For retired Anglican clergyman Reverend Fred Msimenta, the negative effects of his country‘s massive oil venture have begun to show early, and they are being manifested right in his backyard.
A few metres from his house in Butimba East village in Kikuube District in Western Uganda, lies what remains of his former half-acre tree plantation, which has now been reduced to mere stumps. He had to cut down the eucalyptus trees and sell them to traders before they had reached maturity to give way to the East African Crude Oil Pipeline (EACOP) project. His land was identified for compulsory acquisition as it lies right on the 30 metre-wide corridor along which the pipeline will run.
Reverend Msimenta is not alone; a similar fate has befallen his neighbours in this fertile farming region where — besides coffee, maize, beans, sweet potatoes and a host of other crops — farmers also engage in commercial agroforestry, giving the area a beautiful green cover.
“We do not know how this area will look like in the future after this project disturbs nature. Already trees are being cut down to give way to the pipeline and to open up access roads. Without doubt we will lose a lot of animal habitats, forests and wetlands,” he says.
“There are many fears in people’s minds, a lot of communal land including forests will be taken up by the pipeline and we are really apprehensive over what will happen,” adds the clergyman.
The massive pipeline will move oil from the East African country’s oilfields in the larger Albertine region eastwards for some 1,443 kilometres to the port of Tanga on the Indian Ocean coast of neighbouring Tanzania for export, Uganda being a landlocked country.
It will be the world ‘s longest electrically-heated crude pipeline, with numerous pumping stations along the route to the Tanga terminal, due to what experts say is the “waxy” nature of the crude.
It is partly because of this that the project — which will cost the two countries and their partners, China National offshore Oil Corporation (CNOOC) and Total, in the region of US$3.5 billion — that Msimenta and his neighbours are harbouring numerous fears over the environment.
It’s sheer scale aside, EACOP is just but a part of the “Pearl of Africa”’s huge fossil fuels venture that also includes Tilenga and Kingfisher oil development projects, the latter consisting of six wells located inside the biodiversity-rich Murchison Falls National Park. The projects jointly hold an estimated six billion barrels of oil reserves, 1.4 billion of which is classified as recoverable.
It will be the world’s longest electrically-heated crude pipeline.
More than 20,000 people including landowners and “land users” will be affected by the whole enterprise, which will include six oil fields and 400 wells in 31 locations under Tilenga alone. Out of these, Total claims that no more ten will be drilled in the wildlife park.
“We hear news of spills in other countries around the world and wonder what would become of our land if the same were to happen here, but when we ask the authorities tell us that this will be a sophisticated conduit that can neither leak nor break,” Msimenta says.
Like many people here, the community leader expresses concerns for the Wambavya river and its many tributaries that emanate from one of Uganda’s most notable wetlands. In this locality, for example, is to be found the Ijumagambo wetland that gives rise to a stream of the same name which empties into Wambavya, the most important river in western Uganda.
Any threat to the river, Msimenta believes, would jeopardise the Kabalega Electric Station, a 9 MW hydropower station constructed along the river. Wambavya is also critical to the survival of Lake Albert, a trans-boundary resource shared with the Democratic Republic Congo, the river being its main inlet to the south and a source of livelihood for thousands of people in both countries.
“We hear news of spills in other countries around the world and wonder what would become of our land if the same were to happen here.”
These fears are however disputed by the country’s oil sector regulator, the Petroleum Authority of Uganda (PAU), which claims to have taken environmental and social measures to address both the direct and indirect impacts of the projects.
“Various Environment and Social Management plans are in place to address any cumulative and or indirect impacts. These also provide for various mitigation measures and environmental safeguards. In addition, continuous sensitisation programmes are undertaken within the communities to mitigate such impacts,” says Ernest Rubondo, PAU Executive Director.
Rubondo claims that the pipes will be insulated and buried to ensure there is no damage; and that Environmental and Social Impact Assessments (ESIAs) have been undertaken by the oil companies in consultation with state institutions and the communities concerned.
Some of the mitigation measures Rubondo claims will also be taken will include management of dust and equipment. He says that “combustion equipment will be designed to meet national regulations and project standards regarding air quality,” adding that “The project will also provide for progressive vegetation and habitat restoration as part of efforts to curb emissions.”
Total is equally defending itself against claims of possible adverse environmental effects, saying that it will implement actions that “generate a positive net impact on biodiversity”. Total also says that it will only use less than one per cent of Murchison Park land for its activities.
“The route of the EACOP pipeline has been designed to minimise its environmental impact. Careful attention was paid to watercourses, and “horizontal’ drilling will be used for the most sensitive case”. It said in a statement.
Environmental groups are however having none of it, insisting that the three projects — EACOP, Tilenga and Kingfisher — will spell doom for the environment, that they will affect or have affected over 30 “ecosensitive” areas, including Budongo Forest, and the Murchison Falls-Albert Delta Wetland, a critical bird area protected under the Ramsar convention.
“Of major concern is the fact that a third of the EACOP will be constructed in the Lake Victoria basin. This poses immense oil pollution risks yet project developers have failed to provide adequate mitigation measures to address the threats. As a result, court cases have been filed in courts in Uganda, the East African Court of Justice (EACJ) and in France,” said Dickens Kamugisha, CEO of AFIEGO, Uganda’s foremost energy policy research and advocacy body.
EACOP, Tilenga and Kingfisher will produce over 34.3 million metric tonnes, over 48 million metric tonnes and over 26 million metric tonnes of carbon, respectively every year, says Kamugisha.
According to Mohamed Adow, CEO of Nairobi-based energy and climate think-tank Power Shift Africa, the economic benefits from oil projects remain largely short-term compared to their prolonged impacts on Africa’s climate, environment and human health.
Adow notes that, considering Africa’s vulnerability to climate change, there is no reason for continued investment in fossil fuels, since there exists an abundance of potential for renewable energy — wind, solar and geothermal.
