The exploitation of coal, a hard black road made up of 65-95 per cent carbon that burns when set alight, has a long history going back thousands of years.
Prospecting for coal in Kenya started in 2000 and the discovery of large, commercial coal deposits in the Mui Basin in Kitui — a 500 square kilometre area about 270 kilometres east of Nairobi — was announced in 2010.
The government revealed during the recent budget reading that it has allocated funds for coal mining and there are plans to drill 20 more coal exploration wells.
Kenya is doing this just as the world is scaling down coal mining and rolling out plans to phase out coal and replace it with renewable energies. The government has already signed two concession agreements with investors and there are plans to supply coal to the proposed — and contested — 1050 MW Lamu coal plant 350 kilometres away, and to the proposed 960 MW coal plant to be established in Kitui County.
Approximately 100,000 people (more than 30,000 households), primarily small-scale farmers, will be displaced to make way for the coal mining operations.
The promoters of coal mining in the Mui Basin are the government, through the Ministry of Mining and Petroleum, and private investors. The government has already awarded concessions for the four blocks available in the Mui Basin. The first one was awarded to a Chinese company called Fenxi Mining in 2011, for blocks C and D, while the second, for blocks A and B, was awarded in 2015 to a consortium of two companies, HCIG Energy Investment Company and Liketh Investments Kenya Limited. The consortium also won the tender to construct a 960 MW coal plant in the eastern part of the Mui Basin under an Independent Power Producer (IPP) framework in 2015.
The case for coal
The decision by the government to mine coal at a point when the world is fighting the effects of climate change and phasing out coal is quite surprising. Even though coal played a significant role in building the economies of many developed countries, this came at a high cost. Moreover, the technology to render renewable energy competitive was not yet available. Now it is.
So, why on earth would Kenya mine coal? The rationale is that Kenya will generate a lot of money in revenue, provide jobs, and aid manufacturing. But is this accurate?
The Ministry of Energy and Petroleum estimates total coal deposits to be north of 1 billion tonnes valued at US$75 billion (about KSh7.5 trillion). So, on the face of it, one can understand why both the national government and the county government of Kitui are keen to proceed in haste to get the coal out the ground.
However, the proponents fail to mention that since coal exploration and extraction are expensive ventures (hence the concession agreements with foreign companies), Kenya will not be receiving all of the expected KSh7.5 trillion from the extracted coal. The mining companies have to recover their upfront costs (free of any royalties) before sharing the proceeds with everyone else (government, community, etc.). This is a problem that Kenya is already facing in Turkana following the discovery of oil reserves in the Lokichar Basin, where the government and Tullow Oil now disagree on US$2 billion in exploration costs for Tullow’s six years’ work in the Turkana oil fields.
The Mining Act, enacted in 2016, and the concession agreements signed in 2011 and 2015, detail how the royalties collected will be shared: 70 per cent for the national government, 20 per cent to the county government, and 10 per cent to the community. But since the concession agreements are yet to be made public, we can’t tell what percentage of the total revenues from the sale of the coal will be paid out in royalties. This is problematic.
Also causing excitement are the supposed job opportunities that the coal mining will provide. According to the census data released in 2020, 39 per cent of Kenyan youth are unemployed, four in every ten youth. The assumption is that there will be many opportunities for employment — direct and indirect — for this group.
Direct employment will be for those working in the mines, those hired to transport coal to the proposed coal plant sites in Lamu and Kitui, and those who will be fortunate enough to be employed in the power plants to process the coal.
Indirect employment will be provided by the manufacturing companies that will be created as a result of what the government and those supporting the coal project claim will be cheap and adequate power. All this is speculation.
We remain sceptical, particularly because most of these jobs, especially the high-paying ones, will be taken by expatriates from China since we lack expertise in coal mining and running coal plants.
President Kenyatta has declared manufacturing one of his administration’s deliverables. The target is for manufacturing to contribute up to 20 per cent of the Gross Domestic Product (GDP) by 2022; it currently represents 9.2 per cent of GDP. It is common knowledge that manufacturing is energy intensive.
Most of these jobs, especially the high-paying ones, will be taken by expatriates from China since we lack expertise in coal mining and running coal plants.
Those pushing coal argue that we need to utilise our deposits to power our manufacturing dream and enjoy the economic benefits that will ensue. However, the country currently has an overcapacity in electricity and coal does not compare favourably with other sources such as geothermal. Therefore, having a coal industry in Kitui will increase the electricity tariff, thereby exponentially increasing electricity costs for manufacturers that will be passed on to the consumer of finished goods. Moreover, our manufacturing companies won’t be able to compete with imported products due to the high electricity tariffs they will face.
The case against coal
To make an informed decision about whether we should mine the coal that we have discovered in the Mui Basin, it is crucial that we look at what we have to lose if we go in that direction. Are there other means by which we could attain our ambitious goals?
Below are the reasons why the government should leave the coal in the ground.
Our laws are clear that any natural resources that are discovered should be utilised to benefit the people of Kenya. The Constitution of Kenya 2010 classifies minerals (such coal) under public land. Further, the law also elucidates that public land belongs collectively to the people of Kenya as a nation, as communities, and as individuals.
The community in the Mui Basin is vehemently opposed to coal mining in the region. The women in particular have raised concerns over informal land tenure rights. The community is pondering where they and their families will go when they abandon their ancestral lands to coal mining.
Women stand to lose the most if the community is evicted from the Mui Basin to give way to coal extraction. In Kenya, women traditionally have less control over land, with significant decisions being made mainly by men. They have had to resign themselves to enjoying only the user rights to the land (farming, grazing, fetching firewood, etc.)
Since the land in the Mui Basin is mostly without title, the project proponents have only sought the views of the heads of families, leaving out women who are important stakeholders and who stand to be severely affected by the proposed coal mining.
