Tag Archives: Mombasa

Grand railroad corruption: Kenya’s Daily Nation drops expose of grossly inflated pricing and alarming details from “secret” SGR contracts

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A vital “must read” from the Daily Nation confirms that in spite of Kenyan president Uhuru Kenyatta’s promise to release the contracts for the truncated Standard Gauge Railroad project, the Government of Kenya has been withholding the documents concerned about meeting public records obligations. It is said that Kenya signed the undertakings with Chinese state-owned corporations rather than the Chinese State as such, and that the documents include secrecy provisions that the lawyers are interpreting to conflict with Kenyan law as to the Governments obligations to its own citizens for public contracting.

The story details item after item of hugely inflated prices for components such as generators, supplies, machinery and equipment:

This explains how Kenya ended up paying two times more for a diesel train than what Tanzania negotiated for an electric train. A comparison of the costs shows that Tanzania is building an electric rail at half the price of Kenya’s diesel SGR line.

TANZANIA’S FASTER

At $1.92 billion, which translates to about Sh192 billion at current exchange rates, for the 422 kilometres, Tanzania’s line is not just cheaper; being electric, it’s designed to support a maximum speed of 160km/hour for passenger trains and 120km/hour for freight.

This pales in comparison to Kenya’s line, whose passenger trains have a maximum speed of 120km/hour with freight hauliers doing 80km/hour at best.

Kenya opted for diesel-powered engine that can be upgraded into electric in future.

It is the results of this greed and negligence that taxpayers are now paying for.

OPERATION COSTS

Currently, the revenues generated from the passenger and cargo services on the track cannot meet the operation costs, estimated at Sh1.5 billion a month against average sales of only Sh841 million.

Meanwhile, Kenyans transporters who have allegedly been hurt by Kenyan restrictions intended to forcibly subsidize the non-competitive costs of the Chinese-operated SGR, are seeking the contracts in court. Likewise, the civil society coalition Okoa Mombasa has filed a formal records request as a precursor to a suit if the documents continue to be withheld.

Readers may remember previous reporting of a leaked Auditor General documents indicating that Chinese firms may have been given a security interest in Kenya Port Authority assets and property to secure the loans for these inflated costs. From Maritime Executive in December 2018:

Kenya runs the risk of losing control of the Port of Mombasa if it should default on loans from state financial institution China Exim Bank, according to a new report from Kenya’s auditor general. The terms of a $2.3 billion loan for Kenya Railways Corporation (KRC) specify that the port’s assets are collateral, and they are not protected by Kenya’s sovereign immunity due to a waiver in the contract. 

KRC accepted the multi-billion-dollar loan in order to build the Mombasa-Nairobi standard gauge railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC).

“The payment arrangement agreement substantively means that the Authority’s revenue would be used to pay the Government of Kenya’s debt to China Exim bank if the minimum volumes required for [rail] consignment are not met,” auditor F.T. Kimani wrote. “The China Exim bank would become a principle over KPA if KRC defaults in its obligations.”

In addition, any dispute with China Exim Bank would be handled through an arbitration process in China, not in Kenyan courts. The auditor general expressed concern that the port authority had not disclosed these arrangements in its financial statements. 

The Auditor General’s term expired before publication of a final report and has been left vacant, conveniently for freedom of action and ability to avoid disclosure by Kenya’s political officials.

The more information that comes to light the more it would appear that the uneconomical nature of the “white elephant” megaproject was baked in from early stages and does not look to be readily resolvable without exterior finance, renegotiation, write down or other intervention.

Meanwhile, The Star covers a report by the Tax Justice Network that Kenya’s financial sector is well designed to hide corruption as the second most secretive in Africa:

Kenya’s financial sector is the among most secretive globally, according to a new report  by Tax Justice Network.

The sector has been ranked the second most rigid in Africa after Algeria and among the top 30 in the world in the latest Financial Secrecy Index of 2020.

The annual index by Tax Justice Network (TJN) has scored Kenya’s secrecy rate at 76 per cent, meaning the country is a fertile market to stash ill-gotten private financial wealth and other illicit financial flows (IFFs).