“The far-reaching environmental impacts, displacements, changes to groundwater and risk to our health cannot be put on the same scale with short-sighted, short-lived economic interests,” he argues, adding that it was satisfying to know that banks like Barclays and Credit Suisse had reportedly pulled out of financing EACOP. “Indeed, if more international financial institutions make commitments to prioritise green projects, such initiatives like EACOP will not see the light of day,” he says.
Meanwhile, despite the objections, on 11 April the presidents of Uganda and Tanzania inked the final agreement for the joint venture, paving the way for the commencement of EACOP as soon as funding is secured. Uganda president Yoweri Museveni and his Tanzania counterpart Samia Suluhu Hassan signed the deal in Kampala, moving the controversial project closer to reality.
It was satisfying to know that banks like Barclays and Credit Suisse had reportedly pulled out of financing EACOP.
Last year, groups including the Centre for Food and Adequate Living Rights (CEFROHT), the African Institute for Energy Governance (AFIEGO), Natural Justice-Kenya and the Centre for Strategic Litigation Limited, filed a case against the Attorney Generals of Uganda and Tanzania, and the regional bloc — East African Community (EAC) — at the East African Court of Justice.
Besides seeking an injunction against the construction of the pipeline, they are pursuing nullification of a September 2020 Host Government Agreement (HGA) signed by the governments of Uganda and Tanzania with Total, in a ceremony graced by President Museveni of Uganda and the former president of Tanzanian, the late John Pombe Magufuli.
“Oil activities in Lake Albert region have already displaced some 7,000 people including 3,500 children and 1,500 women, and no compensation has been offered to them since 2012, even after we sued on their behalf in high court in Uganda in 2014,” say the petitioners.
The EAC has been enjoined in the case since the organisation is a signatory to various international treaties and agreements on the environment and human rights.
Considering Africa’s vulnerability to climate change, there is no reason for continued investment in fossil fuels since there exists an abundance of potential for renewable energy.
The petitioners are also seeking a declaration that EACOP is a violation of the fundamental rights of the people of East Africa. They say that the pipeline will traverse forests, lakes, wildlife habitats, farmlands and settlements, endangering not just the biodiversity, but lives and livelihoods as well.
Kamugisha says that opposition to the project has led to constant harassment of activists in Uganda through intimidation and imposition of stringent rules for the groups.
Harassment aside, it is not yet clear if EACOP owners will be able to secure the US$2.5 billion external financing needed for the project, if reports by the Stop EACOP campaign are true. The alliance reported that major banks in France — BNP Paribas, Société Générale and Crédit Agricole — were withdrawing their earlier commitment to finance the project.
The EACOP is unlikely to remain Africa’s largest pipeline for long; Angola and Zambia have signed a Memorandum of Understanding for a feasibility study for a US$5 billion pipeline to transport oil and gas from Angola to Zambia.
This piece was first published in Science Africa. You can find the original article here
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Kenya’s Opaque Procurement Deals: The Case of G4S
The opaqueness of public procurement may be losing Kenya much needed tax revenues that would greatly ease the tax burden on ordinary Kenyans.
In 2016, ActionAid and Tax Justice Network reported that Kenya loses an estimated KSh100 billion (Currently US$1 = KSh110) annually to tax incentives – reductions in corporate income tax, customs duties or VAT ostensibly provided to encourage investment – that often benefit foreign corporations. This amount represented 5.8 per cent of that year’s KSh1.7-trillion government budget.
That same year, former head of the Ethics and Anti-Corruption Commission (EACC) Philip Kinisu reported that Kenya loses about KSh600 million to corruption each year. At the time, this translated to about a third of the entire national budget. Earlier this year, the president said that over KSh2 billion is stolen every day from government coffers. Granted, this sparked quite the reaction on social media, but nobody really knows how much Kenya actually loses to graft. One of the main reasons for this is the opaqueness of public procurement.
For the government to provide services to the citizens of Kenya, it is at times necessary to contract with private entities to deliver goods or services. Indeed, the Public Procurement and Asset Disposal Act (Procurement Act) of 2015 provides a framework for efficient procurement by public entities. Under this framework, it is crucial that such procurement is conducted or implemented in a transparent manner. This is especially crucial when dealing with foreign-registered companies. Some may remember the story of CMC Ravenna, the Italian company that filed for bankruptcy in its own country shortly after it had received a KSh15 billion down payment by the Kenyan government for the construction of Arror, Kimwarer and Itare dams. The total value of the three contracts was KSh150 billion.
In 2013, Washington, DC-based think tank Global Financial Integrity (GFI) estimated that the Kenyan government lost potential revenues of KSh97 billion for the year to trade misinvoicing of which KSh21 billion was attributed to uncollected corporate income tax. Meanwhile, Kenya’s budget has been steadily increasing from KSh2.2 trillion for the 2015/16 financial year to KSh3 trillion for the 2019/20 financial year. And of course, most of the tax burden falls on ordinary Kenyans and is supplemented by heavy borrowing, which citizens eventually have to pay for.
So, how is it that multinational corporations are able to siphon so much money out of the country? And why is it that our government keeps dealing with them? To answer this question, I looked into one well-known multinational company with a strong base of operations here in Kenya: G4S.
Public procurement transparency and the case of G4S
Why G4S, you ask? G4S, recently acquired by Allied Universal for £3.8 billion (Currently £1 = KSh150), is a giant global multinational corporation. The world’s largest security firm, it is active in over 90 countries across six continents. In 2019 it reported annual revenues of £7.8 billion, equivalent to 40 per cent of Kenya’s budget and about 60 per cent of the government’s projected tax revenues for the same year. This figure is expected to shoot up to £13.5 billion following the acquisition. In Africa, where it is the largest private employer, the firm reported revenues of £405 million in 2018, which is roughly equal to the Kenyan government’s entire allocation to the health sector that year. Their most lucrative operations on the continent were in South Africa and Kenya.
