Treasury ignored AG’s advice on multi-billion Telkom-K share deal

The Attorney General has disowned the deal between the Treasury and France Telecom which saw transfer of government shares in Telkom Kenya to the French firm with no money changing hands.

Appearing before the Parliamentary Public Investments Committee Attorney General Githu Muigai said the National Treasury ignored his advice costing the government billions in lost revenue.

The AG told the committee that he wrote to the former permanent secretary at the treasury, Mr Joseph Kinyua, warning of the impending risk involved in the transaction but his advice was ignored.

“I cautioned the National Treasury of the danger… but they requested that they be allowed to conclude the process as they had already begun,” said Mr Muigai.

Against the law

Mr Muigia said that the Treasury had opted to contract private lawyers to oversee the deal which was against the law.

The AG becomes the second high ranking government official do disown the deal. In August, privatisation commission Executive Director Solomon Kitungu told the same committees that his agency was kept in the dark over shares deal between the Kenyan government and France Telkom, adding that the transaction was inconsistent with the Constitution.

Parliamentary committees on public investments and communications have been probing the circumstances under which government shareholding in Telkom Kenya was diluted from 49 per cent to 30 per cent, with no funds changing hands.

Both committees have read mischief in the manner in which France Telecom acquired additional stake in Telkom Kenya, upping the 51 per cent shareholding acquired in 2007.

This suspicion has been escalated by emerging facts that legal procedures for disposing government’s stake in the parastatal were not followed.

“Where the Attorney General is not involved, most of these transactions are guided by commercial interests,” said Mithika Linturi, a member of PIC.

In December last year, France Telecom wrote off a Sh30 billion debt that Telkom Kenya, through the Treasury, owed in exchange for a 9 per cent shareholding in the company.

The Treasury had promised to give Telkom Kenya, now an outfit owned by the government and France Telecom, a cash injection of Sh4.9 billion while France Telecom paid Sh5.1 billion.

The Treasury paid Sh2.5 billion but failed to meet the June 30, 2013 deadline for paying the balance of Sh2.4 billion, effectively ceding a further 10 per cent shareholding in Telkom Kenya, a move that reduced the government’s stake to the current 30 per cent.