On #AntiCorruptionDay do not forget how then-fugitive Gideon Mbuvi (“Sonko”) came to Parliament in 2010

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With the arrest of Nairobi Governor Gideon Mbuvi (“Sonko”) in Voi on charges of corruption and of fleeing charges and a jail sentence in Mombasa dating back to 1998, it is important to remember how Sonko came into national politics in Nairobi in the first place.

My only personal encounter with Sonko was when he showed up as MP and potential Senator-elect at the Milimani Law Courts in March 2013 when civil society leaders I was working with sought an injunction to stop the IEBC under Isaack Hassan from announcing Presidential election results after shutting down the Results Transmission System, which had allegedly unexpectedly failed (it has turned out the procurement was botched in the first place so the Results Transmission was not ever going to work).

Sonko entered politics and was elected as Member of Parliament from Nairobi’s Makadara Constituency in the by-election of September 20, 2010, as the nominee of the NARC-Kenya party led by Martha Karua, then MP for Gichuga.

Karua was appointed by President Kibaki as Minister of Justice in 2005 following the defeat of the “Wako Draft” constitution at referendum by the nascent Orange Democratic Movement, and reappointed by Kibaki in his original “half-Cabinet” of January 8, 2008 during the Post Election Violence period. Karua resigned as Justice Minister in April 2009 (being replaced by Mitula Kilonzo, father of current ODM Senator and Sonko defense attorney Mitula Kilonzo, Jr.) but one would think she and NARC-Kenya would have had resources to vet Sonko’s background if they were not familiar.

The by-election for Makadara was one of several occasioned by the courts upholding election fraud challenges against the Samuel Kivuitu led and internationally supported Election Commission of Kenya that also failed so obviously in the Presidential race.

As the Daily Nation explained in an article headlined “Makadara rivals bet on the slums” at the time Sonko originally had support of a faction within the ODM party before intervention of party leader Raila Odinga, then Prime Minister in Kibaki’s second administration (sometimes referred to as the “Government of National Unity”):

In Makadara, the roles were reversed in 2007 as ODM’s Reuben Ndolo was ousted by Mr Dick Wathika of PNU. Mr Ndolo also successfully challenged the results in court.

. . . .
The two main parties are seeking to boost their numbers in Parliament ahead of 2012.

The fight is about numbers, especially given that ODM will be seeking to turn the tables on PNU after losing a number of by-elections in the recent past,” Nairobi lawyer and political analyst John Mureithi Waiganjo said.

The party lost in Matuga at the Coast and South Mugirango in Kisii, seats it was expected to win.
Mr Waiganjo says the by-elections also come at a time when ODM, whose party leader Raila Odinga, is at the forefront in pushing for reforms ahead of 2012 elections, requires numbers in Parliament to effect the changes.
The lawyer named Mr Ndolo and Mr Wathika who were on the same side of the referendum campaigns, as the front runners for the seat. But Narc Kenya’s Gedion Mbuvi, popularly known as Mike Sonko, could spring a surprise. 
Mr Mbuvi, who intially sought the ODM ticket, has run a well-oiled, high-profile campaign that has excited many, especially youthful voters.
However, it is his alliance with Nairobi deputy mayor George Aladwa, the Kaloleni ODM councillor, that has been causing Mr Ndolo and the party sleepless nights. Although even PNU’s Wathika received a direct ticket, it is in ODM that the consequences of the nomination fallout are likely to be most felt. 
Mr Aladwa, who was said to have supported the deep-pocketed Mbuvi for the ODM ticket, has been leading a rebel faction which may seriously dent the party’s chances of victory.
Last week, party leader Odinga was forced to intervene in the matter.
At a meeting called by the Prime Minister, Mr Ndolo and Mr Aladwa pledged to bury the hatchet and work together to win the seat for the party. But there has been little evidence on the ground to show the two are back together. Even the joint rally they agreed to hold is yet to happen.
Mr Aladwa is popular among the Luhya, a significant section of voters in the constituency, and the tension between him and Mr Ndolo can only hurt the ODM candidate.
But Mr Ndolo believes that he has an upper hand after reconciling with Mr Dan Shikanda, a former soccer star, who contested the seat in 2007 on a Narc ticket and who could also influence the Luhya vote. Pundits believe that had Mr Shikanda not broken ranks with Mr Ndolo in 2007, ODM would easily have clinched the seat.

