hotel in the morning, minutes after the workers were hurriedly told that new directors would be coming to the hotel, causing anxiety among the members of staff. To outsiders and visitors, the entry of the new managers went unnoticed.

Security Intelligence sources told the Standard that the formal hand-over was to take place at around midnight last night. "We are informed the handover ceremony will take place tonight (lastnight) but I do not think they have invited the media," said a security source that sought anonymity.

The hurried hand-over was being done against the backdrop of a cabinet sub-committee convened by Raila and which plans to grill Kimunya on the sale that has had the entire country focused on the matter.

The handover was also done on the eve of planned demonstrations by a section of MPs who plan to hold a protest march to register their displeasure at the controversial sale. Their attempt to hand over an application to the police at Central Police Station was snubbed and told the face the demo will not be allowed.

Attorney General Amos Wako also met with members of the Law Society of Kenya after which he demanded from Kimunya for all documents on the sale of the hotel. He said he needed to study the controversial sale to be able to give a concrete way forward on the same.

The chief Government advisor who was not party to the signing of the sale said he would advise Government accordingly on the action to be taken on the sale of the hotel that has put the Finance minister on the spot. He at the same time reiterated that businessmen Kamlesh Pattni has not been granted pardon and his court cases are still on track.
"The issue is being handled now by the Prime minister Raila Odinga. I assure you after receiving all the documents on the sale I will then tell you the action to take. I do not want to injure the advocate client confidentiality," he said.

Members of parliament led by North Imenti MP Gitobu Imanyara plan to sponsor a censure motion against Kimunya in Parliament Tuesday afternoon. Imanyara said that they will move a motion of no confidence in Kimunya as Finance Minister and added that they have the support of Ministers, Assistant ministers and backbenchers.
"We will not allow him to continue enjoying the status of a Finance Minister since he lied to Parliament over the sale of the hotel,’’ Imanyara said.

Corrupt Deals by Rogue Finance Minister Threatens Kenya’s Young Grand Coalition Government

The creation of a grand coalition government marked the beginning of a very sensitive period of national healing and reconciliation for Kenyans. The coalition is yet to firmly set its foot on the ground but grand corruption threatens its very stability. This is the third time the Kenyan Finance minister is making international headlines by committing the country to questionable deals that are “too sweet to be passed on”.

Safaricom IPO
In the run up to the general elections in December last year, many questions were raised regarding the manner in which Mr. Amos Kimunya, Kenya’s finance minister, was rushing the listing of Safaricom through an initial public offer (IPO) to raise Kshs. 5O Billion. Mr. Kimunya may have had good intentions but the timing and the manner in which he was “pushing the deal” were very inappropriate. Asked why such a rush to offload government assets held in trust for the Kenyan people - a few days to the general elections, he answered “…people should keep off the NSE as it was not a fish market”. The issues clouding the IPO are yet to be fully resolved, but it was held anyway and Mr. Kimunya is still at the helm the finance ministry.

Kenya - DelaRue Saga
Less than a month into the first quarter of the 2008/9 financial year, other concerns have emerged regarding the introduction of new generation bank notes. According the Chairman of the Parliamentary Public Accounts Committee (PAC), Dr. Bonny Khalwale, the finance minister unilaterally cancelled the tender that would have saved the country three times the cost of printing money. Again Mr. Kimunya toyed with the idea of buying a stake in DelaRue the money printing firm so that “he could save the country some money”. Had it not been for leaks surrounding this deal, he would have committed the country into buying a stake in DelaRue unilaterally. Apparently Mr. Kimunya changed the terms of engagement with DelaRue, went ahead to lie to parliament and the people of Kenya about the matters arising out of the DelaRue saga until when the press highlighted issue. He went on the defensive and called the press reports "rumors"....Continues Below

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1. Aides to Rogue Kenyan Finance Minister in Shady deal Paraded in Shame (List Includes Kenya’s Central Bank Governor)

2. Corrupt Deals by Rogue Finance Minister Threatens Kenya’s Young Grand Coalition Government

3. Britain, Tony Blair and Mugabe are to blame for Zimbabwe’s woes.
4. How to get rid of Robert Mugabe
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Secret Sale of the Grand Regency Hotel
Earlier in the month the same minister lied to parliament about ownership of the grand regency hotel. He claimed that the Government of Kenya was still the rightful owner of hotel (on behalf of the Kenyan People). This was until Lands Minister James Orengo broke the news that the Hotel had already been sold to some unknown individuals. The clearance of the sale was done by the lands ministry through some other equally rogue officials involved in the deal. In a press conference, the minister owned up that indeed the hotel had been sold to the Libyan government at a cost of Kshs. 2.9 billion. Many say that the Hotel was greatly undervalued. According to Senior Counsel Mutula Kilonzo, the hotel could have fetched more than Kshs. 2.9 billion. In 1994, Mutula says, he was part of a team of lawyers who oversaw the exchange of the hotel ownership at a cost of Kshs. 4 billion. 14 years later, Mr. Kimunya has pushed the cost of the Hotel down to Kshs. 2.9 billion. Other “unconfirmed” press reports indicate that Libya actually paid 4.5 Billion for the current hotel sale but the finance minister can only disclose the whereabouts of just Kshs. 2.9 Billion. The difference, Kshs.1.6 Billion still lies somewhere in the equation. There was no public tendering for the sale, the valuation (if it was ever carried out) was rushed and indeed very wrong, the finance minister acted unilaterally yet again.

One bad potato can quickly spoil the rest of the sack if not separated. With new mandates, it was expected that the coalition would direct Kenyans away from past ills of grand corruption which have cost the country its very development. Kenya’s economy should be ranking close or past Singapore’s since the two countries were growing at almost the same rate some 40 years ago. Rogue elements in past governments who ruled with absolute impunity have trapped the country in never ending debt cycle. Poverty is at an all time high. Kenyans cannot afford basic needs due to spiraling inflation. All this was caused by thoughtless unilateral acts by individuals entrusted with managing public property but instead chose to engage in “too sweet to be passed on” kind of deals, such as the Grand Regency Hotel sale. At this age and time, the country cannot afford to waste any more development years through grand corruption.

If allegations against Mr. Amos Kimunya are true, he should not just resign; he should be arraigned in court for gambling with the country’s economy. He is taking Kenyans for fools. He lied to parliament, he lied to Kenyans and he is still at the helm of the finance ministry. He unilaterally controls the printing of a country’s currency, grand spending and selling of countries assets that the government holds in trust for the Kenyan people. Government assets are not personal property. The credibility of Kenya’s grand coalition lies in how it will handle this particular case.