Cyrus Jirongo: The broke billionaire - Daily Nation

Why Jirongo is broke despite his multibillion-shilling properties

Sunday April 8 2018

bankruptcy

Former Lugari MP Cyrus Jirongo. The flamboyant politician was declared bankrupt because of a debt of Sh700 million he owed a long-time friend-turned-foe, Sammy Boit Kogo, in October 2017. PHOTO | FILE | NATION MEDIA GROUP  

By KIPCHUMBA SOME
More by this Author

As Kenyans voted and waited for results in the country’s longest elections last year, one of the candidates on the ballot, Mr Cyrus Jirongo, was in the middle of a mouth-watering business deal that could change his life forever.

The deal, a multi-billion-shillings real estate development transaction that is now surrounded by uncertainty, exposes the complexities of Mr Jirongo’s financial dealings that have haunted him since the 1990s after his involvement with the shadowy YK’92 lobby that bolstered President Daniel arap Moi’s campaigns, largely through siphoning public funds.

Two weeks to the October 26, 2017 repeat presidential poll that had been ordered by the Supreme Court, the flamboyant former Lugari Member of Parliament had been declared bankrupt because of a debt of Sh700 million he owed a long-time friend-turned-foe, Mr Sammy Boit Kogo.

UNITED ARAB EMIRATES

Mr Jirongo appealed the bankruptcy declaration and was allowed to contest the election as a United Democratic Party candidate. However, he performed dismally, coming last with a paltry 3,832 votes.

His uninspiring performance in the polls could be attributed to two main factors: lack of money with which to mount a serious campaign and the fact that his energies were firmly pre-occupied with making big cash, in the billions.

The lucrative deal, said to have taken eight months already, involves a group of deep-pocketed investors from the United Arab Emirates (UAE) who want to develop a megacity on Mr Jirongo’s 1,000-acre piece of land in Ruai in the outskirts of Nairobi. 

The proposed Ruai Park Estate, comprising 10,900 housing units which will be built in three phases, will stretch from the Eastern Bypass all the way to the Nairobi River towards Kilimambogo hills.

Neighbouring him on the other side of the river is the Kenyatta family which is putting up a dream city called Northlands on their 12,000-acre land at an estimated cost of Sh500 billion.

The Sh15 billion Jirongo project is the kind that has transformed UAE from a quiet backwater desert a few decades ago to one of the world’s most important economic centres on the back of massive gas and oil resources.

FORBES MAGAZINE

Now, barring obstacles, such a gleaming metropolis is about to be raised not far from the Nairobi sewerage treatment plant in Ruai, courtesy of Mr Jirongo and Sheikh Rakadh Group, one of the biggest private companies in UAE.

Its founder, Sheikh Rakadh Bin Salem Bin Hamed Bin Rakadh, is a member of the UAE royal family and one of the richest men in the country.  In 1995 he had a stint as the president of the Organisation of Petroleum Exporting Countries (OPEC). He was the head of the Ministry of Petroleum and Mineral Resources in 1996.

With a net worth estimated to be in excess of $8 billion, according to Forbes magazine, the sheikh, who is believed to be in his mid-70s, has been looking for business ventures abroad, particularly in Africa, which is widely considered the hottest investment destination today.

During the Transform Africa Summit held in Kigali in May 2017, the group announced plans to invest $50 million (equivalent of Sh5 billion) in the Rwanda Smart City Master Plan. 

FEASIBILITY STUDIES 

Mr Jirongo has long been looking for such a partner. “I would be stupid to throw away such a deal,” Mr Jirongo told the Sunday Nation yesterday in a mobile phone interview. 

If the deal goes through, Mr Jirongo’s many financial troubles will have been solved with the stroke of a pen. As it is, the former Cabinet minister is not putting any cash into the deal — for he has little of it nowadays — but his equity in the project is his land which is valued at Sh4 billion.

This will give him a 50 per cent stake in the project which is expected to fetch anything between Sh40-Sh50 billion once the houses are sold. A one bedroom house is expected to sell for Sh3 million, said Mr Jirongo

The Emirati investors have already paid for the feasibility studies, soil tests, architectural designs and all the other relevant fees — totaling to more than Sh200 million.

According to the masterplan, which was drawn in September last year  by the London-based architectural firm, Atkins, the first and second phases of the project will comprise a total of 8,068 units of which 3,800 will be two-bedroom, 1,900 one-bedroom and three bedrooms of a similar number.

