Apparently Odinga is an 'adept populist' ...
Caught in the act
Jan 26th 2006
From The Economist print edition
A courageous investigator uncovers more corruption in Kenya. But will the government, or the country's president, be shamed into taking action?
IT BEGAN in early 2003 with a second-hand car. Though battered by Nairobi's bad roads, its owner, a top Kenyan civil servant, was trying to sell it as new to his chum's ministry. It was a small scam. But John Githongo, the permanent secretary for ethics and governance in the newly-elected government of Mwai Kibaki, feared worse was to come. This was the sort of impunity Mr Kibaki had sworn to end, after replacing the kleptocratic regime of a veteran dictator, Daniel arap Moi.
Mr Githongo, an expert on corruption and a former Nairobi correspondent for The Economist, was correct. Over the next two years, he watched as the government emulated its crooked predecessor. He alleges it signed $300m-worth of dubious or fraudulent contracts in the security sector alone. It also inherited $400m-worth of such contracts from Mr Moi's government, and honoured them. Mr Kibaki's most trusted ministers told Mr Githongo the cash was needed to smooth the passage of a new constitution—which Kenyans rejected in a referendum in November—and to win elections due next year.
Mr Githongo fled to Oxford University last February, after receiving death threats. In November, he sent a 36-page summary of his investigations to Mr Kibaki—whom he had briefed on them during his time in office—and to the Kenya Anti-Corruption Commission (KACC), a hitherto ineffective investigative body. When neither responded, Mr Githongo passed his dossier to a Kenyan newspaper, the Daily Nation; on January 22nd it began exposing the contents. Perhaps not coincidentally, the KACC had stirred itself a few days before, summoning 30 people for questioning, including the vice-president, Moody Awori, and two ministers fingered in Mr Githongo's dossier. Western diplomats in Nairobi, who for years had watched Kenyan politicians gobble aid money, briefed foreign journalists on the scandal. The furore has been impressive.
On radio and television, Kenyans lambasted Mr Kibaki and his inner circle—all of them members of his Kikuyu group and known as the “Mount Kenya mafia”. Opposition politicians, predictably, urged the government to resign. That is unlikely to happen, not least because Kenyan MPs are among the world's best-paid. But Mr Kibaki, of whom Kenyans expected much, looks weak and discredited. His Rainbow Coalition had already split during the referendum campaign; its non-Kikuyu members, led by an adept populist, Raila Odinga, a Luo, have formed a new opposition alliance. And Mr Kibaki is now accused of failing to stop massive fraud, or hunt the perpetrators. Referring to the scams outlined in his dossier, Mr Githongo said the president “was briefed about these issues all along.” His revelations provide a unique insight into top-level looting in one of the world's most corrupt countries.
Corruption in Kenya is not natural-resource driven, as in other African countries. The Goldenberg scandal, which cost Kenya perhaps $1 billion in the 1990s, involved the illegal export of fictitious gold and diamonds, not real ones. At high levels, corruption involves ministers and civil servants paying as much state cash as possible for shoddy goods or services never rendered.
Shoddiness is the key. Kenyans' weary tolerance of third-rate goods allows large margins on corrupt deals. This is especially true of arterial transport. The road from Mombasa, on the Indian Ocean, to Kampala, Uganda's capital, is potholed and dangerous. The rolling stock of the railway running along the same route has not been upgraded for decades, despite frequent infusions of government cash. Such is the general decrepitude of the state, and rapacious fleecing of businesses by the bureaucracy, that it costs more to ship a tonne of grain from Mombasa to Kampala than from Chicago to Mombasa.
Dishing the dirt
Central to Mr Githongo's allegations is a contract negotiated in December 2003 by senior civil servants, to pay $37m for secure passport equipment, previously valued at $10m. The deal was to be financed, at 4% interest, and the equipment obtained by a company registered in Britain, Anglo Leasing and Finance (ALF). By early 2004, the government had paid ALF $1.17m on this contract. In 2001, Mr Moi's regime had signed another contract with ALF, to finance and obtain a forensic police laboratory for $59m. Though no work had been done on the laboratories, the government had paid ALF $5m on this deal.
Alerted to the two deals in April 2004, Mr Githongo swiftly established that the company did not, in fact, exist at the three addresses given for it in Britain and Switzerland, and that no Kenyan official involved in the deals admitted to knowing the identity of the company's directors or investors. At an address given for the company in Liverpool was a small property company, Saagar Associates, which was owned by a member of the Asian-Kenyan Kamani family, with strong business links to Mr Moi's regime. Another company owned by members of the family had gained notoriety for providing the Kenyan police with 1,000 crummy Mahindra jeeps at inflated prices. Saagar Associates claimed to represent ALF; one of its directors had signed contracts on ALF's behalf.
