Mr Moneybags : Big Money Games That Run Kenya's Politics.
chifu
By Kamau Ngotho
After a brief tactical retreat in the wake of the expose on Anglo-
Leasing scandal mid last year, key figures in the Narc administration
are back in the money games partly to enhance their business portfolio
as well as to create a war chest ready for 2007 elections.
The renewed boardroom shifts and intrigues have given rise to rival
camps right inside State House competing for new business turfs or
fighting to preserve existing ones.
But a most interesting twist to it is the new-found working
relationship between top money men of the Moi era and key members of
the Kibaki administration.
A most talked about illustration of the new business friendship is the
deal that saw leading electrical instruments manufacturer East African
Cables change hands from business magnate Naushad Merali to associates
of President Kibaki.
Equally interesting was the sale of the life-insurance portfolio of
Alico Insurance Company to Heritage AII Insurance Company and the
change of ownership of shares in the former mobile phone firm KenCell
Communications Ltd, now Celtel Ltd.
In the first deal i n October last year, Merali, a business associate
of retired President Moi, sold East African Cables to a little known
company (then), Trans-Century Ltd. The board of the new company is
chaired by a Mr Zephania Maina.
A check at the registrar of companies showed that the new company is a
subsidiary of Affiliated Business Contacts (ABCON), owned by Mr Eddy
Njoroge, the managing director of the Kenya Electricity Generating
Company (KenGen). Mr Njoroge is a long time associate of President
Kibaki and key financier of Kibaki presidential campaigns since the
1992 election.
The Sh300 million sale of the cable company could raise questions of
conflict of interest as East African Cables is the leading
manufacturer of electric cables, whose biggest consumers are KenGen
and the sister company, Kenya Power and Lighting.
Quick on the heels of the East African Cables deal was another where
Alico Insurance Company sold its life-insurance portfolio worth Sh6
billion to Heritage AII Insurance.
It is also around the same time when Merali purchased Vivendi Telecom
International shares in KenCell at $230 million (Shs 16 Billion) and
sold them to Celtel the very same day for $250 (Shs 17.5 Billion)
million, making a cool profit of $20 million (Shs 1.5 Billion). It was
followed by an announcement that Celtel would extend its reach in a
roll-out project to be financed by a local consortium of financers,
with the CFC Bank at the forefront.
Absolutely nothing fishy in all that. However, it was not lost on
pundits in business circles that the lists of shareholders and
directors of Alico, Heritage AII, Celtel, and CFC Bank read almost the
same.
Two directors of Alico, P.K. Jani and H. Da Gama Rose, are also
directors of Heritage AII and CFC Bank. Others in CFC Bank and
Heritage AII, but not in Alico, are Mr Charles Njonjo and Mr J.C.
Kulei.
In Celtel, the principal shareholder is Sameer Investments where
Naushad Merali and H. Da Gama Rose are directors. Jani, Kulei and Da
Gama Rose are widely believed to represent business interests of
retired President Moi.
Sources contend that at the end of the day, money was quite probably
changing hands from the left to the right.
Local interests acquired the East African Cables from a London-based
electric cable manufacturer, Delta Engineering Company, in October
2000. The new owner was a hurriedly constituted subsidiary of Sameer
Investments Group called Yana Trading Company. At the time of the
purchase, East African Cables assets were valued at Sh274 million.
Yana Trading bought the company at a grossly undervalued price of
Sh110 million.
Business and political associations in Kenya have a long history. They
began in early 1970s when key members of the Kenyatta government
registered a private company by the name African Liason and Consulting
Services.
The new company's shareholding read like a roll of who was who in
Kenya at the time. Among the top names in the privately-owned company
were then Vice-President Moi and Finance minister Mwai Kibaki. Moi
appeared in the shareholder register in his own name while Kibaki had
his shares held in trust by an old friend, Mr Nick Mugwandia Muriuki.
Muriuki and President Kibaki had known each other since the early
1960s when they worked at the BP/Shell company on leaving college. So
close were they that they double-dated two girls at Kambui Teachers
College in Kiambu, and who ended up as their respective spouses.
Kibaki's date was Miss Lucy Muthoni whom he married in 1960.