Half the company’s global subsidiaries are registered in tax havens — a red flag for tax avoidance — and its Kenyan subsidiary is almost wholly owned by a Dutch holding company. Despite this, G4S has been awarded several contracts by public entities in Kenya such as Kenya Power, the Ministry of Energy, and the Independent Electoral and Boundaries Commission (IEBC). All this, combined with the presence of two prominent politicians on G4S Kenya’s Board of Directors, makes it the perfect case study of why we need more transparency in public procurement.
Poor track record
The company has a poor track record in several of the countries in which it operates. In the United Kingdom where it has its headquarters, G4S was in 2011 contracted to run Birmingham Prison for a period of 15 years. However, halfway into the contract period, in 2018, the British government had to take back control of the prison following a rise in violence, substance abuse, and three self-inflicted deaths within an 18-month period. The company also came under fire in 2011 after a Kenyan asylum seeker died while in their custody, just a year after an Angolan deportee died after being held down by three G4S guards on a plane, with fellow passengers hearing him cry out: “I can’t breathe”.
In Jordan, all six United Nations agencies reportedly cancelled their contracts with the firm after human rights activists highlighted the firm’s complicity in “Israel’s grave violations of Palestinian rights and international law through its partnership with Israel’s police.” A 2019 assessment of G4S’s operations in Qatar and the United Arab Emirates led to Norway’s US$1.1 trillion wealth fund, the largest in the world, excluding the company from its investments because of “unacceptable risk that the company contributes to, or is responsible, for serious or systematic human rights violations”.
The company also came under fire in 2011 after a Kenyan asylum seeker while in its custody.
In Africa, the company has been implicated in the use of violence, including electrocution and beatings, to subdue prisoners in South Africa’s Mangaung prison. Here in Kenya, G4S has been in the news for all the wrong reasons. Some readers may remember the string of robberies back in 2011 that earned them the moniker “Gone in 40 Seconds”. In 2019, part of the KSh72 million cash in transit stolen from G4S by police impersonators was found buried in one of the perpetrators’ father-in-law’s backyard. A former employee was awarded KSh35 million in damages after being fired for rejecting the sexual advances of her superior. The company’s workers have repeatedly gone on strike due to low pay and inhumane working conditions. G4S security personnel beat up and caused grievous harm to refugees picketing outside UNHCR offices in Nairobi, and there have been accusations of G4S security personnel demanding bribes from refugees in Daadab seeking entry into the main UNHCR compound.
Yet despite all the negative publicity, the Kenyan government keeps entrusting G4S with taxpayer money through contracts that are not published in accordance with public procurement and access to information laws. In many jurisdictions, the principles of public accountability demand transparency in government spending, with very few exceptions, for example, on matters of national security.
Private companies in Kenya are legally entitled to a measure of confidentiality and the Access to Information Act does not expressly impose proactive disclosure obligations on private bodies. However, according to the Commission for Administrative Justice (the Ombudsman), “the requirements [of the Act] can be extended to private bodies that receive public resources and benefits, provide public services or [are] in possession of important public information”.
No, the Act does not expressly impose proactive disclosure obligations on private bodies. However, the requirements can be extended to private bodies that receive public resources and benefits, provides public services or is in possession of important public information #Julisha
— Ombudsman Kenya (@KenyasOmbudsman) February 22, 2019
In any case, both Kenya’s Access to Information Act and a 2018 Executive Order from the President require all government agencies to “maintain and continuously update and publicise . . . complete information of all tenders awarded”.
At the very least, one would expect government entities to publish their tender adverts and awards on the public procurement information portal (PPIP), which was created for exactly that purpose. However, when I went to search for contracts awarded to G4S, I only found two published contracts – one of very low value and one that did not even indicate the contract amount.
If the news articles and press releases on their website are anything to go by, G4S does a substantial amount of business with the government of Kenya, so a search on the PPIP should have yielded more results. This definitely heightened my curiosity even more, so I went a step further and conducted a good ‘ole google search: “Government contracts awarded to G4S” – I used different variations of the same search phrase, and while I found more results, none of them appeared on the PPIP.
For example, Kenya Power, the state corporation in charge of distributing electricity, has been consistently publishing each month’s tender awards on their website since March 2018. They published two awards to G4S in December 2019 and March 2020 worth KSh2,693,520 and KSh117,302,726 respectively. This is one example of a public entity that meets the legal threshold of publication under section 138 of the Procurement Act and section 131 of its attendant Regulations of 2020. However, it is unclear whether failure to publish on the portal would attract any penalty. The Ombudsman, which has been mandated with enforcing the Access to Information Act, did not respond to my query on this issue.
Additionally, G4S reported on its website that the Ministry of Energy awarded them the contract to secure the Lake Turkana Wind Farm Project (LTWFP), Africa’s largest wind power project. The details and value of the contract are undisclosed and unpublished. There are also several internet search results indicating various direct contract awards to G4S Kenya between 2015 and 2019, but the links are broken. None of these contracts has been published on either the Procurement Portal or the Ministry’s website, which is the minimum requirement for publication.
The two internet search results below also indicate that the Ministry of Energy may have awarded at least two contracts to G4S Kenya in 2017 and 2018. As with the above however, the links are inaccessible. They are also not on the PPIP or the Ministry’s website.
When I sent an email to the Ministry of Energy requesting copies of documents containing information on the total number of contracts awarded by the Ministry of Energy to G4S Kenya Ltd or any of its affiliates between 2014 and 2019, the Ministry’s response was, “Please note that we do not have such documents.” A follow-up request was ignored.