After winning the by-election by defeating both Ndolo of ODM and the PNU Party nominee Wathika on the ticket of PNU Coalition member NARC-Kenya, Sonko later left NARC-Kenya and joined PNU successor party Jubilee to successfully run for Senate in 2013 and then Governor in 2017. Karua ran separately for president as the NARC-Kenya nominee in 2013 and for Governor of Kirinyaga in 2017.

Hon. Karua has been a member of the International Advisory Council of the International Republican Institute (the organization I worked for in Kenya during the 2007 election) since 2015. The Council is a “select group of recognized leaders from around the world who share in our vision of democracy and freedom, and are willing to lend their names and counsel to this cause.”

What did the 2004 “Kroll Report”, leaked and published in 2007, say about Kenya’s drug running Akasha Family?

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Ten years into the major multinational counter piracy missions off the Horn of Africa, are China and India paying their fair share?

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Operation Atalanta of the European Union (EUNAVFOR) commenced in December 2008 and was joined by the Combined Maritime Forces (CMF) Combined Task Force for counter piracy force (CTF-151) in 2009.

The Combined Maritime Forces are a multinational security venture based in Bahrain, with U.S. and U.K. top command.

  • 33 member nations: Australia, Bahrain, Belgium, Brazil, Canada, Denmark, France, Germany, Greece, Iraq, Italy, Japan, Jordan, Republic of Korea, Kuwait, Malaysia, The Netherlands,  New Zealand, Norway, Pakistan, The Philippines, Portugal, Qatar, Saudi Arabia, Seychelles, Singapore, Spain, Thailand, Turkey, UAE, United Kingdom, United States and Yemen.

China and India do send ships independently to cooperate in the CTF-151 mission. But given the volume of Chinese and Indian trade and shipping at this point, are they bearing their fair share of the cost?

Piracy has been radically reduced in recent years off Somalia and in the bab-el-Mandeb, Gulf of Aden region patrolled by CTF-151.

For the United States to solve the “free rider” problem for trade competitors, especially the PRC, the best approach it seems to me is to increase our own trade and investment in East Africa, as well as globally where we have facilitated the rise of the PRC as a trading power through free global maritime security, direct and indirect foreign investment, lax cybersecurity and intellectual property protections, etc.

While it has been our policy since my childhood to facilitate the rise of China, although under slightly varying rationales at different times over the years, President Trump has sometimes, along with a few of his advisors, expressed a desire to change this policy and our formal National Security Policy calls for recognition of “great power competition” as the superseding longterm priority to the ongoing war with al-Queda and progeny or similar groups.

National Security Advisor Bolton announced a “New Africa Policy” suggesting some rethinking back in December, but it seems to have been largely overcome by events since then. Bolton’s “back to the 80’s” focus on Cuba and Nicaragua to add to the standoff involving Venezuela, along with primary redirection of focus to the permanent “shadow war” with Iran, takes bandwidth, already constrained, away from African issues. Meanwhile rapidly unfolding events in Sudan, Algeria, Libya and Egypt at a time of increased uncertainty in much of Central Africa with limited clear U.S. engagement suggest that we are very much in flux about whether we are serious about recalibrating our overall reticence to compete in Africa.

Powerful forces of bureaucratic inertia and domestic American politics suggest that we are likely to continue deficit spending to help secure Chinese trade with Africa without get much further toward making it pay for itself at least through the 2020 election.

As of 2017, US exports to Sub-Saharan Africa were $ 11.7B., or somewhat less than the cost of an aircraft carrier or two amphibious assault carriers, with a trade deficit of $3B. Chinese exports were $37.4B with imports of $18.5B. (India had exports of $13.1B and imports of $19.7B.) The Chinese trade surplus with Sub-Saharan Africa approximately equals the annual U.S. Navy Shipbuilding and Conversion budget.

Voter Registration challenges on Kenyan Coast

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Nation: Voting problems on Coast. One is potential intimidation tactics discouraging voter registration, with the IEBC finding flyers calling for voters not to register or vote, and reports that youth, possibly associated with the separatist group the Mombasa Republican Council, have been seen copying down names of those registering. The second problem is that some politicians and local officials are reporting that groups of voters are being ferried from their home areas to register in other locations.

