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August 2004

Corruption returns to haunt NARC

The emergence of “new corruption” in the National Rainbow Coalition [NARC] government has led to the suspension by the European Union [EU] of aid to Kenya barely eight months after a group of donors resumed lending to the country.
Fred Oluoch

In an unprecedented move, the EU last month suspended the disbursement of US$587,500,000 in budget support, which had already been factored in this year’s budget.

The head of EU delegation to Kenya Mr Gary Quince made the announcement on 16 July, expressing dissatisfaction with the way the Anglo Leasing scandal was being handled. The scandal – in which a firm the government claims it does not know – was awarded passport tenders totaling US$96 million through single sourcing – is the worst to hit the government so far.

Mr Quince and the German ambassador to Kenya Mr Bernd Braun held a meeting with president Mwai Kibaki after which they announced that funding was postponed and could only resume after the government takes action on rising official graft.

The EU remains Kenya’s second biggest donor after the World Bank. Through the European Development Fund and the European Investment Bank, the EU provides 40 per cent of global financial assistance. In addition, EU is the most significant partner commercially.

An influential player in donor politics in Kenya, the EU aid generally finances 10 per cent of the development budget. It is feared that if the suspended funds do not come by September, Finance Minister David Mwiraria may be forced to borrow from the domestic market to cover for the US$600,500,000 budget deficit.

Fears abound that Kenya may soon be starved of the much needed aid, given that other diplomatic missions have also warned that they would withhold aid unless the government stepped up the war on corruption.

The diplomatic missions of USA, Britain, Canada, Germany, Japan, Norway, Sweden and Switzerland warned that so long as Kenya’s Treasury was being looted, they would not give any money. “Development partners cannot be expected to put their taxpayers’ funds at the service of Kenya if the country’s own Treasury and public resources are being tapped for private gain”, they warned in a statement.

The group called for the resignation and prosecution of those found to be involved in corruption. ”Those who appear to be implicated should be required to step aside in order to facilitate investigations”.

But it is the British High Commissioner to Kenya Sir Edward Clay who caused ripples with his stinging attack on the Kibaki administration. Clay tore into the government over corruption, which he claimed had cost the country US$192 million in just 18 months of Kibaki’s administration.

”We hoped corruption would not be crammed in our faces. But it has. Evidently, the practitioners now in government have the arrogance, greed and perhaps a desperate sense of panic to lead them to eat like gluttons. They may expect we shall not see, or notice, or forgive them a bit of gluttony because they profess to like Oxfam lunches. But they can hardly expect us not to care when their gluttony causes them to vomit all over our shoes”.

It was in November 2003, after a hiatus of more than a decade, that donors finally resumed lending to East Africa’s largest economy, which had been teetering on the brink of collapse following several years of official corruption and mismanagement by former president Daniel arap Moi’s regime.

Kenya remained a pariah among bilateral and multilateral donors but president Kibaki’s government, which came to power in December 2002, declared zero tolerance of corruption and finally convinced the Bretton Woods institutions and other development partners to loosen their purse strings.

But now, the credibility of the government, which was elected and won donor support on anti-corruption platform, has been seriously dented by reports of top-level corruption involving billions of shillings. Notably, the projects involving a company called Anglo Leasing and Finance have continued to be shrouded in mystery, especially over the failure by the government to name the local principals of the company.

It is also noteworthy that a number of ministers, who have been associated with corruption, still sit pretty in the cabinet, to the chagrin of donors. Speaking at a ceremony to mark US Independence Day last month, US ambassador to Kenya Mr William Bellamy said his government was unhappy with the way Kibaki was handling democracy and the war on corruption,

At issue, Bellamy said, was the way Kibaki handled his cabinet infighting, the recent reshuffle in which he appointed five opposition MPs to the cabinet, the battle against corruption and the stalemate in the constitution review. “The recent reshuffle was a major issue because it had dashed hopes for a true multi-party or coalition democracy”, added Bellamy.

Whereas the government embarked on serious anti-corruption measures, including the tracing of funds stashed away during the previous regime, critics see this move as selective. The official opposition Kenya African National Union [KANU] has termed the move to recover looted funds a witch- hunt targeted at its leaders.

Former cabinet minister in the KANU regime Mr William Ruto, who was recently arraigned in court over a land scandal, wonders why the government has not prosecuted or fired its corrupt ministers. “It appears to us that there is emerging once again the ugly head of corruption in the government, particularly in the procurement of goods and services”, said Mr David Musila, the Deputy speaker of the National Assembly.

But it is the Anglo Leasing scandal that has become the government’s biggest nightmare. KANU MP Mr Maoka Maore blew the whistle on a passports tendering project that has become the government’s biggest headache. In April, Maore tabled documents in parliament showing how the passports making equipment, which was to initially cost US$ 10 million was inflated to US$30,375,000 and the tender awarded to a French firm without competitive bidding.