Mr Githongo briefed Mr Kibaki on his investigations. His dossier records him informing the president that some of his closest advisers were prime suspects in the affair. Then in early May an odd thing happened: the money paid to ALF was repaid to the central bank. Several weeks later, a Swiss man, Michel Gruring, who said he was ALF's managing director, announced that the contracts had been cancelled.
Shortly after, $6.3m was repaid to the central bank by a company called Infotalent Ltd, which had been contracted to provide communications kit to the police, and about which Mr Githongo had made preliminary inquiries. Mr Githongo alleges it was also a shell company. In July, another company, Silverson Forensic, repaid $910,000 from a bank in Liechtenstein, and cancelled a contract to finance and supply police vehicles. Mr Githongo says he was told that both repayments were made after the government contacted a prominent Nairobi businessman.
Whoever was behind the contracts had hit on quite a clever scam. By entering into a contract with an entity that did not, in any real way, exist, the government had no legal recourse if its promised goods or services did not arrive. Moreover, it ensured the government would be obliged to service its “debt” to the company, though it had received nothing in return, and though the company had not, in fact, extended any finance on its behalf. In effect, the government was paying interest on loans to itself, in order to secure goods or services at inflated prices. Crucial to the model's success were the unscrupulous businessmen who registered the bogus companies and handled the cash.
Though pleased, no doubt, to have recovered $12m of public funds, Mr Githongo had reason to stay zealous. On May 14th 2004, around the time ALF began repaying, the governor of the central bank, Andrew Mullei, wrote to a civil servant in the finance ministry, Francis Oyula, seeking confirmation that he should continue making payments on $600m-worth of contracts in the security sector, signed with 17 companies between late 2001 and early 2004, including ALF. Mr Oyula replied authorising payments on most of the contracts and promising further authorisations. According to Mr Githongo, several of the companies were mere shells, like ALF. Others existed, but the government had promised to pay well over the odds for their goods. One of these was allegedly a foreign company contracted to supply a naval vessel for $57m, which had subcontracted the task to a Spanish ship-builder. The ship, according to one diplomat in Nairobi, is little more than “a civilian ship with grey paint.”
Mr Githongo says he was informed on several occasions by the then justice minister, Kiraitu Murungi, that senior members of the government were behind the ALF scam and others; Mr Murungi allegedly told him that the culprits were, in short, the government itself. He said the minister claimed the money would be used to fund election campaigns, and was being managed by Chris Murungaru, the then minister for internal security. According to Mr Githongo, Mr Murungi urged him to end one of his investigations. If he did so, Mr Murungi allegedly suggested, a debt held by Mr Githongo's father with a local businessman, whom Mr Githongo was investigating, would be forgiven. Mr Murungi denies all this. He said this week that he was not involved in the ALF contracts; did not try to impede Mr Githongo; and did not tell him that money from graft would be used to fund vote campaigns.
Mr Githongo has not accused Mr Kibaki of direct involvement in the fraud, but alleges that he must have been aware of it. Even after many detailed briefings from Mr Githongo, Mr Kibaki said publicly that he had seen no evidence of top-level corruption. Mr Githongo resigned on January 24th 2005, while in Britain; he had received several anonymous death threats.
Last year, two senior civil servants implicated in the scandal were sacked and charged with corruption. Mr Murungaru was dropped from the cabinet after Britain and America revoked his visas; a former British high commissioner to Kenya, Sir Edward Clay, had earlier accused Mr Kibaki's government of behaving “like gluttons” and “vomiting on the shoes” of foreign donors. Mr Murungi, who has denied that ALF was in any way a scandal, was made energy minister in a cabinet reshuffle in December, by which time Mr Kibaki had already received Mr Githongo's dossier.
Though badly damaged, Mr Kibaki could perhaps salvage some respectability by removing those fingered by Mr Githongo. If not, foreign donors in Nairobi speak of “fiscal consequences”, possibly including the obstruction of loans and grants that keep the government afloat. If nothing else, Mr Kibaki and his circle will almost certainly be punished by the voters in next year's election, just as their corruption cost them dearly in the constitution referendum. If those at the top do not much mind thieving politicians, ordinary Kenyans, with homes and school fees to pay for, increasingly do.