The community is pondering where they and their families will go when they abandon their ancestral lands to coal mining.
We need to ask ourselves whether development that separates families, friends and clans and evicts them from their ancestral homes qualifies as sustainable development. Should development improve and enhance the standard of living of the community in the Mui Basin or should it serve to sever family ties? Is it wise to move ahead with coal mining given the human rights concerns regarding the displacement of communities and the dispossession of residents, especially women, through the loss of their informal land tenure rights?
The jurisprudence on public participation under our 2010 Constitution is abundantly clear but the people of the Mui Basin, and Kenyans in general, have yet to exercise this fundamental right and value enshrined in our constitution.
The coal in the Mui Basin is close to the surface, and therefore the default mining method will be open-cast mining (defined as “a surface mining technique of extracting rock or minerals from the earth by their removal from an open-air pit”).
Inevitably, open cast mining will cause pollution, disrupt the area’s fragile ecosystem, contaminate groundwater, and cause unprecedented harm to local flora and fauna.
The Least Cost Power Development Plans 2017-2037 confirm that coal mining (open-pit) has significant environmental and social impacts and questions the decision to proceed with this venture given that the coal in the Mui Basin is of a lower quality than coal imported from other countries like South Africa.
It’s important to note that mining in Kenya is still a nascent sector, contributing a tiny fraction — about 1 per cent — of GDP.
Global coal prices have been fluctuating wildly due to a dwindling and unpredictable market and the global downward trend in coal financing and development. As a result, over 100 banks and financial institutions have announced their divestment from coal mining and coal power plants.
The Mui Basin coal is known to have a low calorific value and would thus attract a low price, making it less attractive than high-quality imported coal. It is unlikely that other coal users such as cement and steel manufacturers will find Mui coal attractive.
We need to ask ourselves whether development that separates families, friends and clans and evicts them from their ancestral homes qualifies as sustainable development.
Additionally, evacuating the coal in the Mui Basin for processing or export will require a significant investment. For instance, if the coal were to be utilised at the proposed Lamu coal plant, constructing the railway to the plant will cost north of KSh290 billion, making the railway extension more expensive than building a coal plant in Kitui or Lamu.
In the most recently updated Least Cost Power Development Plans for 2017-2037, even the government doesn’t rank coal favourably over geothermal energy and hydroelectricity. The report concludes that the Lamu coal plant will be severely underutilised (only 0.9 per cent of the capacity to be realised with moderate growth in demand). Moreover, this will affect the coal mined in the Mui Basin, as it will have no market to supply.
The above factors make mining coal in Kenya a risky affair that will result in stranded assets and a substantial economic burden for Kenyans.
A plethora of toxic minerals and heavy metals are released into the soil, air and water bodies in the process of mining coal, posing significant health concerns. Among the health impacts of coal are diseases like Silicosis, a lung disease caused by inhaling silica dust. Black lung disease (known more formally as coal workers’ pneumoconiosis) is caused by inhaling coal dust and carbon that causes scarring in the lungs and impairs the ability to breathe.
Estimates show that 1,200 people in the US still die from black lung disease annually. According to a 2001 US study, there were higher than usual numbers of cardiopulmonary disease cases, chronic obstructive pulmonary disease, hypertension, lung disease, and kidney disease among residents who live near coal mines.
The situation is even worse in developing countries like Kenya, where regulations are lacking, and those in place favour coal proponents. This means that the impact of coal mining on health among members of the Mui Basin community members will likely be higher than what we see in developed countries.
Coal mining causes different kinds of pollution that cause environmental, health, and other concerns. These include noise, water and air pollution.
As coal is mined, the noise can be heard from a distance of up to 10 miles (about 16 km). While one could argue that noise pollution is the least harmful environmental effect of coal mining, it causes discomfort to communities living near the coal mines and those working in the mines.
As far as water pollution is concerned, acid mine drainage — highly acidic runoff from coal stocks and handling facilities — infiltrates waterways, contaminating the local water supply. This makes the water unsafe for consumption and affects the PH balance of surrounding water bodies such as lakes and streams.
Open-cast mining will cause pollution, disrupt the area’s fragile ecosystem, contaminate groundwater, and cause unprecedented harm to local flora and fauna.
Kitui County, where the Mui Basin is located, is a semi-arid region that is highly dependent on groundwater for domestic use. Once the water becomes unsafe for consumption through contamination, the residents will be severely affected. They will end up paying a fortune for clean water (by either purchasing filtered water or walking long distances to find safe water) or continue to use the now contaminated water at the expense of their health.
What is worse is that the effects of acid mine drainage sources can be felt years after the coal mine has closed and the proponents of the project have moved on to other interests.
One of the by-products of coal mining is coal dust, which is dirty and smells unpleasant. It is dangerous if inhaled, especially over a prolonged period. Prolonged exposure to coal dust puts one at risk of contracting “Black lung disease”, leading to lung cancer, pulmonary tuberculosis, and heart failure if left untreated.
One of the biggest concerns of coal mining is acid rain. The high acidity of the mine drainage remains in the water supply, even through evaporation and condensation, eventually coming down in the form of “acid rain”, thus perpetuating the cycle of pollution.
We also can’t rule out accidents; coal mines do collapse (both accidentally and due to nature-induced reasons). Collapsing mines cause thousands of deaths; China experienced 4,600 deaths from coal mine accidents in 2006. We could also experience coal fires that fill the atmosphere with smoke containing carbon dioxide, carbon monoxide, methane, sulphur dioxide, nitrous oxides, and other greenhouse gases and fly ash.
Kitui County, where the Mui Basin is located, is a semi-arid region that is highly dependent on groundwater for domestic use.
The above reasons are a cause of grave concern; Kitui County could lose countless lives to collapsing coal mines, and if coal fires were to occur, the county would stand to lose vast tracts of farmland, affecting food security.
