Brace for war as Kinyua wades into ‘Black Hole’ of corruption

Head of Public Service Joseph Kinyua. He ordered procurement officers to go on forced leave. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • Mr Kinyua has issued a circular stopping State corporations and government departments from signing memorandums of understanding as well as commercial agreements without Cabinet approval.

  • Mr Kinyua should get all ministries and State corporations to publish all the MoUs and commercial contracts they have secretly signed with contractors.

  • “During 2017, various ministries such as the Ministry of Energy and Kenya Power entered into a series of loans with Exim Bank China amounting to a total of $1.2 billion and 3.4 billion Chinese Yuan.”

Head of Public Service Joseph Kinyua has made an audacious attempt at tackling what I describe as corruption.

According to the front-page splash of the Business Daily on Monday, Mr Kinyua has issued a circular stopping State corporations and government departments from signing memorandums of understanding as well as commercial agreements without Cabinet approval.

On the face of it, one could assume that Mr Kinyua was merely addressing a procedural issue. But the truth of the matter is, he has waded into the space where big money is made — and he must expect stiff political resistance.

Yet Mr Kinyua has put the spotlight on what has emerged as one of the blackest ‘Black Holes’ of corruption exploited by the elite to make big bucks.

Indeed, the secret MoUs and commercial contracts are the single most important contributors to the accumulation of expensive public commercial debts.

And the masters of the game are Chinese contractors.

ARRANGE FINANCING

Today, the typical Chinese contractor is a wily fellow who goes about town carrying an English name — Charlie, Lee, Tonny, Lily, Sandra, Johnny.... Accompanied by a local fixer — most likely a politically well-connected operative with friends in high places — the Chinese will approach a Cabinet secretary or a parastatal head with a proposal to implement a large infrastructure project, complete with the promise to arrange financing for it.

At the initial stage, an MoU is hurriedly signed with the CS. That is followed by the signing of a commercial agreement by ministry or parastatal. Finally, the National Treasury will be invited to sign a financing agreement with a Chinese bank, which will have been brought into the picture by the foreign contractor.

That way, a new expensive commercial loan will have been secretly introduced into our national debt register.

Today’s nouveau riche prefers this type of deal for several reasons. First, it allows one to sign opaque commercial contracts and MoUs by circumventing oversight institutions such as Parliament, Controller of Budget and the Auditor-General. That way, one can conspire with their foreign cronies to push a project into the government’s spending programme without having to wait for appropriations from Parliament.

KICKBACKS

Secondly, since the deals can be procured and concluded without subjecting the project to international competitive bidding, one can pad it with as much backhanders and kickbacks as they choose.

Does it surprise you that, in the majority of cases contracts of this nature will have provisions for huge advance payments even before a spade has been lifted?

The third reason why today’s oligarch loves such a deal is that debt servicing is a first charge on the Consolidated Fund and, therefore, debts have to be paid before appropriations. That means repayment of the money borrowed from China is almost guaranteed.

The big problem is, we don’t get to know about such deals until details of the finance agreement are disclosed by the Treasury in the external debt register.

The Chinese have become too rampant. If you think I’m exaggerating, take a look at what the government disclosed in the prospectus that it put out for the recent Eurobond, on page 100:

“During 2017, various ministries such as the Ministry of Energy and Kenya Power entered into a series of loans with Exim Bank China amounting to a total of $1.2 billion and 3.4 billion Chinese Yuan.”

This means that, in just one year, ministries signed shady commercial contracts worth billions of dollars.

COMMERCIAL CONTRACTS

Mr Kinyua should not stop at just issuing guidelines and rules to ministers. He should get all ministries and State corporations to publish all the MoUs and commercial contracts they have secretly signed with contractors.

Yet stopping these deals will not be easy for Mr Kinyua. This is the space where one of the most viciously fought political struggles is happening — namely, the struggle for opportunity to broker projects negotiated through MoUs and commercial contracts with Chinese contractors.

Away from the limelight, segments of the political elite are at each other’s throat. And being a broker or political godfather of these deals can be extremely lucrative.

As I have argued in this column before, I see Chinese contractors becoming a big political force in this country. Soon, we’ll have five large Chinese contractors sit at a corner in a Nairobi restaurant and decide whom they will back for president.