The idea to form the company was conceived at the Cabinet level in
1970 at the height of the government's Africanisation project. It was
to serve as a local competitor for government supply tenders and
contracts. Before this, all contracts and tenders went to European and
Asian companies.
It is significant that interviews for the first chief executive of
Africa Liason were conducted by a committee of the Cabinet, chaired by
Moi. The company's first chief executive was Mr Julius Gecau.
He was poached from BAT where he was the personnel manager. He later
became chief executive of the Kenya Power and Lighting Company.
After that there was no looking back for Alico as it massively
invested through purchase of shares in banks, insurance companies, car
dealerships, real estate, manufacturing and farming.
Other main shareholders in African Liason Company were then Attorney-
General Charles Njonjo, head of civil service Geoffrey Kareithi and
GSU commandant Ben Gethi. Others were the PS in charge of Defence, Mr
Jeremiah Kiereini, and Central Bank Governor Duncan Ndegwa.
In the footsteps of African Liason Company came Heri Limited, a
publicly-owned company but whose shareholding read like a duplicate of
African Liason's. While Kibaki was listed by name in Heri's
shareholding, this time Moi preferred to remain in the shadows with
his shares held in trust by a Mr Richard Khemoli.
While the principal mover in the formation of the African Liason
Company was the Cabinet itself, for Heri Limited the idea came from
the family of car dealers D.T. Dobie. It is believed the Dobie family
felt the need to form the company and invite into it the big names of
the day as a way to ensure they got a piece of the cake from lucrative
government contracts.
Heri's breakthrough came when it was awarded a contract to supply the
Kenya Armed forces with Mercedes lorries in 1973.
It is significant that next to the DT Dobie family, then PS in the
Ministry of Defence, Mr Jeremiah Kiereini, now the chairman, Kenya
Breweries, had the largest number of shareholding in Heri.
If Africa Liason and Heri acted as the business cord that tied
together different political operatives of the day, Naushad Merali
appears to be the latter day cord that runs through the Kenyatta, Moi
and now Kibaki business connections.
Merali is with the Kenyatta family at the Commercial Bank of Africa
where the later has majority shareholding, and at the First-American
Bank.
Merali is also the founder and main shareholder in the Equatorial
Commercial Bank. Confidential sources at the Nairobi Stock Exchange
have confirmed to The Standard that two senior Cabinet ministers in
the Kibaki government bought substantive share-holding in Equatorial
Bank mid last year.
Reports that could not be independently confirmed are that late last
year, Mr Merali sold to the Kibaki family a 500-hectare piece of land
on the Nanyuki-Timau road. The land is next to Lewa ranch.
A group associated with Cabinet ministers Christopher Murungaru and
Kiraitu Murungi is also reported to has acquired significant interest
in the 45,000 Lewa Conservancy from Mr Ian Craig. The later has for
long fought behind curtains to have influence over the Kenya Wildlife
Services.
A signal that Merali, a formidable business feature of the Moi era,
was not in the bad books of the big guns in Narc came in September
last year when he was pictured at State House, Nairobi, handing over a
Sh500,000 cheque to President Kibaki for the National Famine Relief
Fund.
It did not escape observers' notice that whereas many donors to the
fund - including those with bigger cheques than Merali's - had been
trooping to the Harambe House office of the Special Programmes
minister Njenga Karume to hand in their donations, Merali went to
State House.
It was even more remarkable, given the fact that Kibaki, unlike his
predecessor, has no time for cheque receiving, that Merali be the very
first to be so honoured.
Merali's door to the corridors of power opened in 1983. At the time he
was working as an accountant with Ryce Motors, when he registered a
company by the name Sameer Investments, with himself as the managing
director.
The new company hit town with a storm when it immediately acquired
majority shareholding in the then Firestone East Africa (1969) Ltd and
re-named it Firestone Kenya Ltd.
Besides Merali, the other two directors of Firestone were listed as
James Kanyotu, then director of Security Intelligence and Mr F.J.
Addley, then working for the law firm, Stratton and Kaplan. Lawyer
Addley was retired President Moi's nominee in many companies.