G4S also reported being awarded a 2-year contract worth KSh81 million to store, secure and deliver laptops to 8,600 primary schools under the digital literacy programme through which the president had promised to issue each standard one pupil with a laptop. Again, this tender award was not published by the public entities involved. However, I dug further and found that the Jomo Kenyatta University of Agriculture and Technology (JKUAT) had published an article on their website indicating that they would be partnering with G4S and four other institutions to implement this project.
G4S’s role in this consortium was to distribute the devices to the schools. I wanted to understand how JKUAT, a public institution, arrived at the decision to contract G4S for this public project, and so I sent an information request to the corporate email indicated on their website. To their credit, I received an instant response from one Dr Ngonyo, directing me to the “directorate concerned who will be in a position to respond” to my enquiry. The email that I was given was not functional, and so I wrote him again, requesting an alternative email. Again, he replied instantly. This time, the email he shared did go through, but I have not received a response to date, not even an acknowledgement of receipt.
The digital literacy project ultimately fell short of expectations, with problems such as fewer devices being delivered than had been promised, lack of complementary infrastructure such as electricity, and inadequate ICT training of teachers. In the wake of COVID-19, the entire 2020 school year was cancelled, and public school pupils lacked the resources, or devices, to proceed with e-learning.
I also had the advantage of accessing a data leak from the Integrated Financial Management System (IFMIS), a financial management system that was rolled out by the government to enhance transparency and accountability in public procurement. The data showed that the Independent Electoral and Boundaries Commission (IEBC) made payments of KSh5,548,930 to G4S between 2014 and 2017. These contracts have neither been published on the procurement portal nor in the IEBC’s reports. For instance, the IEBC’s annual report for the 2014/15 financial year included, on page 67, a list of all contracts fully executed between June 2014 and June 2015. There is no mention of contracts for the provision of security services, yet the IFMIS data shows that a total of KSh3,260,280 was paid to G4S between 28th October 2014 and 31st March 2015.
So what’s their secret?
As part of my research, I interviewed the operations manager of another established private security company operating in Kenya. Wishing to remain anonymous to protect the company’s business, my contact said that it is difficult to get government contracts, which are mostly awarded based on political connections. The manager indicated that many private security companies in Kenya are owned by ex-police officers and MPs, which gives them an advantage when bidding for government contracts.
I was unable to verify this information given that beneficial ownership disclosure was not legally required at the time of this investigation. This has recently changed, and companies had until 31st January 2021 to update their beneficial ownership information with the Registrar of Companies. However, by the time of this publication, it is not yet possible for citizens to submit beneficial ownership requests through the eCitizen platform. Companies have now been granted a grace period up to 31st July 2021 before the Registrar starts enforcing for non-compliance.
However, through the PPIP and the official companies search available on the eCitizen platform, I was able to determine that at least two politicians sit on G4S Kenya Limited’s board.
The first is Moody Awori, a 92-year old veteran politician who once served as Vice President under President Kibaki. He also served as MP for Funyala Constituency and as Minister of Home Affairs. He is credited with introducing prison reforms that improved conditions for inmates, but he was also implicated in the Anglo Leasing corruption scandal. According to his autobiography, Riding on a Tiger, Awori was appointed to the board of G4S, then Securicor Services, soon after it was registered in Kenya in 1963. In June 2021 he was still listed by the PPIP as one of the company’s directors.
According to former Permanent Secretary for Governance and Ethics John Githongo’s Anglo-Leasing report, the department of immigration was directly under Awori’s purview. He authorised a contract for printing of passports that was allegedly inflated to three times the cost. Even after a due diligence check by Mr Githongo and then Minister of Energy Hon. Kiraitu Murungi revealed that the contracted company did not exist, he authorised payments anyway. Awori still insisted he did no wrong and refused to resign from his position. At the time of this publication, the contents of the Anglo-Leasing report are the subject of a court dispute.
The second G4S Kenya director is John Matere Keriri, who was an active politician from the late 80s up until 2007. He was voted in as MP for Kirinyaga Central Constituency, formerly known as Kerugoya/Kutus Constituency in 1997, and was appointed as State House Comptroller by President Kibaki in 2002. Just before his dismissal from State House in 2004, he was approached by Dutch businessman Carlo van Wagenigen to assist with getting government approval for feasibility studies and government guarantees against financial risk for a business idea that would later become the Lake Turkana Wind Farm Project (LTWFP). According to Wagenigen’s account, his “good friend” Keriri set up a meeting with then Permanent Secretary for Energy Patrick Nyoike, who gave the green light for the project.
There is no mention of contracts for the provision of security services, yet the IFMIS data shows that a total of KSh3,260,280 was paid to G4S.
Upon his dismissal from State House in 2004, Keriri was appointed the Executive Chair of the Electricity Regulatory Board (ERB), which was succeeded by the Energy Regulatory Commission, and subsequently by the current Energy and Petroleum Regulatory Authority. The ERB was established to regulate the generation, transmission, and distribution of electric power in Kenya. This included setting, reviewing, and adjusting tariffs, as well as approving electric power purchase contracts between and among electric power producers and public electricity suppliers.
Incidentally, the power purchase agreement between LTWFP and the Kenyan government included a take-or-pay clause that saw taxpayers foot the bill for a KSh1 billion fine when the government delayed in building a transmission line to connect the wind farm to the national grid. The World Bank had earlier expressed concern over this clause that would burden consumers, and withdrew its support in 2012. According to Biashara Energy Solutions Ltd, a renewable energy SME where Keriri was a director, he was “one of the Chief Financial Advisors for Turkana Wind Power project who is attributed for structuring new financing model after the announcement of the World Bank to pull out of the project financing.”