Access to information
The belief is that coal will give a big boost to the country’s development. However, the secrecy surrounding the project makes this is doubtful; in effect, the government and the investors that have mining rights in the Mui Basin have yet to make public the concession agreements they have already signed.
The community in Kitui, and Kenyans in general, have been left to speculate over the contents of the concession agreements. It is concerning that both the government and the project proponents are reluctant to make the agreements public, if indeed they are in the public interest.
After separating the wheat from the chaff and carefully examining the pros and cons of mining coal in Kenya, we have concluded that it would be unwise for us as a country to continue down this path. If we do go ahead with the coal project, we will be left with stranded assets and a substantial burden to add to an already struggling economy.
China is dismantling its coal plants and is likely to sell them to Kenya as new. This will happen because we have yet to see a “sweetheart” deal between our corrupt government and China that is free of corruption.
Common sense demands that we count our coal losses and move towards sustainable renewable energies that are greener and more cost-competitive.
We as a country must resist this project by all legal means necessary. It is the only patriotic thing to do.
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BP Millions Promised to Offshore Firm Run by Angolan Tycoon Accused of Corruption
The investigation was based on hundreds of pages of confidential files provided by Jonathan Taylor, a former SBM lawyer turned whistle-blower. The documents include emails, contracts, legal advice and corporate intelligence reports. Journalists also had access to hours of secret audio recordings of SBM crisis meetings.
British oil major BP paid $100 million to cancel a shipyard construction project in Angola only for a third of the money to be promised to a Panamanian company run by a powerful and allegedly corrupt Angolan official, according to whistle-blower documents seen by Finance Uncovered.
The documents shine new light on the enormous influence of oil executives at the top of Angola’s state-owned oil company Sonangol, who have for decades acted as gatekeepers to Sub-Saharan Africa’s second largest hydrocarbon reserves.
After cancelling an order for floating oil platforms from the Paenal shipyard in Angola, BP wired its cancellation fee in November 2011 to SBM Offshore N.V., a specialist construction company that had been developing the yard and preparing to lead the build.
Two months later, SBM signed a contract agreeing that, after deducting certain costs, the remaining $70.3 million would be shared, on an equal basis, between it and a secretive Panamanian company called Sonangol International Inc (SII).
There is no suggestion this agreement was reached with BP’s knowledge or consent.
The 50-50 split had been verbally requested by Baptista Sumbe, who was then a top executive at Sonangol, according to SBM documents. Sumbe was also president, chief executive, secretary and treasurer of SII, as well as being the sole signatory for at least one of its bank accounts, according to filings on the Panama corporate register.
More concerning still — and initially unbeknown to SBM’s newly promoted chief executive Bruno Chabas — SBM had been quietly paying millions of dollars in “commissions” to a second Panamanian company run by Sumbe, called Mardrill Inc, without anything in return. This shocking revelation, which later featured in multiple court cases, was discovered by SBM’s lawyers conducting an internal investigation in early 2012 following an unrelated tip off.
This history of bribes to Mardrill had for years been kept a closely held secret, known only to former SBM chief executives and few, if any, others inside SBM, papers in a Swiss court case would later explain. In January 2012, Chabas (left) did not know about it when he signed the agreement to pay $35 million to SII — though he found out days later.
At that point, having learned that Sumbe was suspected of corruption, the SBM boss could have halted the payment and torn up the contract with SII.
Finance Uncovered asked SBM whether, despite its concerning discoveries, it still went ahead and paid $35 million to SII in 2012. The company declined to answer.
In a statement, SBM said Finance Uncovered was asking about “dated issues… the company has long put behind it”. It added: “[Our] legacy issues have been widely reported on for years and have been resolved with multiple authorities around the globe. In 2012 a complete new management team took over.”
The trail of money and promises, leading from BP to Panama, was unearthed in a collaborative investigation involving: Finance Uncovered, De Telegraaf in the Netherlands, Expresso in Portugal and The Telegraph in the United Kingdom.
The investigation was based on hundreds of pages of confidential files provided by Jonathan Taylor, a former SBM lawyer turned whistle-blower. The documents include emails, contracts, legal advice and corporate intelligence reports. Journalists also had access to hours of secret audio recordings of SBM crisis meetings.
Taylor has separately passed documents to the Serious Fraud Office and has said he is willing to share the same files with prosecutors in other countries.
Together, these files provide a front-row view of SBM’s tortuous deliberations as it was forced, on the one hand, to face up to a past built on bribes, while, on the other hand, seeking to remain in favour with some of the most corrupt regimes in the world.
Sumbe’s request that SBM share half the money received from BP sounded simple enough, but it sent the $3.3 billion construction company, listed on the Amsterdam stock exchange, into a spin. Without a written contract that entitled Sonangol or SII to those funds, Chabas and the SBM legal team feared such a payment could look like a bribe.
Justifying the payment
SBM decided it needed to come up with a justification before handing over the funds — a rationale that could be set out in a formal contract.
Whistleblower documents reveal executives explored multiple proposals, consulting with three law firms and hiring corporate intelligence firm Kroll to carry out background checks. Finally, a summary of the planned payment was sent to non-executives on SBM’s audit committee for sign off.
The result was a January 2012 contract, signed by Sumbe and Chabas, which, at first glance, appeared to be one of the most polished and scrutinised agreements SBM had contemplated in years.
But investigations by Finance Uncovered and its media partners have cast the agreement in a different light.
One of the main justifications SBM put forward for its decision to pay SII was that the Panamanian company was being reimbursed for money wasted on developing the Paenal yard in preparation for BP’s oil platform order. But whistleblower documents show SII did not incur any meaningful expenses at the shipyard; much of the costs were instead financed by a loan from SBM.
