Is this the end of the affair for Kenya’s oligarchs?

In a clash between business interests and politics, the pendulum of survival in CMC, the troubled car dealer, has swung so dramatically since independence and more swiftly over the past two years.

To better understand a classic case study of the perpetual revolving door between government and private business, one needs not look any further than CMC Holdings.

So when Finance minister Uhuru Kenyatta announced in June 2009 that Kenya had picked the VW Passat car as the ideal replacement for fuel guzzlers for senior government officials, he triggered a backwash of anger, especially among the new generation of MPs.

For starters, Mr Kenyatta had brought back to the government’s list of suppliers a car dealer that has served as an investment club for Kenya’s top civil servants and politicians during the regimes of Jomo Kenyatta, Daniel arap Moi and Mwai Kibaki.

CMC has always maintained a close relationship with the government to ensure business continuity through state tenders and has several huge contracts such as the supply of Land Rovers and now VW Passats, which have shaped the fortunes of the firm.

Last Friday, CMC, which in October 2009 purchased 120 Passats on behalf of the government, shared the spoils with Toyota in a new deal worth Sh170 million.

The government received 69 vehicles – Land Rovers and Toyota Land Cruisers – to be used by the security agencies in the ongoing war against the Al-Shabaab.

CMC supplies Land Rovers and Volkswagens among other models in the Kenyan market.

But will the current woes facing the car dealer and the departure of Jeremiah Kiereini from the helm of the company mark the beginning of the end of affairs for some of Kenya’s known oligarchs?

Investment vehicle

The wars at CMC may mark the end of the golden era for one of Kenya’s biggest corporates which was an investment vehicle for powerful government officials.

“While it never featured in the public domain as an influential company, behind the scenes, it was very powerful,” says university lecturer Prof Macharia Munene. “The political backing it enjoyed then is no longer as strong as it was, partly explaining the current woes. Then, the company would not have been allowed to sink or even attract the negative attention it is currently going through.”

The company’s story revolves around two of Kenya’s biggest corporate titans, Bruce McKenzie who was President Kenyatta’s Agriculture minister, and Mr Kiereini, who once served as the head of Public Service.

Mr Kiereini exited as CMC Holdings chairman earlier this year, long before the current battle began.

Since independence, the names of Mr Kiereini, McKenzie and former Attorney-General Charles Njonjo have come to be associated with the fortunes of the firm.

The current battle for control of CMC is being seen as a showcase of the quiet but bruising struggle between Kenya’s nouveau riche, who have made money under President Kibaki, and the Old Guard represented by the likes of Mr Kiereini, who called the shots during President Kenyatta’s and President Moi’s regimes.

Mr Peter Muthoka engineered a coup against Mr Kiereini, snatching away the chairmanship of the company’s board on March 25, 2011.

He, however, lost his position in September in yet another boardroom coup pushed by an alliance of new principal shareholders.

This brought in Mr Joel Kibe as the current chairman of the board.

When President Kibaki came to power in 2003, observers saw this as the end of CMC’s dalliance with the State with regard to tenders.

His government made a quick switch to Toyota as the official car models for use by government officers.

But that was not to last as, during his second term, CMC made a major comeback.

Cost-cutting strategy

But, as the battle unravels, so is history being written over the fate of some of the most prominent Kenyan oligarchs.

The firm’s fortunes gained prominence as the government retained Land Rover models for the provincial administration and armed forces.

More recently, a cost-cutting strategy saw CMC bag the exclusive tender to supply VW Passats for use by senior public officers.

President Kibaki has turned sharply to the East, dealing more with companies and governments in Japan, China and other Asian economies.

Kenya has previously relied heavily on Western partners, including its former coloniser, Britain, for trade and business.

CMC’s books have not been looking that good, at least recently with the company’s earnings engine sputtering red ink, as a slow Kenyan economy weighed down on its performance.

For the past two years, leaner corporate budgets, stringent government vehicle procurement policies and thin credit lines to the private sector and households proved costly for CMC as it sold fewer units in 2009 compared to the previous year.

CMC posted a net profit of Sh406 million in 2010 and its 2011 results are expected to fall by more than Sh100 million.

Last month, the firm issued a profit warning saying the earnings could plummet by at least 25 per cent.

Controlling the Land Rover franchise and managing government loyalty has been one of the survival tactics for CMC’s leadership.

It was under McKenzie’s leadership that CMC progressed and spread its wings.

Mr McKenzie was Kenyatta’s Agriculture minister until 1969. But CMC was more than a retirement bench.

It was the fulcrum of business and politics, a tricky balance that the company had to navigate in 1960s and ‘70s.

As long as government kept the Land Rover orders coming, CMC was bound to be big.

It had branches in Uganda and Tanzania where they delivered more Land Rovers to Julius Nyerere and Idi Amin’s army. (Amin would later kill CMC chairman McKenzie and his partner Savage).

By the 1970s, it took over the John Deer tractors’ franchise held by Gailley and Roberts since 1926 and Volkswagen too.

But, lately, the British company’s fortunes in Kenya have been at an all-time low – at least politically.

For now, as the boardroom wars continue, one can only watch to see Kenya’s most prominent oligarchs depart the scene of one of Kenya’s most versatile companies.

Additional reporting by John Kamau