POSTBANK CREDIT

Phase three of the project will comprise 2,832 units in total of which 1,416 will be two-bedroom, 708 will be one-bedroom and three bedrooms of a similar number.

The houses will be a mixture of apartments, villas and townhouses. The estate will have sections for urban agriculture, two primary schools, a solar farm, and a retail mall.

The first three phases of the project will occupy 677 acres, leaving out 274 acres on which Mr Jirongo and his Arab investors hope to put up another 7,000 units, bringing the total number of houses to 18,000.

However, when time to put ink to paper came, Mr Jirongo informed his would-be business partners of a small yet crucial hitch which he had withheld from them all along: He had no title deed to the property!

In fact, the document has been held by the Kenya Deposit Insurance Corporation (previously Deposit Protection Fund Board) of the Central Bank of Kenya since 1993 over a Sh1.1 billion loan Mr Jirongo had taken from Postbank Credit Limited (in liquidation).

In 1993, Mr Jirongo’s Offshore Trading Company charged the land as part security to help Sololo Outlets, another firm owned by the businessman, to acquire Sh1 billion loan.

TRANSACTION

The debt that has since climbed to Sh20 billion, primarily as a result of the high interest rates that prevailed in the 1990s and which have compounded over the years. Mr Jirongo is reported to have told the perturbed investors to fork out the extra money to redeem the title deed from CBK. “The Arabs were livid,” said a source familiar with the deal but who requested not to be named so as not to be seen discussing a longtime friend with the media.

It’s also not known whether the former MP had told his guests that a group of squatters want the High Court to nullify his title deed and declare them the valid owners of the massive tract of land.

Or the fact that a company calling itself Emris Investments is laying claim to the same land over Sh50 million that it advanced Mr Jirongo in another botched land deal.

Mr Karpal Anwar, the CEO of Ethraa International, the investing arm of Sheikh Rakadh Group, declined to comment on the Ruai deal but instead referred us to their Kenyan representative, Gikera & Vadgama Advocates.

Mr Punit Vadgama of the law firm seemed to suggest that the deal has not collapsed entirely. “There were conditions precedent to be met by Mr Jirongo and we are still waiting,” he said, without elaborating what those conditions are. “In any transaction there are conditions.” 

CENTRAL BANK

Mr Jirongo acknowledged that there have been delays on his part in concluding the deal, primarily because of his problems with the CBK debt. He claims he has so far paid Sh1.3 billion of the 1.6 billion he owes the bank.

“What I owe CBK is Sh283 million only, but they never tell you people this,” he said. “But I have told them I will pay the remainder within two weeks and allow construction to start.”

Mr Wallace Kantai, CBK’s head of communication, said he could not give us the true position about Mr Jirongo’s loan at such a short notice when we contacted him yesterday afternoon.

However, an independent source at CBK with knowledge of the matter but who did not wish to be named since he is not authorised to talk to the media, said the amount of outstanding debt as claimed by Mr Jirongo is correct.

Another confidential source said that, frustrated with the Jirongo deal, the Arabs had briefly approached a prominent Jubilee politician who owns an expansive 1,600 acres next to Mr Jirongo’s.

“They (the Arabs) strongly felt that the plans for the city could be perfectly transferred to the land adjacent to Mr Jirongo’s without necessitating a lot of design revisions,” said our source.

'WITCH HUNT'

The influential politician agreed to hive off 1,000 acres of his land for the project, but disagreed with the investors on the pricing of the land. Whereas Mr Jirongo had valued his land at Sh4 billion, the moneyed politician valued his at Sh7 billion, said our source.

This would have brought his equity in the project to Sh7 billion, almost half the cost of the project, as opposed to Mr Jirongo’s Sh4 billion.

Yesterday, Mr Jirongo said he has a binding agreement with the Emirati tycoons and therefore the possibility of them reaching out to other local businessmen in regard to the same project does not arise. 

He dismissed as “witch hunt” by some of his political and business rivals’ claims that a senator from a prominent family had offered to help him with the cash on condition that he gets 50 per cent of Mr Jirongo’s share.

“I have sold a lot of my properties to make this deal a reality. Those who are making such claims are simply trying to scuttle it, but they can’t do that since everything has been done by the book,” he said.