Obviously the IEBC will have large challenges. No surprise in that. A big question will be whether the IEBC will be seen as taking some level of decisive action to get in front of these situations, or not. In 2007 election, I was told afterwards that once it became clear that the ECK was both toothless, and not going to be an honest broker, the process degenerated as most of the players expected rigging and acted accordingly.

More economic news from Kenya while the campaign season continues to heat up

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And in the key sector of immediate interest to the expat community, “Java House deal wins African investment award” from the Nation:

A multi-million dollar deal that saw Nairobi Java House sell a majority stake to a US private equity fund has won the Africa Investor of the year award in a ceremony that also honoured two Kenyan bank chief executives.

The transaction amount was not made public, but Mr Bryce Fort, the managing director of the equity fund, ECP, said at the time that it fell within the firm’s average deal size of about Sh5.1 billion ($60 million).

“The ECP is a strong believer in Africa’s growing middle class,” said chief executive Hurley Doddy in a video address to the Africa Investor summit after winning the award.

The Java House deal, which saw the Washington DC-based ECP acquire a majority stake in the Kenyan coffee chain, was made public early this year.

Here is the link to the story at Africa Assets.

Meanwhile, the IMF predicted 5.7% GDP growth overall for Sub-Saharan Africa in 2013 after 5% growth for 2012.

The Star reports that one group of analysts project that Kenya could near this average, reaching 5.3% growth in 2013 “but only if there is a smooth political transition with a clear winner in round one.”   The pre-election uncertainty and distraction of the campaign are weighing on the economy at present.

Upsidedown Freightcar

A key example of the progress and the frustrations in the Kenyan, and regional, economy, is found an op/ed column in the Sunday Standard from Polycarp Igathe, Chairman of the Kenya Association of Manufacturers, headlined “Inefficient railway system hurting national growth”:

Last month, I visited the port of Mombasa in the company of board members of Kenya Association of Manufacturers (KAM) and Kenya Shippers Council (KSC).

We witnessed firsthand, that at long last, chronic port congestion and inefficiencies are being tackled, bravely, by Kenya Ports (KPA), but timidly by Rift Valley Railways (RVR).

Gichiri Ndua, KPA’s Managing Director explained the gains, efforts and challenges at Kilindini port. Ship-to-shore gantry capacity has more than doubled, dredging of the port is complete and the new berth 19 is almost finalised allowing Port of Mombasa to handle a 16 per cent growth in cargo throughput. Some of the largest shipping lines are now able to call and enables Kilindini to become a transshipment port.

We confirmed that delays in cargo offtake and high cost of cargo transportation are the result of dismal failure in improving railway infrastructure in tandem with port infrastructure. Citadel Capital and Transcentury the major shareholders in RVR must simply know that they are failing the country in outstanding fashion.

Igathe goes on to write that the railroad bottleneck is a key impediment to regional growth, with Mombasa “the only port known in the world to rely 95 per cent on road freight”.  He hails reports of a new commercial contract between the Kenya Railway Corporation and China Roads and Bridges to start building a standard gauge rail line from Mombasa to Malaba as a “game changer”.  Read the whole piece for a Kenyan manufacturers perspective of what is needed for long term growth.

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Kenya Update: election campaigns, teachers strike, Mombasa unrest

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Close to 100 Kenyan civil servants tendered their resignations by Monday’s deadline in order to run for public office in the upcoming elections. The Standard reports.

Perhaps the most conspicuous is controversial Government Spokesman Alred Mutua who will seek the Governorship of Machakos County through the Wiper Party, formerly ODM-Kenya, headed by V.P. Kalonzo Musyoka.

Charity Ngilu, Water Minister from Kitui South, has entered the presidential race, the second female candidate along with Martha Karua. Ngilu was the first Kenyan woman to run for president in 1997.

Kenya’s public school teachers have gone on strike, from the Daily Nation:

School activities have been paralysed as teachers went on strike to demand for more pay.

The teachers defied a court order issued on Friday declaring the strike illegal and failed to report to the more than 30,000 public primary and secondary schools countrywide.

A survey by the Nation established that no learning took place on the first day of Third Term.

In Mombasa, a Muslim cleric, Said Abubaker Shariff Ahmed, suspected of involvement in terrorism has been charged with inciting the deadly riots following the killing of his associate Aboud Rogo.