The acquisition was not without controversy. It began with an April
1983 visit to Kenya by then vice-president of the US-based Firestone
Tyre and Rubber company, Mr A.G. Kraemer. At the time the US based
firm owned 51 per cent equity in Firestone East Africa. The rest of
the shares (49 per cent) were owned by the Industrial Commercial
Development Corporation (ICDC).
While in Kenya, Kraemer made an announcement that his firm intended to
sell its entire stake in Firestone East Africa to indigenous tyre
dealers. Subsequently, then Firestone East Africa managing director
Steve Fabian arranged for a consortium of five leading indigenous tyre
dealers to purchase the shares from the US company.
The consortium included Mutaratara tyres, Buckley Tyres, Kirinyaga
African Rubber, Kenya Tyre Enterprises and New Tyre Enterprises.
Upon negotiating the sale agreement with the American industrialist,
the local consortium applied for foreign exchange from the Central
Bank of Kenya in those days of controlled money regime.
CBK rejected the forex application without giving any reasons as was
required by law. Recalling the incident, the managing director of one
of the bidding companies, Buckley tyres, Mr Samuel Magua says: "There
was a strong reason to believe the CBK was ordered not to allocate us
forex to buy Firestone. Our worst fears were confirmed when we learnt
that the visiting American CEO had been to State House with Mr James
Kanyotu, who ended up as a director in the new Firestone company."
The consortium of five was just about to head for the courts when the
American firm announced it was selling its shares to Sameer, who
already had the forex and a higher offer.
Sameer's acquisition of the 49 per cent shareholding by ICDC was to
come in 1995 and in similar controversial circumstances. According to
the 1995 report of the Auditor-General, Corporations, the now defunct
Parastatal Reform Committee had demanded that ICDC offload its shares
at the Nairobi Stock Exchange at Sh100 million, a fifth of their true
value.
Prior to the sale, Sameer Investments had placed pre-emptive rights on
the ICDC shares to lock out competition. It acquired them and three
years down the line, Sameer re-floated the same shares at the Nairobi
Stock Exchange for Sh1.5 billion, effectively making a 1,500 per cent
profit.
That is the genius of Naushad Merali, who is described in the company
website as the "Seer behind Sameer".
Perhaps that would partly explain why none of Kenya's First families,
past and present, wants to keep him far away from their business
stables.
The groups fighting for control of the money bags in Kibaki's State
House roughly fall into two groups: The Young Turks - an eager beaver
generation spoiling for riches - and the Moustache Petes, the veterans
of the old money group.
The new money group comprises youthful sons of privilege also known as
the St Mary's Group as most of them are alumni of Nairobi's Saint
Mary's School. The most high profile member of the group is long-
serving private secretary to Kibaki, Mr Alfred Getonga.
He is the son of a former Nairobi Town clerk, the late Simeon Getonga.
Others in the group, but operating in the background, are two sons of
the President, Jimmy and David, and their sister Judy Wanjiku.
Away from State House, the foot soldiers of the new money group are Mr
John Macharia, the managing director of Triple-A-Capital and son of
businessman and media tycoon S.K. Macharia of Citizen Media Group, the
chief executive of the City Hoppa bus company, Mr George Thuo, and Mr
Francis Michuki, a director of the Windsor Golf and Country Club and
son of Transport minister John Michuki.
Acting as the shadowy point-men to the group are businessman Jimmy
Wanjigi, a son of former Cabinet minister Maina Wanjigi, and a former
top executive at Commercial Bank of Africa, Mr Victor Gitobu.
Also believed to be allied to the Young Turks is National Security
minister, Dr Chris Murungaru, and his PS, Mr David Mwangi. Transport
minister John Michuki has also been playing ball from their side as
can be deduced from the fact that he had given duty exemption to a
company associated with his son in the cranes project which was to be
financed through Triple-A-Capital.
On the other hand, the old money Moustache Petes consist of old
friends of the President, some going back to their days at Makerere in
the late 1950s. Others in this category are golfing buddies from
Muthaiga and all-time royals from the President's Othaya home.
