A year after President Uhuru Kenyatta brandished a corruption list of shame in Parliament, the public profile of graft is unprecedented.
The conventional wisdom is that this in turn reflects a corruption explosion in the country, and in effect, that Uhuru Kenyatta’s is the most corrupt administration in our history.
Anti-graft supremo John Githongo has recently described the Jubilee administration as a scandal, and the Chief Justice recently declared the country a bandit economy.
In my column that coincided with the President’s fateful State of the Nation address last year, I posed a question: Will he drain the swamp, or will he sink in it? The answer to this question turns on his administration’s two mega-corruption scandals, the Waiguru affair, and Eurobond.
So far, the sensational Planning and Devolution Ministry/National Youth Service scandal is focused on Sh791 million stolen in the most brazen manner. Information that is flowing into the public domain suggests that this is the tip of an iceberg. A big iceberg.
In the FY2014/15 budget, the Planning docket was allocated Sh16 billion for “Youth Development Initiatives”, broken down into Sh1.55 billion wage cost for temporary staff, Sh1.9 billion for “fuels and lubricant”, Sh2 billion for an item called “Rentals of produced assets“ and Sh9.5 billion for “Rehabilitation of civil works”.
The cost of Britam Tower currently under construction in Upper Hill, which will be the tallest building in Nairobi is put at Sh7 billion. This budget would have built two of them plus change. The Sh1.9 billion for fuel is enough to fuel 1,000 big bulldozers working eight hours a day for a year. And what are these ‘‘produced assets’’ that were to be leased for Sh2 billion?
We are looking at a political slush fund. The Budget Controller’s report shows that all the money was spent. Best case scenario is that only 20 per cent could have been spent genuinely, which means we are looking at a theft of at least Sh12 billion.
Ms Waiguru was, and probably still is, a powerful associate of the President. A profile for Adan Harakhe, her principal accomplice, published in the media recently paints the picture of a career criminal. We have to presume that Waiguru was privy to his background before hiring him, which can only lead to the conclusion that he was head-hunted to run the racket.
Lets turn to Eurobond. I have three observations to make.
First, it’s been reported recently that the Greenfield Terminal project at the Jomo Kenyatta International Airport has stalled. This is one of the few Vision 2030 flagship infrastructure projects that makes economic sense.
Aviation is one of our leading foreign exchange earners, bringing in more than $1 billion a year — most of it earned by Kenya Airways. The collapse of this project and the woes of Kenya Airways are a very ominous threat to the economy. But what has this to do with Eurobond?
According to the report, the contractor has done work worth Sh8 billion but has only been paid half the amount. The government is now looking for modalities of demobilising the contractor.
The government maintains that all Eurobond money financed development projects. And here we are, with as important a national project as you can get that was not funded. For the umpteenth time, where are the Eurobond projects?
YOUTH FUND SCANDAL
My second observation has to do with the Youth Fund scandal, specifically the theft of Sh180 million that was part of Sh400 million fixed deposit. Two things. First, the bank accepts instructions to change signatories, shortly before maturity, to a single signatory without board approval.
A single signatory for a state corporation account? Subsequently, the bank accepts instructions to pay a supplier from an investment account. What are the KYC (know your customer) procedures for? Is this not a case of a bank knowingly facilitating fraud?
Again, you may be wondering what this has to do with Eurobond. Recently we were treated to a vigorous, if tortured defence of banks authored by Kenya Bankers Association chief executive.
Now, this is the second case of involvement of local banks in facilitating theft of public funds. As I wrote before, if the missing Eurobond money is not hidden in CBK, our local banks may have knowledge of where it went.
My third one takes us to Kuala Lumpur and to a tour de force of international financial sleaze.
1Malaysia Development Berhad (1MDB) is a state investment fund set up to spearhead development of Kuala Lumpur into a global financial centre, a flagship project of Prime Minister Najib Razak.