SBM also argued that the money from BP ought to be evenly shared with SII because the Dutch construction firm had regularly split joint venture income with Sonangol companies in this manner since the 1990s. However, the Paenal yard was not a 50-50 joint venture. SBM and SII each had only one-third stakes in the holding company that controlled Paenal. The remaining one-third was owned by Korean company Daewoo Shipbuilding and Marine Engineering Co.
A spokesperson for DSME told Finance Uncovered she was unable to find evidence that the Korean company knew of the $100 million from BP, or SBM’s plans to split it with SII.
As well as putting forward seemingly misleading justifications for the planned £35m payments to SII, SBM appeared not to have heeded warnings contained in early legal advice. For example, lawyers from Berwin Leighton Paisner, now part of Bryan Cave Leighton Paisner, recommended SBM should take steps to ensure funds not reach Sonangol or its executives.
One BLP lawyer wrote: “From the materials we have reviewed, it is not clear what (if any) financial or other risk Sonangol itself has taken in connection with Paenal Yard which would justify its receipt of any portion of the [BP cancellation fee].”
He added: “Absent a clear, contractual entitlement to these funds, any payment made to Sonangol itself would risk being perceived (at best) as an unjustified ‘windfall’ and (at worst) as a payment which may have some corrupt intent given the recipient, the power it wields in Angola and the risk that these ‘windfall’ funds could be paid onwards to government officials.”
Confronting the past
Days after Chabas signed the agreement to pay SII, SBM received news that plunged the company into crisis. One of its customers, the U.S. gas company Noble Energy, had found emails on a laptop suggesting that a former SBM sales executive, who had left years earlier to set up a consultancy firm, knew about suspicious gifts which could amount to bribes — and could be linked to SBM.
Worse still, discreet investigations by SBM’s legal department, codenamed “Project Pandora”, quickly found that concerns raised by Noble were the tip of an iceberg. Bribery at SBM was widespread. And one of the hotspots was Angola, where the inquiries suggested SBM had channeled millions of dollars in bribes to Mardrill, one of the Panamanian companies run by Sumbe.
Despite these revelations, however, Chabas appeared to see no reason to tear up SBM’s contract with SII and break its promise to pay $35 million.
Secret audio recordings reveal how he pressed SBM’s general counsel and head of compliance Jay Printz to ensure the money was swiftly wired to SII. During the fractious meeting, Chabas said: “I thought this [the agreed payment to SII] was signed off … We need to progress. I’m concerned about the relationship with Sonangol, so that’s something we need to progress quickly.”
Printz, who taped the meeting, would quit SBM the following month.
On the recording, he is heard telling his boss: “I’m worried, you know, to be blunt, that … you’re going to have a hard time doing the right thing, which could involve shutting down a lot of business in Angola.
“I mean, these guys are going to have to stop being paid bribes, and they’re not going to like that,” he said. In a later U.S. settlement with prosecutors, SBM would later admit it had bribed at least nine Sonangol executives. Printz added: “And I know perfectly well what’s going to unfold here.”
Three weeks later, the troubled lawyer drafted a resignation letter to Chabas in which he complained of the “inappropriate resistance” he had encountered while leading Project Pandora. “SBM is unlikely to comprehensively remediate its widespread bribery practices,” he wrote. “I remain concerned that further offences are likely to be committed.”
Finance Uncovered was unable to reach Printz or confirm that the draft resignation letter was sent. After he left SBM, Chabas asked another member of the legal team, Jonathan Taylor, to take over Project Pandora. Taylor also grew concerned and resigned two months after Printz.
SBM’s payments to Mardrill would later feature in the settlement of criminal cases in the United States and the Netherlands, which together cost the company $478 million. They were also used as key evidence in the Swiss prosecution of Didier Keller, one of Chabas’s predecessors as SBM chief executive.
By contrast, Chabas’s decision to authorise a $35 million SBM payment to SII has never featured in a criminal case. In fact, prosecutors have mostly praised Chabas for his cooperation and for the steps he took to clean up SBM’s culture of corruption.
SBM would later boast that remedial measures taken by the company in 2012 left it “the white swan in a pitch-black pond.”
When asked a series of questions about SBM’s dealings with Sumbe, and about payments to the Panamanian companies he operated, Mardrill and SII, the Dutch construction company declined to give specific answers.
Finance Uncovered and its media partners identified several similarities between SII and Mardrill that might have given SBM cause for concern: both were registered to the same address in Panama, though neither had operations in the country; both used accounts at a bank in Portugal where Sonangol was the largest shareholder; and the two companies had two directors in common.
Another warning sign that might have troubled SBM was the fact that the exact ownership of both Mardrill and SII was shrouded in mystery. Though both companies presented as part of the Sonangol empire, neither were named on a list of subsidiaries companies published in Sonagol’s 2012 annual report. Meanwhile, filings at the Panama corporate registry showed both were set up in the late 1990s with “bearer shares”.
Companies that issue bearer shares are popular with people looking to hide their control of bank accounts and other assets. Such firms do not keep a register of shareholders, instead granting ownership rights to the person — the “bearer” — in physical possession of share certificates. The use of bearer shares has been restricted or outlawed in many countries in recent years.
SBM said it had carried out additional inquiries into SII’s ownership in 2012 and was eventually satisfied that it was owned by Sonangol. It did not respond to questions about the ownership of Mardrill.
Sonangol also told Finance Uncovered that it is the owner of SII. This is confirmed in Sonangol’s recent annual reports, where the Panamanian company is now listed as a subsidiary company.
BP thrives in Angola
The trail of evidence running through the whistleblower documents raises questions not just about decisions at SBM, but also about BP’s anti-graft efforts in notoriously corrupt Angola, Africa’s second largest oil producer.
