How Rotich met with Qatar officials to rope them into Eurobond plan

Fresh details have emerged of how Qatar National Bank (QNB) LLC was included into the Sh250 billion Euro Bond saga at the last minute further raising questions on their role as one of the three lead managers of the loan.

The Sunday Nation has seen communication between QNB, the embassy of Kenya in Qatar, the Ministry of Foreign Affairs and the National Treasury and Qatar Finance Minister which offers a window into how the deal was sealed.

The communication shows how National Treasury Cabinet Secretary Henry Rotich met QNB acting CEO Ali Ahmed Al Kuwari and Qatar Minister of Finance Sherif Al Mandi in Qatar last year to discuss a sovereign bond and especially the Islamic version known as Sukuk.

“In the April 2014 meeting between CS Rotich and HE Sherriff Al Emadi, the minister of Qatar and chairman of Qatar National Bank  and later with Mr Ali Ahmed Al Kuwari, the acting Chief Exceutive Officer of QNB, the bank expressed its interest in arranging a Sovereign Bond for Kenya after Eurobond,” says the letter.

The letter is from the Keyan embassy in Qatar and signed by Mr James Omosa for the ambassador. It is written on September 23, 2014 way after the first prospectus way after the first prospectus was released — explaining the presence of two prospectus dated June 19, 2014 and November 28, 2014 appearing in the Irish Stock Exchange Debt Security Documents. The first did not mention QNB but the second did.

When Sunday Nation broke the Qatari link story, it showed that QNB, which is said to enjoy close relations with influential people in the Jubilee government, was not part of the initial deal that had Barclays Bank, JP Morgan and Standard Bank listed as the joint lead managers of the transaction.

Mr Rotich confirmed to the Sunday Nation that he had indeed met the QNB officials. He said the last minute inclusion of “the most respected bank in the Middle East”, was meant to cover the region because there was immense interest there.

“The reason you want such lead arrangers is to have your bond succeed and this is how we had the bond oversubscribed,” he said.

“We have a Memorandum of Understanding with the Qataris to help us make Nairobi an international financial hub,” he said.

He also admitted that he had received many requests from investors from abroad who wanted to establish banks in Nairobi.

Mr Rotich mounted a robust defence of the bond arguing the economy was better off today because of the proceeds. He said it had helped reduce domestic borrowing from Sh200 billion last year to Sh110 billion this fiscal year.

“Sh140 billion from the bond directly went into the budget to fund infrastructural projects. The reserve for the Central Bank shot from Sh6.5 billion to Sh8.5 billion, where did the extra Sh2 billion come from? It came from Eurobond.”

Whereas Mr Rotich had said the Tresury had written to ministries to outline the projects funded by the Eurobond, on Monday, he reneged from this earlier promise. Mr Rotich told the Business Daily that the Sh196.9 billion net proceeds from the sovereign bond issue and tap sale were lumped together with other government revenue and disbursed to ministries, making it difficult to pinpoint specific projects.

“The ministries cannot differentiate whether the money they have received from the Exchequer came from VAT, income taxes, customs duties, excise taxes, domestic borrowing or the Eurobond,” Mr Rotich said in an interview, adding that the Treasury’s role is to disburse funds to the ministries according to their request and in line with the approved budgets.

Mr Rotich, speaking to the Sunday Nation, accused the media of holding brief for the opposition which he charged is out to discredit his docket.

“You know when we give you the correct information but you keep getting back to us with same allegations of pilferage that do not exist, one cannot resist the thought there is a push from ‘the other side’”, he said.

The CS said contrary to reports that some monies were never channelled to the consolidated accounts, all of it had been accounted for and no accounting rules were flouted in the course of the transaction.

Eurobond is now a subject of investigation by the Ethics and Anti-Corruption Commission (EACC) and the Public Accounts Committee (PAC) after the Director of Public Prosecution (DPP) Keriako Tobiko directed that investigations be done and the file deliver to him within ten days for directions. Then, the Treasury Principal Secretary Kamau Thugge confirmed that they included QNB at the end of the process after they realised that they did not have a coverage in Asia and the Middle East.

“We included them at the end of the process. They went through the Ministerial Tender Committee just like the rest of the lead managers. The reason was to cover the whole world,” said Dr Thugge.

He stated that the government brought in the Qataris because Kenya was thinking of raising the Sukuk in future.

“The QNB came in largely for two reasons: To get as wide diversity of investors as possible — that is, JP Morgan (US), Barclays (UK), Standard (Africa) and QNB (Middle East) and since we were thinking of issuing a Sukuk bond, it was important to get someone who might later help us,” said Dr Thugge.

Sunday Nation has established that the letter from the embassy, which also detailed among others QNB presence into the Kenyan market, was received at the Ministry of Finance on October 8 and forwarded to the National Treasury the same day.

The letter also refers to an earlier meeting between the then Chief Executive Officer of the bank who later became the Finance Minister on their interest to buy Kenya Commercial Bank (KCB).

“During the meeting QNB expressed interest to buy a Kenyan bank with a regional presence in East and Central Africa region,” says the letter which is said to have been copied to the Director Middle East Directorate and the Group Chief Executive Officer, Kenya Commercial Bank.

In the letter, Mr Omosa quotes another meeting between Mr Rotich and QNB chief where they promised “to consider either a partnership with a local Kenyan bank or a green field branch in Nairobi any time from 2015’ in the event the buyout does not happen.

QNB, which was established in 1964, is the largest bank in the Middle East and North Africa region. They current control 45 per cent shares of the market in Qatar. They are in Egypt, Tunisia, Iraq, Libya, United Arab Emirates, Syria, Indonesia, India, China, Lebanon, Yemen, Mauritania, Kuwait, and Oman among others.

Yesterday, the government communication confirmed that QNB is now the largest shareholder in Togo’s Eco bank, which has a presence in Nairobi, Kenya.

“With 23.5 per cent shareholding, QNB substantially becomes the largest shareholder in Eco bank, the leading Pan African Bank with a presence in 36 countries across Africa including Kenya,” says Mr Omosa.

The Treasury has defended the Eurobond saying that no money has been lost and accused opposition leaders of misreading the government’s accounts.

Other key players in the Eurobond transaction were Dyer and Blair, which is owned by businessman Jimnah Mbaru. Dyer and Blair were the co-managers. Mr Mbaru, now a politician, was a long serving chairman of the Nairobi Stock Exchange.

The prospectus also shows that Citibank was the paying agent with Anjarwalla & Khanna, Kaplan and Stratton, Arnold and Porter LLP (US) and their London branch being the legal advisers.