Economic leeches have robbed Kenyans of their souls for ages

Raila Odinga addresing the media on oil deal at Jaramogi Oginga Odinga Foundation in Nairobi. [Emmanuel Wanson, Standard]

If anyone imagines the foul smell coming from the much-hyped Government-to-government deal on oil imports is a passing cloud, they must be very unknowledgeable of the country’s economic history. Economic leeches refer to a shadow or black economy of dishonest people or criminals that operate outside the tax system or that bleeds the economy of collected taxes.

Tory Shepherd, in an article on The Guardian Weekly dated 19th June 2023, points out that the shadow economy leeched an estimated US$12.4 billion out of the Australian Economy. This estimate was based on the country’s Auditor’s report. Ideally, there are very few economies in the world that do not have economic leeches.

The problem becomes much more complicated when the shadowy or black economy operations take over key sectors of the economy, or worse still become the dominant side of the economy. The oil deal is teetering towards the side of the first major scandal to rock the Kenya Kwanza administration on the balance of publicly available evidence.

The Ann Njeri story may be the invisible hole leaking water into the G to G oil deal whose architects might have thought to be watertight.

While the oil deal is not the only one that is questionable for the current administration, it might have given the opposition and Hon Raila Odinga specifically, the hook to hold onto after the collapse of the unpopular street protests. It would not be surprising if this wave of scandals extended to the fertilizer subsidy programme and edible oils imports.

They all join the ranks of some of the hurriedly executed deals that little has been disclosed as to their true contractual obligations to the nation and the taxpayers.

Walking back into our recent economic history, however, there would be nothing unique about this scandal. Many such scandals have robbed taxpayers of billions either shortly before or after general elections. In 1992, the Goldenberg scandal oiled the operations of the Youth for Kanu ‘92 which was strategic for KANU winning the elections. When the Kibaki administration established the Justice Bosire Commission to investigate the gold export scam, the proceedings played out on our TVs like a movie cast from hell.  

On its part, despite riding into power through a very strong anti-corruption wave, the Kibaki administration itself suffered a similar fate; this time through shadowy security contracts famously called Anglo Leasing. The chains of Anglo Leasing are still on our necks because the estimated Sh18 billion contracts were signed through irrevocable promissory notes.

Different script, same cast

All the ghosts of Anglo Leasing need to do is to appear at the designated bank somewhere among the tax havens in Europe and present the voucher. The designated banks cash it and issue the attendant fee note to the Kenyan government for payment. The National Treasury settled an Anglo leasing debt of Sh1.4 billion in May 2014 based on a presidential fiat.

While the mega scandals during the Kenyatta administration were too many, the National Youth Service (NYS I) was among the earliest. This would be followed by duty-free Mexican maize landing at the port of Mombasa in under 72 hours of gazetting the duty waiver by the then Cabinet Secretary of the National Treasury, Henry Rotich.

The script for the ongoing oil deal controversy is playing out in the same cast as NYS 1, only this time Josephine Kabura’s character has been taken over by one Ann Njeri. If anyone doubts this, just crosscheck how many companies in Kenya handle contracts worth Sh17 billion in a single transaction. The ones that do, how do their appointed representatives look like and how much taxes do they pay to our national coffers? Why hasn’t the taxman, with all his recent zeal not publicly issued the required fee note for the taxes over the past 32 years this oil deal has been in the news? Why do the actions of the relevant government agencies and officials not add up? Who is fooling who?

Ultimate genius

Around the 2017 elections, there was NYS II and in 2022, the oil subsidy programme. Key controversial transactions for the KK administration in their one year in office have been around the handling of the relief food programme shortly being sworn in, the fertiliser subsidy programme, the edible oil imports and duty-free maize. The supposed G-to-G oil deal was meant to be the ultimate genius for the current administration to tame the runaway cost of living and ease pressure on the shilling against the dollar.

However, while the government calls the opposition statement on the matter ‘hot air’, the deal itself is evidentially turning out to be the real ‘Hot air’. If this were not true, then let the administration table the number of transactions and amounts settled in Kenya shillings to the Saudi Government or its agencies.

Why did the shilling head north against the dollar instead of the intended south after the bilateral agreement? Why have the benefits of dropping global oil prices not been passed to consumers while our neighbours have done so? Should we also treat President Yoweri Museveni’s (an outsider head of state with full access to independent intelligence) views as ‘hot air’ too?

The Consumer Price Index data by the Kenya National Bureau of Statistics for October 2023 indicates all sectors tracked showed price increases in year-on-year comparisons. Between October 2022 and October 2023, commodities under transport prices increased by 13.6 per cent; housing, water, electricity, gas and other fuels went up by 7.8 per cent; while food and non-alcoholic drinks increased by 7.8 per cent.

This basket accounts for 57 per cent of the weight in the tracked commodities and services. Alcoholic beverages, tobacco and narcotics prices grew by 9 per cent; recreation, sports and culture by 5.2 per cent, and restaurants and accommodation by 4.5 per cent. These general price changes speak to the negative impacts of both the oil prices and toxic taxes.

Common threads

From an analytical point of view, however, what must worry us most are the patterns and the common features in all the scams. The majority of them are structured around either purported government-to-government bilateral engagement or an attempt by the government to be directly involved in projects that would otherwise be contracted through the public procurement laws. In NYS, the government sought to do public works projects and directly pumped billions of shillings, including some borrowed under Eurobond one as per Treasury’s submissions to Parliament.

Many of the controversial multi-billion infrastructure contracts have also been fronted as G-to-G agreements. In the case of KK, they turned to the little-known and capacity-deficient Kenya National Trading Corporation to handle the multi-billion subsidy and food relief programmes. Of course, the billions have since been spent.  

Second, are the shadowy characters fronted as the masterminds of these axes of evil dealings? Their lords never get known and the prosecutions wither with no trail.

The patterns and striking similarities of this scam suspect converge towards either an entrenched evil business model or a common lord who lurks out there in the shadows.

Based on the facts, the citizens and their elected representatives owe it to themselves and the generation of our children to demand a transparent public framework that binds any public agency or official before signing any G-to-G agreement on our behalf.   

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