Finance Uncovered asked BP whether it knew that part of the cancellation fee it paid to SBM was later promised to a secretive Panamanian company run by allegedly corrupt Angolan official Sumbe. BP declined to answer directly, but hinted that it took no interest in what SBM did with the money.
In a statement, it said: “BP paid the contractually required sum to settle the … liability to SBM under the terms of the contract. It did not have any intention for, or control over, the future use of the [cancellation fee] in the hands of the payee.” BP said the cost of paying the fee was shared with co-investors in its Angolan operations.
BP’s code of conduct suggests the company is committed to a more pro-active approach to combating corruption. It says: “We do not tolerate bribery and corruption in any of its forms in our business …. [W]e work to ensure our business partners share our commitment.” As part of anti-corruption efforts, the code says, BP follows “counterparty due diligence procedures,” though what these entail is not specified.
The fineprint of BP’s original contract with SBM contained clauses giving the British oil giant the right to inspect SBM’s books and records if it became concerned that payments had been used to fund bribes. Asked if it had exercised these inspection rights, BP declined to answer. It said: “BP completely rejects any suggestion that it acted improperly in the payment of the [cancellation] fee to SBM.”
Asked why, in 2011, it chose to abandon plans to build oil platforms at the Paenal yard, BP said it had “encountered various technical and commercial challenges” at three deep water reservoirs in Block 31, many miles out into the Atlantic Ocean, directly westwards of the mouth of the Congo River.
It said the decision was taken collectively, with its consortium partners, and the cost of cancellation was shared. BP said it had wanted to delay construction work at the Paenal yard rather than cancel it, but SBM refused to grant a contract extension.
Not everything went badly for BP’s Angolan operations in 2011. In December that year, BP signed a new deal with Sonangol that dramatically expanded its interests in Angola, providing access to five new deep water exploration and production blocks covering 24,200 square kilometres. Soon after, BP described Angola as one of its four target countries for investment and growth.
Finance Uncovered has seen is no evidence to suggest a connection between BP’s $100 million cancellation fee payment and the oil major’s transformative deal with Sonangol a month later. For the avoidance of doubt, BP confirmed in a statement that no such connection existed.
In 2012, BP began pumping oil from other Block 31 reservoirs, using a oil platform built in Singapore by Modec, a competitor to SBM.
Sumbe’s Texas mansion
Records disclosed last year as part of the Swiss prosecution of former SBM chief executive Didier Keller show, in detail, what happened to some of the corrupt payments the Dutch oil platform company made to Mardrill.
Prosecutors described how, during a two and a half year period spanning 2006 to mid-2008, $4.7 million was paid from an SBM bank account in London to an account owned by Mardrill at Banco Comercial Português, now called Millennium BCP, in Lisbon, Portugal.
And during the same period, Mardrill made 45 transfers, totalling $2.9 million, from its account at Millennium BCP to accounts controlled by Baptista Sumbe and his wife Rosa Sumbe. Prosecutors said the couple made extensive personal use of this money.
Four years later, in May 2012, SBM whistleblower documents show, SII, like Mardrill, requested money be sent to an account at Portuguese bank Millennium BCP.
Sumbe knew this bank especially well. Not only did the two Panamanian companies run by him own accounts there, but Sonangol was the bank’s largest shareholder, with a stake of 11 percent at the end of 2011.
In February 2012, Sumbe secured a seat on one of the Portuguese bank’s board committees and by the end of the same year Sonangol had increased its stake in Millennium BCP to more than 19 percent — welcome support for a bank struggling in the face of the sovereign debt crisis gripping many European countries at the time.
Millennium BCP told Finance Uncovered it could not comment on specific customers, but added: “In all cases, regardless of the bank’s possible relationship with the parties involved in a transaction, Millennium BCP carries out its duties of analysis and reporting of all entities and transactions with the same rigor.”
Another Sonangol executive who once sat on a Millennium BCP board committee was Sumbe’s boss, Manuel Vicente, who served as president of Sonangol unitil January 2012. Vicente was also a director of SII until 2014.
According to Swiss court documents, Vicente is alleged to have played an early role in encouraging SBM to make payments to Mardrill. According to Keller’s evidence to Swiss prosecutors, the SBM boss had initially attempted to resist pressure from Sumbe to start paying Mardrill in 2001. Keller told prosecutors he thought it suspicious that Sumbe wanted “commission” payments wired to a company set up in Panmana, so he queried the scheme with Vicente. But Keller’s questioning was not well received, according to Swiss court documents, and Vicente criticised him for not trusting Sumbe, his right-hand man.
After this uncomfortable episode, the Swiss court found, Keller knew the commission payments were very likely bribes but authorised them nonetheless. The judge later gave Keller credit for his admissions of guilt, and for cooperation with ongoing criminal investigations, handing him a fine and a two-year suspended jail sentence.
Finance Uncovered’s efforts to contact Sumbe, who no longer works for Sonangol, were unsuccessful. Similarly, Rosa Sumbe could not be reached. For many years, the couple lived with their children at a $1.3 million mansion within the Royal Oaks Country Club gated community in Houston, Texas. The large house has a swimming pool and views over the 16th hole of the club’s golf course. In January this year, Rosa posted a picture on Facebook which appears to show her and her husband at the Houston mansion, suggesting the couple may still live in the area.
Despite the Sumbes and Vicente being named in court proceedings in Switzerland, there is no record of them ever being arrested or charged in relation to Mardrill payments. Nor is there evidence that they personally benefited from funds belonging to SII.
Although the U.S. Justice Department has extensive powers to prosecute companies and individuals responsible for paying bribes, there is currently no specific offence of benefitting from corrupt payments. President Joe Biden’s administration is currently looking to strengthen U.S. law in this area.
Vicente stepped down from Sonangol in January 2012 to start a political career, soon after becoming Angola’s vice-president, a role he held until 2017. Though he remained a director of SII until 2014, a spokesperson for Vicente said he had nothing to do with activity at the company after moving into politics.
