EACC goes after Uhuru men over botched Sh6 billion Telkom sale

Business
By Brian Ngugi | Dec 09, 2023
Telkom mobile phone subscribers queue to upgrade their new sim cards registration at Telkom house, Nairobi. [Elvis Ogina, Standard]

The anti-graft agency has recommended the arrest of key officials in former President Uhuru Kenyatta’s administration and the embattled Controller of Budget Margaret Nyakango over the botched Sh6 billion sale of Telkom Kenya.

The Ethics and Anti-Corruption Commission, which is headed by CEO Twalib Mubarak, has asked the Office of the Director of Public Prosecutions to institute charges against former Treasury Cabinet Secretary Ukur Yatani, former Treasury Principal Secretary Julius Muia and former Telkom Kenya officials for alleged economic crimes in the sale of the telco.

In documents shared with The Saturday Standard, EACC said it made the recommendation after investigations into the contentious deal.

“On 29th August 2023, a report was compiled and forwarded to the DPP with recommendations to charge the former Cabinet Secretary for the National Treasury, the former Principal Secretary at the National Treasury, the Controller of Budget, former Director General Public Investments and Portfolio Management, Chief Executive Officer at Telkom Kenya Limited, chairman of the Telkom Kenya Limited Board, Chief Operating Officer, Chief Strategy and Business Development Officer and Chief Finance Officer at Telkom Kenya Limited and a transaction advisor for Helios be charged with the following offences,” said the anti-graft agency in a quarterly report.

Dams scandal

Yatani was confirmed in office on January 14, 2020, having been appointed by Uhuru as the ministry’s acting CS in July 2019.

Dr Muia was appointed Treasury Principal Secretary in July 2019 to replace current Central Bank of Kenya Governor Kamau Thugge, who, alongside the then Cabinet Secretary Henry Rotich, had been charged with a range of corruption offences related to the Sh63 billion Arror and Kimwarer dams scandal.

Dr Thugge has since been cleared of any wrongdoing even as a case against the former Treasury CS is ongoing. Mr Rotich has defended himself claiming innocence. 

EACC said the officials will be charged with several economic crimes, including conspiracy to commit an offence of economic crime, and 15 counts of abuse of office.

Among Telkom Kenya officials to be charged include CEO Mugo Kibati and chairman Eddy Njoroge. Former Uhuru’s ally John Ngumi, the owner of Eagle Africa Capital Partners, played a role as the transaction advisor for the controversial multi-billion buyout.

Other charges include willful failure to comply with the law relating to the management of funds, alternate count of entering into an obligation that has a financial implication, conflict of interest, procurement irregularity, fraudulent acquisition, and money laundering.

They are also expected to be charged with six counts of Acquisition of Proceeds of Crime contrary to Section 4  as read with Section 16 of the Proceeds of Crime and Anti-Money Laundering Act 2009, and neglect of official duty.

The EACC said in its quarterly report shared with The Saturday Standard that it is awaiting the DPP’s response.

The Ruto government, in October, rescinded the former Uhuru government’s purchase of 60 per cent of shares in Telkom Kenya from London-based private equity firm, Helios.

The decision was made in the twilight of Uhuru’s administration, which nationalised the telecoms operator at the cost of Sh6 billion.

“In addressing the governance challenges posed by the nationalization of Telkom Kenya Limited in the run-up to last year’s General Election, the Cabinet rescinded the decision that the Government of Kenya shall purchase, from Jamhuri/Helios, sixty per cent (60 per cent) of the ordinary shares of Telkom Kenya,” said a Cabinet dispatch in October this year.

Strategic investor

“By dint of this decision by Cabinet, Jamhuri/Helios will refund to the Government of Kenya the amount paid as consideration for the takeover. The decision by Cabinet offers Telkom Kenya an opportunity to source and onboard another strategic investor, subject to the receipt of all regulatory approvals.”

The Ruto government would subsequently announce that a Dubai-based fund, Infrastructure Corporation of Africa LLC (ICA), will now acquire the 60 per cent belonging to UK-based Helios in Telkom Kenya.

Treasury CS Njuguna Ndung’u said the Ruto government agreed to buy 60 per cent shareholding in Telkom Kenya from Helios local subsidiary, Jamhuri Holdings Limited (Jamhuri/Helios), following the decision by Helios to exit the company. 

It said the government consequently decided to amend the transaction to have another private investor acquire the 60 per cent shareholding from Jamhuri/Helios settling on the UAE fund.

“In this regard, a competitive process to identify the new investor was set in motion in January 2023, resulting in an evaluation process that recommended the Infrastructure Corporation of Africa LLC (ICA) of the United Arab Emirates, to be the new majority shareholder in Telkom, based on the offer they put forward,” said Prof Ndungu.

The Cabinet said its intervention will “enhance the operational capacity of Telkom Kenya and make it a competitive player in the telecommunications market.”

Helios, a private equity firm, bought into Telkom Kenya in 2016, saying it intended to rescue the ailing company through heavy investments and an overhaul of management.

“UK private equity firm, Helios Investment Partners, today announced the acquisition of a 60% shareholding in Telkom Kenya by Jamhuri Holdings Limited (JHL), a company owned 100% by HeIios Investors III, L.P. (a fund advised by Helios Investment Partners LLP) following receipt of regulatory approval,” said Helios.

Strategic nature

The former Uhuru administration argued, at the time, that it was necessary to buy out Helios due to the strategic nature of Telkom.

Telkom Kenya was the sole fixed telephone operator in East Africa’s largest economy before the advent of mobile phones. But mismanagement turned it into a perennial loss-maker.

Telkom operates the National Optic Fibre Backbone (Nofbi), a strategic asset, which provides telecommunications connectivity in all counties. Telkom Kenya is also one of Kenya’s biggest property owners given its legacy as a State corporation.

Its fibre optic project is  taxpayer-funded and is seen as a crucial strategic asset for the country. Phase one of the project was completed in 2009 and established a national optic fibre backbone infrastructure with access points in most of the county headquarters and some border towns.

The fibre backbone passes through 58 towns in 35 counties across Kenya with 4,300km of cable already laid.

Telkom Kenya also has a multi-billion-shilling real estate comprising prime properties across the country.

In 2013, France Telecom bought another 11 per cent stake in Telkom Kenya that was held by a Dubai-based private equity firm, a deal that tightened the French multinational’s grip on the formerly State-owned operator.

The deal meant that the French firm owned a 60 per cent stake in Telkom Kenya, initially held by an entity known as Orange East Africa, a special-purpose vehicle created by France Telecom and Alcazar Capital after jointly acquiring a controlling stake in the Kenyan firm in 2007.

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