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Kenyan Court strikes Government’s action outlawing Mombasa Republican Council

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Judicial independence is becoming serious stuff in Kenya.  A three-judge panel of the High Court sitting in Mombasa has ruled that Kenya’s executive branch acted unconstitutionally  in “banning” the secessionist Mombasa Republican Council.  As the decision was reported in the Daily Nation:

The judges advised the group to register as a political party to pursue its agenda through legal means.

And apparently alive to the fact that Kenyans may question the rationale behind their judgment, more so in the light of the group’s secession demands, the judges pointed out that secession was a weighty matter that could not be realised through the means the group was pursuing.

“There may be Kenyans who may disenchanted with the our decision. Some would see it as an endorsement to secession and dismembering of this country.

“To them we say: Secession can only be achieved by far-reaching amendment to the constitution,” the judges ruled.

“Secession is a political agenda. MRC is certainly not a trade union, welfare society or a debating society. It has all the attributes of a political movement,” the judges noted.

“If MRC regards this decision as carte blance to disorder or lawlessness, then they are on their own. The court cannot mute the respondents from exercising their constitutionally ordained obligation of ensuring security for all Kenyans. Should MRC cross the line, then the State, as always can invoke the law including prevention of criminal activities.”

Presumably the Government will appeal, but this would seem a fairly straightforward application of the Constitution.  Advocating for secession is obviously highly controversial–in just about any country, and particularly in Kenya and especially on the Coast, with war in Somalia, a refugee crisis and the specter of an upcoming election given a history of election-related violence.  Nonetheless, it is times like these that require constitutions and the rule of law to provide boundaries within which to have these debates peacefully.

It will certainly be interesting to see how this plays out in the national and regional election campaigns.  Maybe democracy assistance programs working on “party building” can take some of them to visit Parti Québécois?

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Mudslides, Terrorism and Tourism

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The death toll rose to three from the grenade attack on a nightclub north of Mombasa Sunday. In the meantime, in the Mt. Elgon region, on the Ugandan side of the border, there are 18 confirmed deaths from this season’s current mudslides, with 450 missing.

The Kenyan government protested the U.S. warning about a threat of attack in Mombasa as “economic sabotage” given the obvious potential impact on tourism, as well as a “betrayal of trust”, while insisting that it was ahead of the game and fully cooperating with U.S. agencies to stop any such planned attacks. Contrary to some initial reactions on twitter, the local bar attack was clearly not the kind of event that the American Embassy was warning about.

At the same time, Mombasa residents have accused security agencies, especially the National Intelligence Security Services (NSIS), of sleeping on the job.

“As residents of Mombasa, we are disturbed by these attacks which are occurring without any arrests. The police should work around the clock and arrest people suspected to have committed the incident,” said Mr Abdul Abdulla.

Since Kenya sent troops to Somalia last October, a series of explosions have rocked Nairobi, Mombasa and North Eastern region in what is believed to be retaliatory attacks by the Al-Shabaab.

Meanwhile, some American and British tourists on Monday down-played the travel advisory, saying the country was safe.

Mr Kevin Schmidt from California, USA, has been in the country for three weeks and said: “A lot of it is precautionary, they (US government) want to make sure everybody is informed,” he said.

“Man arrested over attack at drinking den,” Mark Agutu in the Daily Nation.

The bigger terrorism issue relates to the seizure of bomb making materials tracked to the port from Iraq and the arrest of two suspects thought to be Iranian.

U.S. Embassy warns of imminent threat of terrorist attack in Mombasa

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From the Saturday Nation:

The United States has ordered its government officials to leave the Kenyan city of Mombasa over an “imminent threat of a terrorist attack.”

The US also suspended all government travel to the coastal city until July 1.

“This is to alert all US citizens in Kenya, or planning to travel to Kenya in the near future, that the US Embassy in Nairobi has received information of an imminent threat of a terrorist attack in Mombasa, Kenya,” read a statement issued by the Embassy Saturday.

“All US government travel to Mombasa is suspended until July 1, 2012.  All US government personnel are required to leave Mombasa.”

However, the Embassy said US private citizens were not affected by the travel advisory but “should consider this information in their travel planning”.

On Wednesday, two containers tracked from Iraq by international police were traced to the yards of a container freight station (CFS) in Mombasa.

This seems to be getting bigger coverage in the international media than in Kenya’s media so far.