Vice President Moody Awori, whose docket includes immigration unsuccessfully tried to convince members of parliament that the deal was clean. But the opposition put more pressure on the government, leading to the sacking of the then Treasury permanent Secretary Joseph Magari and his Home Affairs counterpart Sylvester Mwaliko.

But the opposition claims that the two permanent secretaries are just sacrificial lambs and the buck should stop with Finance minister David Mwiraria and his Internal Security counterpart Chris Murungaru. The two ministers have refused to resign, opting to blame their permanent secretaries for the scam. Despite glaring reports implicating Mwiraria and Murungaru, President Kibaki insists that he cannot sack the concerned ministers unless he is presented with evidence.


Yet, NARC government started on a very good note. In a major departure from the last regime, the new government moved fast to publish the Anti-Corruption and Economic Crimes Bill, as well as the Public Officers Ethics Bill, both of which have been enacted. In October, 2003, president Kibaki led his cabinet colleagues in declaring their wealth, a strong indication of the government’s commitment to fight corruption.

The Kenya Anti-corruption Act provides for the establishment of an anti-corruption commission to investigate corruption cases, while the Public Officers Ethics Act requires all senior public servants, including the president, to declare their wealth and that of their spouses. However, the fight against graft has been hampered by the delay in appointing the Director of the Kenya Anti- corruption Commission [KACC].

Though Justice Aaron Ringera was eventually appointed to the plum post, it was not without controversy as the opposition KANU and the Liberal Democratic party [LDP] faction of NARC teamed up to block his appointment in parliament. LDP was particularly opposed to his appointment on the grounds that he cleared key suspects in the Goldenberg scandal when he was serving as solicitor general in the Attorney general’s chambers.

That the Kibaki government was determined to fight graft was also exemplified by the establishment of a commission of inquiry into the Goldenberg scandal, the country’s biggest financial scam, in which the government paid out a whopping US$250 million as export compensation for non-existent gold and diamonds in early 1990s.

The money was paid out to Goldenberg International, a firm jointly owned by Mr Kamlesh Pattni – a Kenyan of Asian descent and Mr James Kanyotu, former director of the National Security Intelligence, both of whom had powerful connections with the previous regime. Pattni, who is currently testifying at the commission has spilled the beans which may tear the NARC government down the middle.

Already, he has mentioned former president Moi as his accomplice as well as former Vice president and minister for finance, George Saitoti, who is now the education minister, as well as other prominent personalities in the current government.

In yet another commitment in the fight against graft, Kenya was the first country to sign the UN convention against corruption adopted in the Mexican town of Merida in December 2003. The convention is designed to check the flow of illicit funds across international borders. Kenya made history by signing and ratifying the convention.

“For us in Kenya, the fight against corruption is a matter of life and death. It cannot wait for tomorrow. We believe we are doing the right thing by ratifying this convention today”, said Justice and Constitutional Affairs minister Kiraitu Murungi. He added: “It is not by accident that Kenya has become the first nation to sign and ratify the convention. The country has been one of the most corrupt nations on earth”.

But the zero tolerance of corruption has become a hackneyed phrase and the fight against corruption is now facing a credibility deficit, and the president’s reputation is at stake. There is a question as to whether or not he retains the impeccable credentials he had managed to earn in 2003. In that year, a purge of the judiciary, for a long time dubbed the citadel of corruption, saw 23 judges and 82 magistrates shown the door.

For a man who played more important roles in modeling Kenya’s economy, Kibaki’s star seems to be waning. The fact that he is still at the steering wheel 40 years after initiating so many economic reforms is perhaps one of the wonders of Kenya’s economic scene.

The irony is that he participated in the country’s first post-colonial economic policy in 1963. And for the first decade after independence, the economy registered robust growth. But four decades later, he is the chief executive of a country in deep economic troubles.

Regrettably, the country now finds itself in a situation reminiscent of the 1990s when donors withheld aid to Kenya. Kenya’s first collision with donors occurred in November 1991 when the Paris Club suspended most forms of external aid to Kenya following the government’s failure to implement major political and economic reforms.

The suspension was however lifted in mid 1993 after the then president Moi yielded to pressure from the international community and re-introduced multi-party politics and introduced sweeping economic reforms ranging from the removal of price controls, liberalisation of domestic and international trade as well as restructuring of public enterprises.

But the relations were to be strained again in 1997 following the government’s failure to tackle corruption. This led to the suspension of vital donor aid, which was briefly lifted in July 2000, only to be reinstated in December the same year following the government’s disbandment of the Kenya Anti-corruption Authority (KACA).

Consequently, GDP growth rate which was previously standing at 2 per cent has since been stagnating at around 1 per cent, while neighbouring Uganda and Tanzania – relatively smaller economies - on the other hand have been recording growth rates of between 6 and 7 per cent.

It will be interesting to see which decision Kibaki makes – whether to sack his corrupt ministers or retain them and lose donor aid.

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