Here we have University of Narobi chancellor Joe Wanjui, businessmen
Eddy Njoroge, Nat Kang'ethe, Peter Kanyago, John Murenga, FTJ Nyamu,
Duncan Ndegwa and Robert Gacheche, among others.
Working harmoniously with this group are the old money chiefs of the
Moi era, including, Merali, the newly appointed PS in the office of
the President, Mr Stanley Murage, businessmen Karanja Kabage and Mr
Manga Mugwe.
Each man in the later group has a strong Moi-link. Murage is former PS
for Transport in the Moi government. He is also a principal
shareholder in the Kenya Bus Company alongside Mr Samuel Gichuru, Mr
Kabage and a key figure in Moi's State House, Mr Hoseah Kiplagat.
Kabage is a player in his own right, having been chairman of the
strategic Communication Commission of Kenya during the Moi
administration. He was appointed to the position at the time when the
commission had to draw up rules as well as referee entry into the
immensely lucrative telecommunication sector.
It is he who supervised the controversial licensing of a second mobile
phone operator in 1999 and in which various factions in Moi's State
House were pitted against one another. Unable to decide which faction
to grant the licence, Kabage eventually settled on a company
associated with President Moi himself, Sameer Investments.
Mr Manga Mugwe was another significant key player of the Moi era. He
is the chief executive of the steel manufacturing firm, Morris & Co.
An interesting name in the firm's share-holding is lawyer H. Da Gama
Rose.
Mugwe had joined the company in the 1970s as a nominee of Ms Margaret
Kenyattta, then Nairobi mayor. Ms Kenyatta later sold her stake to
Mugwe. Throughout last year, Mugwe was in the news as the leader of
the local consortium bidding for the third mobile telephone operator.
Mugwe's bid through the Econet Wireless company hit a snag when the
licence granted was withdrawn three months after it was issued.
It is believed that Mugwe, whose firm Morris & Co. has had trouble
servicing its loans with both Kenya Commercial bank and the National
Bank of Kenya, could have been acting on behalf of more financially
stable operatives in both the Moi and Kibaki governments.
It is significant that Mugwe had incorporated the government-
associated Kenya Union of Co-operatives in his bid, which is the same
group Mr Hoseah Kiplagat intended to use to bid for the second mobile
operator six years ago.
A Cabinet minister and an assistant minister are believed to have been
among the influential names behind Mugwe's intended venture into the
cellphone industry.
The controversy clouding the licensing of the City Hoppa bus company
to compete with the Kenya Bus Services in Nairobi's Central Business
District is the best example of the bitter rivalry between the old and
new money groups.
On the side of City Hoppa company is Alfred Getonga, a close friend of
Thuo, the bus company's managing director. Thuo and Getonga certainly
see each other on many other fronts.
On the side of Kenya Bus company is of course, Stanley Murage, a major
share-holder in the 70-year-old transporter.
The old money group has always held the new entrants with some measure
of contempt. It is perhaps not without some history. For instance, in
May 1982, a company associated with member of the old money group,
Peter Kanyago, Unichem Ltd, took the extraordinary step of putting a
newspaper disclaimer on its former employee, one Christopher Ndarathi
Murungaru, on a disagreement over a small matter of Sh30,000.
The younger wheeler-dealers have also not helped their cause, having
been caught in a series of scandals, some which might result in
prosecution.
Their first major setback was when their key point man, businessman
Jimmy Wanjigi was made to record a lengthy statement with the Kenya
anti-Corruption Commission on the matter of the Anglo-Leasing Scandal.
The second embarrassment came when information leaked that Transport
and Communications minister Michuki had given an unqualified duty
exemption to a company associated with his son, Francis, to import
telecommunication equipment. Michuki was forced to make a hasty
retreat.
Months later, President Kibaki took away the communication docket from
the larger ministry of Transport and Communication.
At about the same time, the Triple-A-Capital of John Macharia was
caught up in a murky Sh70 million insurance deal with the Nairobi City
Council. The deal was cancelled when city councillors and the media
screamed foul.
Still in the same haste, the Triple-A-capital, which, in the words of
it's chief executive Macharia, was angling itself as "Kenya's top
finance-arranger" got into two more equally disastrous adventures.