Sumbe’s controversial boss
Vicente is no stranger to corruption allegations. In 2010, Angolan anti-corruption campaigner and journalist Rafael de Morais published a report alleging that a U.S. oil exploration company called Cobalt International Energy had gone into partnership with a front company secretly owned by Vicente and two other top Angolan officials. U.S. authorities began investigating the matter in 2011, and the following year Vicente confirmed his involvement to the Financial Times newspaper. Cobalt and Vicente denied wrongdoing but the front company nevertheless ended its partnership with Cobalt. U.S. investigations into the matter petered out.
Vicente was again linked to bribery allegations in 2017, this time in Portugal. The former Sonangol boss was charged with corruption and money laundering after allegedly paying €760,000 ($810,000) to a prosecutor for dropping an investigation into his dealings in Portugal. After the investigation shut down in 2012, Vicente, who sat on the board of Millennium BCP, allegedly asked a colleague at the Portuguese bank to offer the prosecutor job, which he did.
In 2018, the former prosecutor was convicted of bribery offences and sentenced to six years and eight months in jail. Vicente denied the charges, which were thrown out by an appeal court after the Angolan government successfully intervened in court proceedings and argued that the case against the country’s former vice-president should be referred to prosecutors in Luanda.
Anti-corruption campaigners at Transparency International have expressed concern that Angolan prosecutors may never take up the case against Vicente.
Under president João Lourenço, who came to power in 2017, Angola has been aggressively pursuing allegations of past corruption linked to certain former Sonangol executives — most notably Isabel dos Santos, daughter of former president José Eduardo dos Santos. Some media articles allege that Vicente has enjoyed a more favorable relationship with Lourenço, reportedly acting as one of the president’s advisers.
In March this year, Dos Santos filed papers in a London court case alleging Lourenço is pursuing a “personal vendetta” against her. The allegations are based on secret recordings of Angola’s business and political establishment, including Vicente, which were made by Israeli intelligence firm Black Cube, according to the court filing.
Black Cube is well known for deploying undercover private detectives to inveigle their way into the confidences of unsuspecting individuals before secretly taping conversations. Its most famous client was the former Hollywood film producer Harvey Weinstein, who hired Black Cube as part of an unsuccessful effort to fight off accusations that he had used his position to launch multiple sex attacks on women.
Taylor in limbo
Jonathan Taylor, the SBM whistleblower, is currently fighting extradition from Croatia. He had travelled there on what was supposed to be a family holiday 10 months ago, but has been prevented from leaving because of an extradition request from Monaco. He is wanted for questioning over allegations of extortion in Monaco, where SBM’s head office was formerly located. Taylor denies any wrongdoing.
* Written following a research collaboration with Edwin van der Schoot and Micael Pereira
This article was first published by Finance Uncovered.
Kenya: Institutionalised Theft and the High Cost of ‘Budgeted Corruption’
Leaked data exposes loopholes in Kenya’s procurement process, enabling graft.
In June, Kenya’s President Uhuru Kenyatta announced a lofty goal: vaccinating the entire adult population of 27 million against COVID-19 by the end of the year. But a long-time problem –– the lack of functioning medical facilities throughout the country –– left many skeptical.
The lack of clinics is not for want of spending.
In 2016, Kenya’s Ministry of Health paid over US$10 million to private companies to deliver and install shipping containers repurposed as portable clinics, to improve healthcare access for marginalised populations in the urban centers of Nairobi, Mombasa, and Kisumu. For the next four years, the 100 containers sat near the Mombasa port while government agencies investigated how an obscure Kenyan company won a hyper-inflated contract to supply them.
Some time last year, the container clinics were moved from their storage place. Yet journalists could only locate a handful of them, and not one is operational.
Kenyans are used to seeing procurement scandals in the news, stories about billions in public funds paid to ghost companies for goods and services that never materialize. But they rarely learn who is behind the schemes, or why they’re so common.
When OCCRP member center Africa Uncensored acquired a leak of 25,727 public procurement records that spanned nearly four years and eight government agencies, reporters set about digging through the data. They identified companies linked to public officials, while seeking to understand the systemic loopholes that enable endemic fraud and embezzlement in Kenya.
Procurement contracts are now “commonly referred to in Kenya as ‘budgeted corruption,’” according to John Githongo, an anti-corruption activist and whistleblower, who added that there have been no consequences for the political elite involved in the plunder.
“Unfortunately it has been a defining characteristic of the Jubilee (Party) regime, and very sadly the health sector has been predated upon more than others,” he said.
The Jubilee Party did not respond to a request for comment on this story in time for publication.
Public Officials Prosper
While Kenya’s Ethics and Anti-Corruption Commission has been pursuing the case of the hyper-inflated, non-operational portable clinics for five years now, police have made no arrests and no one in power has been officially implicated in the $10 million scheme.
“It is totally out of the question that they would get the contract without the involvement or assistance of a public official. It just doesn’t work like that in Kenya,” said Githongo, who blew the whistle on another public procurement embezzlement scheme in 2002, which is still under investigation.
In the leaked data, reporters found previously undisclosed business links between the obscure company that supplied the clinics, Estama Investment Limited, and public officials, including a charity headed by Kenyan First Lady Margaret Kenyatta called Beyond Zero. They also discovered two former members of parliament in the company network, and a current lawmaker who is under investigation for money laundering in a separate embezzlement scheme.
The director of Estama and Beyond Zero both declined to comment on the investigation. The Ministry of Health did not respond to questions.
This isn’t the only suspect procurement process exposed in the leak.
An earlier investigation revealed that board members of a government corporation were awarded tenders worth millions of Kenyan shillings related to the construction of two dams, intended for one of Kenya’s most water-stressed regions. Reporters showed that their companies continued to benefit even after being outed by Kenya’s Department of Criminal Investigations.
