E-Clips:- Business Pictorial - Kenya Back To Its Bad Old Ways

Business in Africa

Only one and half years after donors resumed lending to Kenya, the relations between the two parties are once again frosty following the emergence of deeply entrenched official corruption. Under the leadership of former president Daniel arap Moi, Kenya remained a pariah among bilateral and multilateral donors for almost a decade due to high-level corruption within the government and a poor human rights record.

However, following the historic December 2002 elections, which saw the ousting of the dictatorial Kenya African National Union (KANU) regime, donors agreed to soften their stand after the new President Mwai Kibaki pledged zero tolerance on corruption. But the honeymoon is now over.

The credibility of the National Rainbow Coalition (NARC) government, which was elected and won donor support on an anti-corruption platform, has been seriously dented by reports of top-level corruption involving millions of dollars. Notably, a string of corruption scandals continue to dog the Mt Kenya Mafia - a cabal of ministers from President Kibaki’s Central region.

So rampant is official graft that the Commonwealth Secretary general Don McKinnon offered to help in the war against corruption during his visit to Nairobi early this month.

“It is the desire of the Commonwealth secretariat that all member countries operate in a corruption-free environment,” he told a press conference in Nairobi ahead of a pan-African conference on accountability.

Relations between NARC and the donors took a nosedive in April 2004 following the unearthing by KANU MP Maoka Maore of Anglo Leasing and Finance scandal, in which a phantom British firm was awarded US$96m passport security and forensic kit tenders through single sourcing. Following the government’s failure to act on the scandal and its reluctance to name the firm’s local associates, the European Union (EU) Kenya’s second biggest donor after the World Bank - promptly suspended US$587.5m in budget support. Since the money had already been factored in the 2004/2005 Budget, Finance minister David Mwiraria was forced to borrow from the domestic market to finance the resultant deficit.

As expected, other donors followed suit, given the EU’s influential position in donor politics in Kenya. By September 2004, it was clearly evident that all was not well, when the IMF delegation visiting Nairobi expressed profound disagreement with the way the government was spending and its inability to fight corruption. Matters came to a head in February 2005 following the resignation of president Kibaki’s anti-corruption czar, John Githongo.

Githongo, the highly respected former director of Transparency International Kenya Chapter, chose to throw in the towel during an official trip in London, citing frustration by the president.

Reaction from the donors was swift. The US ambassador to Kenya William Bellamy froze $2.5m meant for fighting graft and threatened to withhold a further $7m, which is part of the Millennium Challenge Account earmarked to support improvements in ways of governance and other anticorruption activities. “It makes no sense obviously to partner with a government whose commitment to improved governance is purely rhetorical and whose actions belie its statements of good intent,” charged Bellamy.

The German government also withheld US$2.5m meant for anti-graft activities initiated by Githongo. The diplomatic missions of Britain, Canada, 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. But one diplomat who has been relentless on his attacks on the government is the British High Commissioner to Kenya Sir Edward Clay. Last July, he claimed that corruption had cost the country US$192m 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,” he said in his stinging attack.

Early in February, Clay presented president Kibaki with a list of 20 new corruption scandals. However, Foreign minister Chirau Mwakwere has always dismissed Clay as an “incorrigible liar.” Clay, whose tour of duty in Kenya ends in June, has promised to unleash another dossier before he leaves the country.

With the government’s failure to tackle corruption, Kenya now finds itself in a situation reminiscent of the early 1990s. 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 Moi yielded to pressure from the international community and re-introduced multiparty 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 Anticorruption Authority (KACA).

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 the KANU regime. Whereas the government embarked on serious anti-corruption measures, including the enactment of anti-corruption legislations and the tracing of funds stashed away during the previous regime, it has done very little to stem what is known in donor parlance as “new corruption.”

Consequently, 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.

It will be interesting to see which decision Kibaki makes – whether to sack his corrupt ministers who are still sitting pretty in the cabinet - or retain them and lose donor aid. But with the Kenya Anti-Corruption Commission’s Director Aaron Ringera’s declaration that corrupt ministers will not be prosecuted, indications are that the ministers, who only a few months ago were running away from auctioneers, will continue to amass wealth at the expense of Kenyans, majority of whom live below the poverty line.

It is ironic that as the ministers go scot-free, their permanent secretaries have been hauled to court in their capacity as accounting officers. But the government will certainly have a lot of questions to answer when donors converge in Nairobi later this month for their consultative meeting.