Two years later, after almost a decade of feasibility studies and investment negotiations, project construction started and G4S announced that they had been awarded a contract by the Ministry of Energy to secure the wind farm on a three-year rolling basis for a period of 15 years. Available records show that Matere Keriri joined the board of G4S Kenya Ltd a year later, sitting from 2015 to 2017, though a search at the Company Registry conducted in May 2020 indicated that Keriri was still on the board. G4S has won tenders from the Ministry of Energy, under which the ERC falls, during Keriri’s tenure on its board. The details of these contracts, including the monetary value, are only visible as internet search results whose links are broken. They have not been published on the PPIP or the Ministry’s website as per the public procurement transparency requirements.
This should matter. The lack of information on contracts awarded to G4S and their monetary value obscures a high risk of conflicts of interest or, worse, may indicate that collusion, cronyism, kickbacks, or some other form of corruption was instrumental in G4S’s financial success. The Public Procurement and Asset Disposal Act tries to prevent this by prohibiting public officers from taking part in any procurement process in which they have an interest, and also expressly forbids inappropriate influence in procurement decisions.
Under section 176 of the Act, any person found guilty of violating this law faces up to 10 years of imprisonment or a fine of up to KSh4 million, or both. Should the offending party be a body corporate, then a fine of KSh10 million will apply. The Act also requires procuring entities to publish tender notices and awards. This means that any public entity that has failed to publish contracts awarded to G4S and other public entities is in breach of the law. However, the Act is unclear on whether this is a punishable offence.
Given the lack of publicly available information, Kenyan citizens have no way of checking whether they are getting the best value for their money with regard to these contracts.
G4S’s questionable corporate structure
According to records filed with the Company Registrar, G4S Kenya Ltd is 82 per cent owned by a Dutch holding company. In the world of financial crime and illicit financial flows, “Dutch holding company” is a red flag for tax avoidance. The snapshot below shows that the G4S structure comprises of a series of subsidiaries and holding companies ultimately owned by G4S plc based in the United Kingdom.
This should concern Kenyan taxpayers. This company structure raises questions of tax planning and tax avoidance, especially since Oxfam ranked the Netherlands third out of fifteen countries that “facilitate the most extreme forms of corporate tax avoidance”. The European Parliament has also labelled it a tax haven. Corporate tax havens have been known to help big business cheat countries out of billions of dollars every year and in fact, a 2016 study by Oxfam Kenya shows how companies in the extractives industry use conduit companies in the Netherlands for tax avoidance.
If public procurement continues to be shrouded in secrecy, then citizens will have no way of finding out whether G4S and other multinationals are indeed cheating the Kenya Revenue Authority (KRA) out of much-needed taxes, or whether they are relying on political patronage to win government contracts paid for by taxpayer money.
The need to strengthen the access to information regime in Kenya
When I reached out to G4S to clarify some of the points raised in this article, they told me that I had no written authority to write about G4S, and should I attempt to publish anything without their written authority, it would “cost me”. When private companies have dealings with the government, when they have prominent politicians sitting on their board of directors, and when they play critical public roles such as the provision of security, then citizens and especially journalists should have the right to look into their affairs, and the veil of secrecy ought to be lifted.
There is a need to demand increased accountability for companies that conduct business with government agencies. Without full disclosure, there is a potential risk that Kenya may be losing much needed tax revenues that would greatly ease the tax burden on ordinary Kenyans.
In the world of financial crime and illicit financial flows, “Dutch holding company” is a red flag for tax avoidance.
I also contacted the Commission on Administrative Justice, otherwise known as the Ombudsman, the agency in charge of enforcing the Access to Information Act of 2016. After my requests for information to JKUAT and the Ministry of Energy were denied, I asked the Ombudsman whether they could offer any redress mechanisms to citizens who are denied their right to information, or if government agencies faced any penalty for failure to disclose information. Ironically, I was informed that I had to write a formal letter on the letterhead of the organisation that I represented, which would then go through their internal processes before eventually landing on the relevant officer’s desk. As of the writing of this article, my request is still pending. Nonetheless, the Ombudsman indicated through their official twitter account that requests for information are valid as long as they provide sufficient details of the information sought. Furthermore, such requests do not have to be in writing.
Yes, requests should provide sufficient details of the information sought. This includes the particulars of the applicant, name of the institution from which the information is being sought, details of the information sought, and nature of intended access #Julisha
— Ombudsman Kenya (@KenyasOmbudsman) February 22, 2019
The request does not have to be in writing, it can be made orally. In such cases, the Information Access Officer should reduce it to a written form and give a copy to the person making the request #Julisha
— Ombudsman Kenya (@KenyasOmbudsman) February 22, 2019
Unless the government starts respecting the constitutional right of access to information, we shall continue to lose billions that could have gone towards the public good, such as for example, providing social services in education, healthcare, or social welfare cushions for small business owners that have been hit hard by the COVID-19 control measures.
BBI: Uhuru Should Heed the Lessons of History
An accurate account and analysis of past constitutional innovations demonstrates very clearly the need for wide consultations among the populace and a broad-based consensus.
The rapprochement of March 2018 between Uhuru Kenyatta and Raila Odinga, now famously referred to as “the handshake”, which kick-started the BBI consultation process and culminated in the Report of the Steering Committee on the Implementation of the Building Bridges to a United Kenya Taskforce Report, is emblematic of the rough-and-tumble that is the country’s tumultuous political history.
The report of the taskforce provided long-awaited principles and recommendations for the construction of “a new Kenyan nation,” including several changes in the current constitution. But a portion of Kenyatta’s Mashujaa Day speech on 20 October 2020 suggests a need for caution. It was rather ahistorical, and unfortunately, oblivious of numerous imposed top-down attempts at constitution-making and other general attempts to foist government declarations or policy documents on ordinary people.