In another, reporters identified two obscure companies belonging to a niece of a powerful MP, Rachael Nyamai, who had oversight of the health ministry’s spending at the time the contracts were awarded. The companies, which had no history of delivering medical supplies, appear to have been paid $240,000 to do just that. One of the companies, Tira Southshore, was also awarded a mysterious $43 million agreement to supply hand sanitizer, according to the government’s procurement system. Reporters were unable to confirm whether the money had been paid, and Nyamai declined to answer questions.
A separate investigation showed numerous contracts belonging to companies owned by Frank Mithika Linturi, a controversial senator from Kenya’s Meru County (more on this below).
Kenya’s legal anti-corruption framework doesn’t ban public officials from doing business, and has very broad standards for what could be considered conflict of interest when it comes to public tenders. For example, a public official can hold shares in a company that wins a government contract, but cannot have a controlling interest.
“They played around with the law quite interestingly,” said Harriet Wachira, a program coordinator at Transparency International-Kenya, referring to the loopholes enshrined in the 2013 Leadership and Integrity Act.
There are several efforts now underway that would strengthen the legal framework around conflict of interest and other corrupt practices. Last year, Kenyan authorities started collecting beneficial ownership information, which will be accessible to law enforcement agencies. Senator Farhiya Ali Haji recently introduced lifestyle audit legislation that would target unexplained wealth. And the Attorney General’s office is actively reviewing a draft bill that would significantly strengthen conflict of interest standards, according to a 2019 version seen by Transparency International-Kenya.
“If all these laws come together the anti-corruption landscape would change completely,” said Wachira. “It would make very serious strides in sealing the loopholes.”
A peculiar phenomenon of Kenya’s procurement system is the awarding of contracts to companies that don’t produce the goods they promise to deliver, and have no track record of providing the services required. Inexplicably, they are paid by government agencies to procure goods and services from other companies.
This was the case with Estama, which purchased the shipping containers from a Chinese company, as well as the two companies owned by Nyamai’s niece, neither of which produce the medical supplies they were paid for.
It was also a red flag in the controversial $630 million Managed Equipment Service government project that was meant to get much-needed medical equipment to Kenya’s 47 counties. Using the leaked data, Africa Uncensored revealed that the government paid obscure Kenyan companies to procure the medical equipment from foreign suppliers.
Linturi, the controversial senator, is linked to at least 14 companies, whose services range from insurance to pharmaceuticals to furniture supply. One of his companies, Atticon Limited, which started as a construction firm, was awarded a $1.1 million contract by the Office of the Deputy President in 2016 to supply honorary medals.
Former employees told reporters that the senator’s company received the inflated contract and then procured the medals from Dubai. They also said the senator employed fraudulent tactics to win the tender, using multiple companies he owned to bid against each other, creating an illusion of competition.
Linturi, who did not respond to questions from reporters, was briefly detained, reportedly on fraud charges, three weeks after the Africa Uncensored investigation was published.
The issue of middleman companies winning public tenders “for things that they’re not remotely qualified for, or have the capacity to supply” is “something that we have seen over and over again,” said TI-Kenya’s Wachira, citing various procurement scandals, including recent headline-grabbing stories about COVID-19 supplies fraud.
Current regulations require the awarding agency to do due diligence on the companies bidding for tenders, but there is no independent oversight or enforcement, according to Wachira.
In the case of the honorary medals, Linturi used multiple companies to bid on a tender from an office where his romantic partner was the chief of staff. Mariane Kittany told reporters that it’s possible he used their relationship to influence the tender.
“If you really want to award the work to a friend of yours there is no law that they can come after you with, to say that this person has no capacity,” said Wachira. “Legally there is no penalty for not conducting due diligence.”
‘Blanket’ Purchasing Powers
The majority of questionable contracts reporters identified in the leaked data were so-called “blanket purchase agreements,” which are typically reserved for trusted vendors who provide recurring supplies such as newspapers and tea, or services such as office cleaning.
But blanket purchase agreements in Kenya appear to provide fast and vague transactions, with minimal scrutiny.
“A blanket agreement is something which should be exceptional, in my view,” said Kenya’s former Auditor-General, Edward Ouko.
The leaked data lists more than 2,000 such agreements, however, committing about $1.7 billion to non-competed, single-supplier contracts in the span of 42 months. Among these were the contracts awarded to Nyamai’s niece, and the inflated contract to Estama for portable clinics.
“Procurement laws require that BPAs [blanket purchase agreements] be used in very selective circumstances,” said Kwame Owino, a Kenyan policy expert. “These contracts are kept out of the public space so we can’t see whether the price is reasonable.”
Leaked data analysis indicates that the Ministry of Health has issued more blanket purchase agreements during public health emergencies, such as the Ebola outbreak in 2015.
An audit of contracts awarded during the 2020 COVID-19 pandemic also concluded that the Kenyan Health Ministry’s procurement agency engaged in multiple irregular procurement methods, including issuing retrospective single-source contracts, and choosing companies with no history or qualifications.
Steering the Software
In July, Kenya’s Auditor General Nancy Gathungu and Controller of Budget Margaret Nyakang’o appeared before the senate to confirm yet again what has been flagged by watchdogs for years: The government’s procurement software system is prone to “fraud, error and non-disclosure of revenue.”
Gathungu went further, alleging that the Integrated Financial Management System (IFMIS) is manipulated “deliberately to hide information” from auditors at the close of the financial year.
Nearly two decades after IFMIS was implemented in Kenya to improve efficiency and reduce corruption in public procurement, the system that was championed by President Kenyatta in his previous position as head of Treasury, as well as the World Bank, has become an efficient vehicle for the theft of public funds.