The Prime Minister is also chairman of its advisory board. 1MDB went on a borrowing binge, raising $11 billion in international bond markets, which some observers, including former PM Mahathir Mohammed, thought was excessive. Trouble began early last year, when 1MDB missed debt payments. Soon, stories were swirling around that a lot of money had gone missing.
The most damaging of these was a complicated trail through shell companies and tax havens that led to a mysterious deposit of $681 million into the personal account of the Prime Minister shortly before the election.
The Prime Minister claimed the money was a donation by a member of the Saudi royal family. The investigation traced the money to 1MDB. The Attorney General, a compliant one, refuted the finding, cleared the Prime Minister and closed the file. The government went on to claim that the money was in fact returned to the donor after the election.
The Swiss authorities estimate the total fraud at $4 billion. Also investigating are US, Singapore, Hong Kong and UAE authorities. The investigations put the Prime Minister’s total take at over $1 billion dollars.
The targets of investigations include Malaysian officials and moneymen, an oil company linked to a Saudi prince, an Abu Dhabi sovereign wealth fund, and the usual suspects—international banks.
JP Morgan Chase and the Royal Bank of Scotland, which handled large payments that according to The Economist raise the question “whether there were grounds to suspect that any of the transactions were questionable-or whether especially rigorous checks on public officials and other “Politically Exposed Persons”, or PEPS, were called for and carried out”. US authorities are investigating Goldman Sachs, which handled 1MDB’s bond issues and earned suspiciously high fees, for money laundering and corruption.
What has this got to do with Eurobond? Three things.
First, it speaks to disbelief. There are still people who are clinging to the belief that the Eurobond theft is so outrageous it cannot be true. It seems to me that this question is now settled.
Second, it speaks to the culpability of banks and international banks in particular. Heads are rolling. The South East Asian boss of Goldman Sachs was this week subpoenaed by the US Justice Department. Another banker with the Singaporean subsidiary of Swiss private bank BSI is facing money laundering charges there.
The CEO of BSI Singapore announced early retirement this week. Also on the cross-hairs is the CEO of the Malaysian Bank where the Prime Minister banked his loot. She is an employee of the bank’s parent, the international bank ANZ. In short, banks are full of crooks.
As I’ve observed before, it is difficult to launder $1 billion dollars locally, so our Eurobond money must have flowed back out into the international financial system.
We have unanswered questions regarding the role of the Qatar National Bank (QNB). Who parachuted it in and why? And there are uncanny coincidences. QNB is now the majority shareholder of Togolese pan African bank Ecobank.
Before his appointment to chair the Central Bank of Kenya board, Mohammed Nyaoga was chairman of Ecobank’s Kenya subsidiary. QNB announced the purchase of a substantial additional stake in Ecobank in September 2014, same month the ill-fated billion dollars vanished.
The third observation is a political parallel. In a previous column, I wrote that we should prepare for a very severe assault on our governance institutions.
Even now, the dominant view in Malaysia is that the Prime Minister will get away with it, as all the institutions are now fully captured by the executive. This is how Tony Pua, an MP and member of the Public Accounts Committee summed it: “The key problem behind what we are facing today is the fact that our institutions have been captured.
He (the Prime Minister) gets to sack the Attorney General at will, he gets to replace investigating officers in the police department as well as the anti-corruption commission, he gets to remove his deputy prime minister as well, he controls the wheels of power both in his political party as well as the government.”
Is Uhuru winning the war on graft? Wrong question. The question that is now inescapable is his culpability. I wrote a year ago that the NYS was President Kenyatta’s racket. Developments continue to reinforce that prognosis way beyond anything we would have expected. On Eurobond, he has evidently exercised his right to remain silent.
We of course like Malaysians do not have the independent institutions or the political wherewithal to pursue this legally.
What is our recourse? In similar circumstances, we had no qualms prosecuting and convicting Moi in the court of public opinion.
Its about time.