Hoping to, perhaps, prepare the ground for elite-led changes to the 2010 constitution, the president’s speechwriters sought to arrive at this end by using a portion of the speech to remind citizens that constitutions are not static but often change. This process, the writers asserted, should be a product of “constant negotiation and renegotiation of nationhood”, and building a constitutional consensus. The italicized end of the president’s paraphrased speech is instructive, and erroneous in the light of the country’s constitutional history.
Moreover, referring to the Steering Committee’s report, the speech sought to prepare the ground for constitutional and other changes by calling for the building of “a sense of national ethos” that will emphasize belonging and inclusion. This, as the committee rightly observed, must include “documenting our history honestly”. But not so the president as per his speech, notably.
Most historians and citizens would agree that a key element in such an honest history must be factual accuracy regarding past events and interpretations solely based upon such facts. It is this latter point that the speechwriters disregarded in putting forth an account of constitution-making. While correctly emphasizing the need for a constantly moving exercise requiring, again, note, a consensus among political leaders and wananchi, the examples from which they drew during the colonial era demonstrate no such thing. Neither the Lyttleton Constitution of 1954 nor the Lennox-Boyd Constitution (announced in 1957 and implemented in 1958) were the product of a consensus.
First, both constitutions were imposed by the secretaries of state for the colonies after whom they are named, and the terms were dictated by the then governor Sir Evelyn Baring and his advisors—does this ring a bell yet? Elitist. Moreover, the Kenyan population, and particularly Africans, had no input whatsoever in the Lyttleton Constitution, which was imposed even though all six of the Africans appointed to the Legislative Council (LegCo) refused to accept the Lyttleton plan. That plan was not about inclusion at all, but its main purpose was to create a multiracial council of ministers in which, in the early stages of planning, no African would hold a portfolio. Lyttleton eventually agreed for one ministry to be headed by an African, but it ought to be recalled that the constitution provided for three European settler ministers to join the two settlers already holding the important portfolios of finance and agriculture.
Neither the Lyttleton Constitution nor the Lennox-Boyd Constitution were the product of a consensus.
The key group for Lyttleton and the governor in Kenya’s racial politics of the time was thus the European settler politicians. The acceptance of the plan by most of them constituted Lyttleton’s success and left the African population, among whom none could vote for representatives to the Legislative Council, totally excluded. While there was little inclusion, African LegCo members did gain a promise from Lyttleton that the colonial government would take steps to provide for African representation. The promise, imposed without the agreement of settler representatives, led to the first African elections of March 1957. The eight African Elected Members (AEM) immediately launched a campaign for change that would produce a more inclusive constitutional order (European voters elected 14 LegCo members and Asian voters 6).
Amazingly, Kenyatta’s speechwriters cast this as consensual by the statement that if the Lyttleton Constitution “was wrong, it was made right” by the Lennox-Boyd Constitution. This interpretation has no basis in fact as all the European settler members of LegCo opposed the AEM campaign, which included a refusal to accept the two ministerial positions reserved for Africans in 1957. Significantly, most Asian political leaders came to support the AEM demands. Just as in 1954, then Secretary of State Alan Lennox-Boyd, in response to the AEM campaign, flew to Nairobi in late 1957 to implement constitutional changes suggested by Baring. He was prepared to increase the number of AEM in the LegCo and determined to make them accept ministerial portfolios and introduce what came to be known as specially elected members to the LegCo. AEM rejected these proposals, including the six additional LegCo seats for Africans and the creation of a council of state.
Convinced he knew best, and that the only views that mattered were those of the European settler population, an infuriated Lennox-Boyd went ahead anyway, giving up his attempt to build consensus and ignoring the opinions of most of the Kenyan population. The result was continued political exclusion, and a period of on-going political tension and racial hostility. The AEM boycott of the Lennox-Boyd innovations (except the six additional LegCo positions) by April 1959 forced the British government to accept that the Lennox-Boyd plan had become unworkable. The solidarity of the AEMs won the battle.
But it was a glaring distortion of history to single out Oginga Odinga, Daniel Toroitich arap Moi, and Masinde Muliro as heroes in the president’s speech while at the same time seeming to say that as AEMs they consented to the changes desired by Lennox-Boyd and Baring. Nothing could be further from historical fact as the archival records of the discussions leading to the Lennox-Boyd Constitution clearly illustrate. Asian political opinion supported the need for constitutional change, but several of the European elected members of LegCo did not favour discussing constitutional changes. The years 1959 and 1960 brought an end to consensus among the settler political elite.
The first Lancaster House constitutional conference (LH1) thus brought together Kenyan LegCo members who viewed constitutional change very differently with few apparent grounds for agreement. While the settlers were divided, the 14 AEM delegates were united in a firm stand in favour of a rapid democratic transition for Kenya leading to self-government and independence within a short period of time. European delegates were, by contrast deeply divided, with the right-wing United Party favouring continued colonial rule and the New Kenya Party (NKP) delegates favouring a gradual transition to independence, and a multiracial executive and parliament with reserved seats for Europeans and fewer for Asians. The new Secretary of State Iain Macleod, like his predecessors, was unable to find or facilitate consensual agreement on a new constitution. Contrary to the claims of the speechwriters, therefore, there was no common ground negotiated among the delegates.
Macleod moved beyond this stalemate by putting a set of proposals before the by-now weary delegates that they were required to accept in full or reject. This was a quite different approach than in 1954 and 1957. Macleod then cleverly manoeuvred the African, Asian, and NKP delegates into acceptance of his terms that went some way toward meeting the demands of African delegates, but not others, for instance, universal suffrage, the appointment of a chief minister, and the release of Jomo Kenyatta. In a real sense, for that reason, the LH1 constitution was an imposed one, and indeed many living in Kenya at the time rejected it.
The 14 AEM delegates were united in a firm stand in favour of a rapid democratic transition for Kenya leading to self-government and independence within a short period of time.