The first was an arrangement to pay off the Kenya Pipeline Company's
Sh1.6 billion debt and recover the same money from the parastatal at
an exorbitant profit. The deal came a cropper when Ntonyiri MP Maoka
Maore blew the whistle on the scheme he called "modern day
shylocking." Worse, it cost the KPC chief executive, Dr Shem Ochuodho,
his job, a matter that has since been turned to the courts.
Without batting an eyelid, Triple-A-Capital hopped into yet into
another mega deal. This time it bid to "arrange" financing of a Sh5
billion project to upgrade Mombasa port. By now the company had
overreached itself and the proposal was rejected outright.
But much as people around President Kibaki may have a healthy appetite
for the quick buck, many invariably agree that Kibaki himself has
never been greedy, neither has he ever shown an inclination to use his
position to amass property even though he has always been in a
position to do so having been minister for Commerce, Finance, Vice
President and now President.
That said, however, some fault Mwai Kibaki for sometimes turning a
blind eye when his friends are caught with their little hands in the
cookie jar.
A case in point was in 1980 when he was Vice President and minister
for Finance. At the time, his friend of many years, Mr. F.T.J. Nyamu
was the managing director, Kenya Re-insurance company, a parastatal
under the ministry of Finance.
In April that year, the government directed the Kenya Railways to put
up decent houses for its workers living in the shanties of Muthurwa
and Landi-Mawe railway quarters.
Subsequently, the Kenya Railways set aside the land next to the
Railway Training School in Nairobi South-B for the project. But hardly
before the housing project could take off, a dummy company, Tass
Properties, was hurriedly formed.
The Kenya Railways, then under another of Kibaki's buddies, Mr
Davidson Ngini, sold the land set aside for the railway estate to a
dummy company at only Sh690, 000. Two weeks later, the dummy company
sold the same land to Nyamu's Kenya Re-insurance at Sh14 million.
Instead of the Kenya Railways building low-cost houses for its workers
as the government had directed, the Kenya Re-insurance company
constructed what is today Plainsview and Golden-gate estates and
purported to sell the houses to railway workers living at Muthurwa and
Landi-mawe.
Of course it was a crazy joke as none of them could afford to buy the
newly built houses. They ended up in the hands of anybody who could
afford to pay.
The ministry of Finance, headed by Mwai Kibaki, never bothered to find
out who made Sh13 million - buying railway land for Sh690,000 and
selling it to another parastatal for Sh14 million in just a fortnight.
Nyamu and Kibaki own Finance House, a prestigious address in the
central business district. The family company that manages Kibaki's
businesses, Lucia Limited, is housed at Finance House.
Another of Kibaki's friends, businessman, Nat Kangethe of Saatchi &
Saatchi Associates, was the finance director at the Kenya Meat
Commission when it collapsed. (this portion was later disputed by
Kangethe who said KMC collapsed after he left)
During that time, KMC entered into a queer contract with a dummy
company called Halal Ltd to construct an abbatoir for the company at
Ngong. According to the 1978 Auditor-General's report, no abbatoir was
constructed even after the government poured Sh50 million into the
project.
The dummy company and its sole director, one Mohamed Yusuf have never
been heard of ever since.
Though Kibaki is not in the same wealth league as his two
predecessors, he too has had an interesting motley of business
associates: He is with Mr Nicholas Biwott in the Deacons chain of
clothes shops now re-named Woolsworth. (this part was disputed by
Kibaki's handlers who only admitted that he had a shop at Biwott's
Yaya centre)
Kibaki is with Dr Njoroge Mungai in a real estate firm that owns,
among others, the Union Towers Building on Moi Avenue, Paramount Plaza
and the Marple Courts in Milimani.
A curious shareholder in the real estate company is Mr. P. Gidmooal
who in some instances is a nominee for retired President Moi.
Kibaki is also with Mr Chris Kirubi in the International Life House
and Mr James Kanyotu in Dolphin Ltd, a real estate company with prime
investments at the coast.
The directors are listed at Mr John Murenga and Ms. J W Kibaki.
In Kenyan politics and big business, you get the strangest of
bedfellows