Kenya is in a deep financial hole. The country is in a place it has not been for the last 60 years. And as financial experts and policy makers agonise how to extricate the country from the current mess where even paying workers’ salaries and servicing debts is a nightmare, a glance into the past offers some perspectives.
This was in 1993 when banks went bankrupt, the government was forced to liquidate some, while auditors developed ulcers and top bank managers were forced out of office.
Former Kenya Revenue Authority Commissioner General Michael Waweru explains that the International Monetary Fund (IMF) walked around town with a big stick demanding that the government punishes those implicated in the infamous Goldenberg scam.
He captures the desperation of the moment in his memoirs, Kenya’s Tax Czar: An autobiography of MG Waweru by reliving the fight to save one of the troubled banks, Trade Bank.
What had started off as routine audit mission at the bank for him as a senior partner at Ernst and Young uncovered how billions were lost, but he was shocked that he was appointed a statutory manager by Central Bank of Kenya.
As soon as he took over after Easter in April 1993, he realised what he had signed into. When CBK assisted to secure Sh200 million to cope with the high withdrawal rate, it was instantly wiped out.
Customers were withdrawing their money faster than the bank could replace. To stop the bleeding, he closed the bank on April 14, 1993. He issued a moratorium, the first in Kenya’s banking history where he stopped payments and reduced interest to five per cent.
“I received phone calls from desperate customers, some hurling unprintable insults at me. The most stressful was a case where a family had fundraised to get their relative treated in India but that money was tied up in Trade Bank and therefore inaccessible and the patient died."
Despite his efforts to save the bank, IMF was determined to have it liquidated and the CBK Governor removed over the Goldenberg scandal.
He recounts the day he had gone to report to the CBK Governor Eric Kotut that he had met an IMF official coming from the office triumphantly holding a brown envelope which he later deduced was a resignation letter.
When the IMF had their way forcing the governor out of office and liquidating Trade Bank, Waweru says he was so devastated that he developed ulcers.
He would later become KRA Commissioner General in 2003 at a time when the country’s granaries were virtually empty and IMF was no longer dictating the proceedings.