Nonetheless, the AEM accepted it as ending European settler political predominance in Kenya and the new plan as a step on the way to independence. Over subsequent months, however, the consensus that had united the AEM disappeared as bitter divisions developed regarding the type of constitution Kenya should adopt as an independent nation. The competing visions of the two political parties, KANU (a unitary republic) and KADU (majimbo or a federal republic), were difficult to reconcile. This formed the background for the second Lancaster House conference in 1962. The absence of agreement on the basic constitutional structure was clear from the first meeting, and again, a British colonial secretary was forced to impose a settlement that did not take the form of a constitution but of a framework on which a coalition government in Kenya would work out the final document. This took a year and required the British government to draft the self-government constitution and decide key provisions because the KANU and KADU ministers could, well, not agree.
This brief narrative serves to make it clear that there was no consensus here anymore than with the three previous constitutional talks. It is thus, rather puzzling, if not amusing in an odd way that, in a desire to promote negotiated and consensual constitutional innovation under the auspices of the BBI in the year 2020, and by the president no less, these should be the examples put before the Kenyan public in justification. Rather, an accurate account and analysis of earlier or past constitutional innovations demonstrate very clearly the need for wide consultations among the populace (unlike the episodes described above where only a narrowly defined political elite participated) and a broad-based consensus. In other words, the same message can be got across to the public by relating the correct facts. As the speechwriters noted: “The more we ponder our history in its truest form, the more liberated we become.” It is always best to heed the lessons of history, not to ignore it altogether, and repeat the same grievous mistakes.
Off the Rails: Angola’s SGR Scandal
Over the past 20 years Angola has been bilked of billions of US dollars earmarked for public projects that delivered little or no actual benefit to the country. And an investigation by Maka Angola into a long-promised revamp of the country’s railway system, suggests the government is still being conned into handing over millions of dollars on schemes that fail to materialize.
For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record. Invariably these were shell companies set up by Dos Santos cronies that never had the wherewithal to deliver on their promises. It was a scam by which the state kleptocrats diverted public funds into their own bank accounts. Under reformist President João Lourenço, things are supposed to have changed. But have they?
An investigation by Maka Angola into a billion-dollar deal for the supply and maintenance of locomotives for the National Institute of Angolan Railways suggests the authorities may need to take a much closer look at what, if anything, they got for their money.
We focus on one of three contracts from May 2015, all signed on the same day on behalf of the Angolan government by the then Secretary of State for Transport, Mário Domingues, and the legal proprietor of AEnergia S.A., Ricardo Filomeno Duarte Leitão Machado, a Portuguese national who owned a 99.9% majority share of the company.
One of these contracts, worth 500 million US dollars, was for the rebuilding, modernization and adaptation of the railway maintenance yards in the cities of Luanda, Lobito, Huambo and Lubango.
In 2013, the Ministry of Transport had signed a Memorandum of Understanding with General Electric to get Angola’s railway system up to date and working again.
For two decades under former President dos Santos, Angola repeatedly awarded multi-million-dollar contracts for complex projects to ‘johnny-come-lately’ companies with no track record
Two years later, AEnergy presented itself as GE’s business partner to draw up and sign three contracts to turn the plans in the Memorandum into reality. The very next day, AEnergy submitted its invoice for an advance of US $75 million against future works and, surprisingly, the invoice was paid straight away – before any of the required checks and balances had been effected.
The contract contained a stipulation (in Clause 20) that it would only take effect once it had been reviewed and signed off by the Tribunal de Contas (the national audit office) and the Angolan President. Neither had done so.
AEnergy’s owner, Ricardo Machado, says: “We were advised by the Ministry of Transport that it had submitted the paperwork to the national audit office in good time, in compliance with the legal requirements it was obliged to observe.”
Mr Machado say that the US $75 million received by AEnergy was an advance against expenses: “Bearing in mind the requirements of the entities that were financing the work, the government agreed to make an immediate first payment so as not to delay the process of manufacturing the priority equipment needed for both the new and updated locomotives.”
He says the problem was that financing of the project was due to come from GE Capital (part of the General Electric group) as outlined in the Memorandum of Understanding, but the money was simply not available in 2016 and 2017. To date, he says, there still hasn’t been funding for the contract to be complete.
But according to Mr Machado Energy “delivered the priority supplies earmarked by Mintrans (the Ministry of Transport) and the value of the services and rolling stock supplied was exactly equal to the amount disbursed.”
Unfortunately the Ministry has no record of any of this.
Where’s the Proof?
A well-informed source as the Ministry of Transport (speaking on condition of anonymity) told Maka Angola that US $75 million could not have been authorised by the Ministry as it didn’t have that money in its budget. Our source believes that the only possible source of the funds was the Angolan Central Bank, the Banco Nacional de Angola (BNA), whose governor at that time was José Pedro de Morais.
Our source says: “Someone must have given orders to the BNA to pay the US $75 million. There ought to be documentation to prove who gave the order and on what basis. Surely if AEnergy had undertaken any contractual work, there would also be records showing how that sum was spent – but we (at the Ministry) have not received any documentary evidence. We simply have no idea what AEnergy did with the money.”
“Furthermore, AEnergy has no justification in citing equipment donated to Angola by General Electric as part of its corporate social responsibility programme as though these were materials purchased by AEnergy with the advance payment.”
“We are talking about mobile medical clinics, training simulators and drones for checking rails; none of these were purchased by AEnergy. None. In fact the Ministry had to order AEnergy logos to be removed from these items because they were donated by GE and had no connection whatsoever with AEnergy.”
Our source has seen nothing to suggest that AEnergy has used any of the US $75 million to make any investment towards infrastructure or training: “Do the math. Then ask yourself: Were we robbed?”
Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources.”
In previous years the Ministry could count on a budget of US $1.5 billion for projects – this year its budget is barely US $100 million. Officials there say the government should conduct an exhaustive audit to recover all the missing millions – that would be a huge boost to investment in essential infrastructure.