Red flags raised by a previous auditor general identified numerous problems with the system that could be exploited by unscrupulous procurement employees and ministry officials. As early as 2016, auditors found duplicates of the same vendor, each potentially with a different bank account, duplicate and ghost login IDs, and remote access for some system users.
Reporters’ analysis of the leaked data also revealed problematic patterns, like people accessing the system outside of working hours, as well as hundreds of duplicate transactions.
Last year, the government quietly moved to overhaul IFMIS, according to TI-Kenya’s Wachira, who follows the developments on the civil society side. Advocates say there’s been a notable shift at the National Treasury on anti-corruption efforts since 2019, when its former leadership was dismissed in connection with a procurement scandal.
It’s unclear when the overhaul will be completed, and the results of a re-engineered procurement portal remain to be seen. Ironically, the tender awarded to a consortium of companies for technical work on IFMIS is being challenged as an unqualified supplier.
As always in Kenya, a lot will depend on political will –– the “soft system” as the World Bank calls it –– to use the software without corrupt intentions.
“There is a human element to the system,” Kenya’s previous top auditor Ouku told reporters. “If the human element is also not working as expected then the system cannot be perfect.”
This article was originally published by the Organised Crime and Corruption Reporting Project (OCCRP)
Tigray Conflict: What Happened to Ethiopia?
The ongoing displacement and killings of minorities and the ongoing war in Tigray—labeled by the federal government as enforcing law and order—are disturbing. It can’t go on.
The recent goings-on in Ethiopia, particularly those of the last few months, have left many puzzled as to what exactly happened to the Ethiopia of 2018—an Ethiopia that promised major political transformations and even took a handful of steps to that effect.
Both the ongoing displacement and killings of minorities in regions such as Oromia, Amhara, and Beneshangul-Gumuz and the ongoing war in Tigray—labeled by the federal government as enforcing law and order—are disturbing. Toward the end of 2020, the federal government started waging what it startlingly called a “law enforcement operation” in the Tigray region, branding the Tigray People’s Liberation Front (TPLF), the leading partner in the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) between 1988 and 2018, as “a criminal organization and vowing to destroy it.”
From media coverage of the events, we have learned that some veterans of TPLF were caught and brought to court while others were killed. The hunt and its accompanying promise to bring the perpetrators to justice continues today; both the war and the legal procedures of those who have been caught are still ongoing at the writing of this post. The humanitarian crisis and the danger of famine in Tigray have become alarming to the international community, while the Ethiopian government seems to turn a deaf ear to humanitarian pleas and pressure.
One wonders where we got it wrong while actually trying to right the sociopolitical ills that the country has inherited from a troubled federal experiment and authoritarian rule since 1991, and a violent imperial history that preceded it.
If we take a closer look at Ethiopia’s political history, particularly in its moments of transition, a familiar pattern of relying on the criminal justice system to solve political problems can easily be detected. For instance, in November 1974, upon seizing power, the Derg (then provisional military government) ordered the killing of 60 high-ranking officials who served in the monarchy. They justified this action by labeling the individuals as criminals as attested to by a statement from the provisional military council.
“The executions,” the council said, “were a political decision taken to mete out justice to those officials of the previous government who had thrived on corruption, maladministration and a “divide and rule” policy.” The Derg also decreed that the rest of the detainees would be tried in a military tribunal. A new government, led by the TPLF/EPRDF, came to power after ousting the Derg in 1991. Again, the regime resorted to the language of law. The first step the EPRDF took was to hunt the perpetrators and bring them to court. These events, which journalist John Ryle described as “the first large-scale human rights trial of recent times,” unfolded on a grand scale: the entire former leadership of the country was under indictment for genocide and crimes against humanity.
On both the discursive and practical levels, there is continuity between these three events. The criminalization of political problems and the attempt to solve them through the court system is a consistent trait of these moments of transition. All three mobilize the law; with a particular commitment to preserving a preexisting law. They believe in the courtroom—which, ironically, they control—to deliver justice. By this account, justice for victims partly depends on the removal of those who are now defined as perpetrators from the political realm, because they are reduced to being criminals, not political actors with constituencies. Only the victors are legitimate political actors; they claim to mete out justice and are thereby absolved of any responsibility for partaking in the violence. All three regimes in post-imperial Ethiopia, sideline the main issue—that is, the unresolved political problems—while relying on the seeming universality and neutrality of the law.
Resorting to the criminal justice system instead of seeking political solutions through the intricacies of the political process justifies further violent actions in the interest of maintaining law and order. As a result, the political goes unscrutinized and the victors simply operate within the existing structure instead of introducing more profound change.
This simply shows that—as Mahmood Mamdani cautions in his new book, Neither Settler nor Native: The Making and Unmaking of Permanent Minorities—a “Nuremberg Trial” inspired approach to solving politically driven violence is inadequate. The courtroom in fact reinforces the vicious cycle of violence by dichotomizing political communities as either victims or perpetrators, thereby defining new enemies. Most of the sociopolitical and economic problems that necessitated the change, such as the quest for democracy, equality, freedom, respect of human rights, and economic development, remain largely unaddressed.
Unless Ethiopia is willing to give a new way of resolving political differences a chance, the vicious cycle of violence will continue unabated. As Mamdani suggests, there has to be room and preparedness to change rules and to be open to new political orders. Relying on the courtroom to solve political problems only serves the interests of those in power, and helps them maintain their position by creating enemies around which they can galvanize popular support. For instance, TPLF has now become the new criminal group; it makes perfect sense, then, for the government and its supporters to withdraw protection from civilians in Tigray and elsewhere who have been victimized in the name of restoring law and order. Collateral damage is the language used to explain atrocities on civilians. Conducting performative politics such as elections elsewhere in the country while framing the conflict in Tigray as a “law and order” issue will not address the deep seated problems Ethiopia is confronted with.
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