Moi did it with Goldenberg, Kibaki Anglo Leasing, now NYS is shaping up for Uhuru

For public accountability purposes, there are, in my view, only two questions for which we need answers. Who is CS Waiguru covering up for? There are two distinct possibilities, herself or people close to the President. The second one is why the President is protecting her, writes DAVID NDII

When Devolution and Planning Cabinet Secretary Ann Waiguru descended on Parliament with a cheering squad and her MP “friends of the committee” proceeded to scuttle the hearings on the National Youth Service debacle, I was reminded of this passage from Animal Farm:

“Silent and terrified, the animals crept back into the barn. In a moment the dogs came bounding back. At first no one was able to imagine where these creatures came from, but the problem was soon solved: they were the puppies whom Napoleon had taken away from their mothers and reared privately. Though not yet full-grown, they were huge dogs, and as fierce looking as wolves. They kept close to Napoleon. It was noticed that they wagged their tails to him in the same way as the other dogs had been used to do to Mr Jones.”

Some things never change.

The President may come to rue the day. Goldenberg did it for Moi, Anglo Leasing did it for Kibaki. The NYS scandal has all the makings of Uhuru’s bugbear. It is emblematic of all of the Jubilee administration’s fatal flaws: hubris, duplicity, fecklessness, profligacy, impunity, megalomania, and of course corruption of every conceivable kind.

OPPORTUNITY COST

Where does one begin?

Kibera. I wrote not too long ago about Kibera being mesmerised with pantomimes. I meant it metaphorically. It turns out to be literally so. Anyone who has been exposed to economics will be familiar with the concept of opportunity cost. What is the opportunity cost of the Sh50 million that we have learned was blown on one evening’s song and dance in Kibera.

Some Sh2 million will get a state-of-the-art public toilet block complete with solar power and a biogas plant. Sh50 million is enough to capitalise a community-owned microfinance bank. But I’d imagine a (sober) digital government might be more inclined to ICT training facilities for the youth of Kibera. Make that 10. Sh5 million is enough to equip and run a decent one for a year.

Moving on to the big picture, the NYS budget has been scaled up from Sh13 billion to a whooping Sh25 billion. This is lunacy. There is no organisation, other than a military going to war, that can effectively double its budget absorption capacity from one year to the next. If there is one thing I am certain CS Waiguru knows very well, it is the corruption risk that such a budget escalation entails. Power corrupts.

But even if the money could be absorbed, is this how we should be spending it? What is the opportunity cost? Our primary school teacher-to-student ratio is approaching 1:60 — one of the highest in the world — against a recommended maximum of 1:40. Sh25 billion is enough to pay 100,000 primary school teachers for a year, which is more than we need to bring the ratio back to 1:40. We don’t have anywhere near enough health workers either.

Would these young people we are militarising not be more useful to society and themselves as teachers and health workers? Sh5 billion would be sufficient to set up a loan scheme to send an additional 100,000 young people to tertiary colleges instead of boot camp over the next five years. Incidentally, the Higher Education Loans Board budget request of Sh9 billion was cut to Sh4.9 billion. Reason? Lack of funds.

SQUANDERING BORROWED MONEY

A year ago, we borrowed $2.75 billion (Sh250 billion) by way of the debut Eurobond issue. It is gone, and we have nothing to show for it. We claimed it was for infrastructure projects. There is no sign of increase in infrastructure building on a $3 billion scale, other than those projects financed by other loans such as the standard gauge railway. Where did the money go? Well, if you get into the habit of splurging Sh50 million on impromptu gigs, on strategy at Sh8 million a bullet point and cornering the ndengu market at Sh25,000 a sack, you can burn any amount of cash. We are squandering borrowed money.

The southbound shilling is the subject of much fretting at the moment. I am at a loss whether the fretting and exhortations to the just landed CBK governor to stem the tide is a lacuna of economic knowledge or cognitive dissonance. This year, the Jubilee administration plans to run a record-breaking budget deficit of 9 per cent of the Gross Domestic Product (GDP). The current account (external deficit) is in the order of 10 per cent of GDP and rising. We are looking for trouble and we are certainly going to find it.

As for the scam itself, CS Waiguru’s defence is that no money was lost. It is diversionary, and it is not original. It was also the Kibaki administration’s first line of defence on Anglo Leasing. But the similarity ends there. Anglo Leasing was a fairly sophisticated scam that was not easy to unravel. This one is a typical Kanu-Jubilee trademark smash-and-grab. Piecing the whole thing together is not particularly difficult.

It all starts with a procurement frenzy from cronies without an approved budget that, from the look of things, was going on for the better part of the last financial year. This is of course a gross violation of financial regulations. As the financial year was coming to an end, the Devolution ministry asks for reallocation of money from other budget lines. The reallocation is approved but with a warning from the Treasury PS to the effect that unauthorised spending is “an offence of financial misconduct”.

The Treasury PS’s letter makes reference to pending bills. Pending bills is the practice of spending units bursting budget ceilings by sitting on invoices that they do not report to the Treasury. It is a big problem in public financial management, as it makes it impossible for the government to control public borrowing and the deficit, as the Treasury will have no idea how much public debt is sitting in unpaid invoices in the ministries.

The Integrated Financial Management Information Systems (IFMIS) is supposed to eliminate this by ensuring that all financial transactions, from ordering to payment, are done in the system.

It should be evident now why the Treasury PS’s letter would create panic in the Devolution ministry. Following the funding approval, there is another flurry of transaction activity to pay the pending bills. But somewhere along the line, the alarm bells go up and attempts are made to delete the transactions from the system. They do not succeed. In the meantime, the Central Bank has also picked up the trail of suspicious-looking payments.

The most suspicious of them all is the letter from CS Waiguru to the Directorate of Criminal Investigations to instigate theft of passwords, long after attempts to delete the transactions had failed. There is no likelihood that theft of the passwords would have resulted in unauthorised payments.

One would think that the theft of passwords is the purview of the people responsible for managing IFMIS in the Treasury, not the CS of a line ministry. The motive for this seems to be that they must have got wind that the thing was about to be blown wide open, as has come to pass.

POLITICAL MILITIA

For public accountability purposes, there are, in my view, only two questions for which we need answers. Who is CS Waiguru covering up for? There are two distinct possibilities, herself or people close to the President. The second one is why the President is protecting her. Therein lies the answer to the first question.

What is not in doubt is where the buck stops. It stops with the President. The whole NYS thing is his racket. He is going to have a hard time convincing those of us who find his autocratic pedigree and Kanu political morality a trifle unsettling that he does not have designs on a political militia. Parallels with the Interehamwe have already been drawn.

Following an attempted coup in 1958, “Papa Doc” Duvalier disbanded Haiti’s army and police and established in its place a paramilitary force, “Militia for National Security Volunteers”, that became known as the Tonton Macoute, which he deployed to rig the next election, and shortly thereafter, a referendum that declared him president for life. The Tonton Macoute were to terrorise Haitians throughout his misrule and that of his son “Baby Doc” Duvalier — a good 28 years.

Founded in the mid-20s with fewer than 5,000 members, the Hitlerjugend was 100,000-strong when Hitler came to power in 1933. Three years later, with a membership of five million, it was declared mandatory for “Aryan” teenagers. By the outbreak of WWII, all German teenagers belonged to it. The Hitlerjugend provided the Nazis with their most fanatical and fierce soldiers, including child soldiers. The near universal membership meant that virtually all Germans who were teenagers in the 20s and 30s have a Nazi past, including Pope Benedict XVI.

Food for thought. Some things never change.

David Ndii is managing director of Africa Economics [email protected]