Was the Contract Even Legit?
Maka Angola’s legal analyst, Rui Verde, emphasises that the process of entering into a contract with AEnergy was incomplete and that the huge sum handed over to the company was not legally justifiable.
“There is the possibility that this was a criminal act,” he says, “and the authorities should be looking into whether any fraud, peculation or money laundering took place.”
He notes that from a legal perspective it is perplexing that the contract fails to identify the equipment, or works, necessary to remodel and modernize the rail yards. It gives AEnergy carte blanche to draw up a Plan of Work and make its own decisions about what it is going to do. “The terminology ‘to remodel and modernize’ is ambiguous and vague and Clauses 3 to 8 in the contract seem to give the private company total discretion over how to spend US $500 million without having to account for it,” says Rui Verde.
“A properly-drawn contract would include a specific Plan of Work, spelling out what equipment is required at each stage. This had none of the specifics required to guarantee how public money was to be used – it was the equivalent of handing AEnergy US $500 million in a brown envelope and letting them decide what to do with it.”
Senior officials at the Ministry of Transport are said to be furious at the lack of any concrete information regarding the project, telling Maka Angola “mislaying just one million dollars would be important, let alone US $75 million, when like every other government institution we desperately need sufficient financial resources
As Rui Verde reminds us, “this brings to mind a similar scheme already before the courts in which the accused argued they needed the US $500 million upfront as surety to secure a US $30 billion loan. In fact, there was no loan on offer.”
Was this really another dodgy deal? In the words of social activist Luaty Beirão, was it just another case of the “embezzlement without end” that was part and parcel of the Dos Santos Administration. In the meantime Angola is still waiting to find out.
Multi-billion-dollar deals between the government of Angola and the US corporate giant General Electric for showpiece rail and energy infrastructure projects are under investigation after reports of scandalous “irregularities” involving an intermediary company.
As reported by Maka Angola, the projects were all part of a Memorandum of Understanding, signed by GE and the Angolan government in 2013. Two years later, three separate contracts by which these proposals would be executed were drawn up by Aenergy (Aenergia, S.A.) acting as GE’s intermediary or “channel” partner, whose legal owner is Ricardo Leitão Machado, a Portuguese national.
This was how the former Angolan administration did business with the world. Under President José Eduardo dos Santos, foreign investors and businesses were required to enter into partnership with the Angolan private sector. All too often, these were companies with nominal owners shielding the involvement of politically exposed persons whose primary goal was to divert Angolan public funds into their private bank accounts.
The Railway Network Deal
Maka Angola reported concerns over the first of those deals: a contract signed with Angola’s Transport Ministry for the modernisation of the Angolan railway system. The project was supposed to be fully funded by a loan from a GE subsidiary, GE Capital, yet the Ministry of Finance coughed up (without prior approval) US $75 million US upfront to Aenergy, with little to show for it several years down the line.
Exercizing its right to reply, a lengthy statement from Aenergy (via PR firm Hill+Knowlton Strategies) says that all its actions in connection with that contract were legal and transparent and that the 20% of costs not covered under the deal with GE were due to logistics and import costs.
Angola’s Transport Ministry has a different opinion.
The Electricity Turbine Deal
This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.
Allegedly, a version of the Aenergy contract suggests GE Capital’s U$1.1 billion would cover the cost of 8 GE turbines. In fact, GE supplied additional turbines but somehow the Ministry says it was persuaded by Aenergy’s legal owner, Ricardo Leitão Machado, that the surplus turbines had no connection with their deal.
As Angola’s increased needs for energy in the regions became clearer, by 2018 Energy Minister João Baptista Borges submitted a proposal to President João Lourenço that Angola revise its requirements to increase capacity for Lubango (in the central highland province of the same name), Dundo (in the Northeastern province of Lunda Norte) and Tômbwa (on the coast of Namibe province. He argued they could achieve this with just four extra turbines, by reducing the turbine capacity for the Soyo I power station (in Northwestern Zaire province), thus remaining within the budget agreed with GE Capital.
When this was put to Aenergy and GE at a meeting in December 2018, there was uproar. Aenergy was set to sell an extra four turbines on to the Angolans, for more than US $120 million, but the GE Angola representatives were adamant that the additional turbines were already included in the deal, as confirmed in writing by GE’s regional executive director, Elisee Sezan.
In short, GE had funded and supplied 12 turbines to Angola; Aenergy had supplied only eight of them while asking the Ministry to pay again for the extra four.
This investigation looked in detail at another of those contracts with Aenergy from May 2015, in this instance with the Angolan Ministry of Water and Energy, by which GE would provide turbines for hydroelectric projects in Angola, also to be financed by GE Capital.
Within days the Energy Minister sent a written report to President Lourenço (dated December 18, 2018) citing a breach of trust and no confidence in Aenergy. From that date onward, Angola began the process of extricating itself from its contractual obligations to Aenergy to deal directly with General Electric (as arguably should have been the case from the very start). On completion of the audit of their contractual relationship, Aenergy was found to owe Angola close to US $118 million.
President Lourenço was finally able to issue a decree authorizing the revocation of the contracts with Aenergy on the grounds of “violation of the principles of trust and good faith” in August 2019 and the following month a detailed dossier was sent to the office of the Attorney-General of the Republic, to launch a criminal investigation and request the seizure of the as yet undelivered turbines. On December 6, 2019, the Provincial Court of Luanda ordered the seizure of equipments in possession of Aenergy, worth US $114.2 million, all of which had been acquired with public funds.
It was only to be expected that Aenergy would react and launch an appeal against the Ministry’s injunction and for now the ponderous legal process is in course. One more mess, left by the Dos Santos kleptocracy, for which the Angolan people pay the price.
This article was originally published by our partner MAKA Angola.
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