How Kshs. 38.5 billion ($385m) of borrowed money “disappeared” from Kenya’s budget

… the June 2013/14 bond issues were moved to the 2014/15 opening balances carried forward from 2013/14 at that time, while the November bond issues were recorded as 2014/15 revenues. If so, we would have a balance of Ksh38.5 billion in the bank, and the full Ksh75 billion (what we had estimated at Ksh67.5 billion) coming onto the budget in 2014/15.

There are no further changes in these numbers in the final fourth quarter COB report for 2014/15, suggesting that by the end of that year, all but Ksh38.5 billion of the Eurobond had come onto the budget and been spent.

The Ksh38.5 billion balance was not brought onto the budget for 2015/16 at the beginning of the year. The August 31 Statement of Actual Revenues shows no budgeted carryover from 2014/15 and an actual balance carried forward of only Ksh204 million. There is a budgeted revenue of Ksh72 billion in further commercial loans for the year, and nothing collected as of August.

So… what happened to the Ksh38.5 billion balance? If it was not spent, it is hard to see why the government wouldn’t be using it now to smooth liquidity during an apparent cash crunch. If it was spent, when did it come onto the budget, for what purpose and why isn’t it visible in public reports? Cabinet Secretary for the Treasury Henry Rotich recently claimed that all of the Eurobond money was spent, but I have not found any official documents showing when the final balance came on budget.

Why should basic facts about billions of shillings require us to sift through vague reports and still come up short?

Lakin’s excellent accounting narrative of budget figures from FY2013/14-FY2015/16 is available here. 

So where did the money really go? Only Treasury Secretary Henry Rotich can tell us what happened, with certainty. In the meantime Kenyans can only speculate. Which is why it is very odd that CS Rotich so far has barely bothered to explain himself.

How tragic would it be if it emerged that someone (or a group of people) stole Kshs. 38.5b ($385m) of borrowed money?

The confusion over the Eurobond cash has elevated public uproar over corruption in the public sector to new levels. The only problem is that blame has been spread thin, with everyone in government being blamed (and no single officer really feeling the pressure, with the possible exception of CS Waiguru).

In my view the two people that should be forced to explain themselves (regardless of whether they are individually corrupt or not) are CS Henry Rotich at Treasury; and the Chairman of the Parliamentary Budget Committee, Hon. Mutava Musyimi. These two men should shoulder any blame arising from any emergent violations of the Public Finance Management Act.

A focus on specific officers and their specific failures will perhaps give the president political cover to get rid of offending public officials. The fundamental challenge of the anti-corruption drive in Kenya at the moment is that it continues to be blind and deaf to political realities. The president is a politician, with an eye on reelection in 2017. The challenge for reformers is therefore to come up with incentive-compatible means (for the president) of dealing with corruption and incompetence in the public sector before then. (The president himself admitted on record that a significant number of public officials are corrupt). Mere calls for public officials, including the president, to act nice will not work. That is the tragedy of politics.

Will rampant corruption jeopardize Kenya’s ability to prevent future terror attacks?

There is an interesting debate on this question over at the Guardian. Following the terror attack at Westgate Giles Foden made the following claim:

In Kenya crime and terrorism are deeply linked, not least by the failure of successive Kenyan governments to control either……… These attacks are part of a spectrum of banditry, with corruption at one end, terrorism at the other, and regular robbery in the middle. Some Kenyans will feel that the conditions in which the attacks have happened have arisen because of economic growth in a vacuum of governance. Money that should have been spent on security and other aspects of national infrastructure has been disappearing for generations.

Two days ago the Kenyan Cabinet Secretary for Foreign Affairs, Amina Mohamed, responded to Mr. Foden with a denial of the charge that corruption in the country was in any way related to the failure of security forces to thwart the attack at Westgate. She reminded readers that:

The disasters of 9/11 or the more recent Boston marathon in the US and 7/7 in the UK – both highly developed countries – could hardly be blamed on corruption, so why Kenya? We do not recall Foden blaming corruption within the security agencies involved.

So what is the relationship between corruption and the likelihood of successful future terror attacks in Kenya?

There is no denying the fact that corruption is a huge soft underbelly in the Kenyan state’s fight against al-Shabaab. As I have pointed out before, the attack at Westgate  showed Kenyans that AK-47s are not a menace only in the hands of cattle rustlers or carjackers. They can also be weapons of mass murder. So reports of police reservists renting out their AKs to criminals or being paid by the same criminals to look the other way do not inspire confidence in the government’s ability to prevent future attacks. Indeed last Friday Reuters reported that:

security officers, diplomats and experts describe a security apparatus that may be squandering skills built with the help of U.S., British and other trainers because suspects can buy their way through police checks and poor inter-agency coordination means dots are not joined up.

Add to this the fact that the country has about 600,000 light weapons and small arms in civilian hands (pdf) – including 127,000 illicit guns in Turkana County alone – and you begin to get the picture of why lax law enforcement, partly fueled by lack of funds and poor training and pay of regular police, but also by higher-ups’ venal proclivities, does not bode well for the likelihood of future Westgate-style attacks.

That said, to put terrorism on the same scale as carjacking would be a mistake, especially with regard to how the Kenyan state is likely to react to future threats of terrorism in the wake of Westgate. Obviously, due to entrenched interests and the administrative power (pdf) of the Civil Service the president cannot simply wish away corruption with a stroke of a pen. But he will be under tremendous pressure from the business community (which, in my view, is his number one constituency) to make sure that things that are singularly bad for business – like Westgate-style terror attacks – do not happen in the future.

Regularized murderous banditry in the less governed spaces in Kenya or carjackings in Kileleshwa are different from terror attacks in that the former are often localized “micro-events” on the national stage (even when they are of Baragoi or Tana River or Bungoma proportions) that rarely ever have systemic effects. Westgate, on the other hand, did have a systemic effect. And in a big way. As such I expect that the government will follow the trail and start closing loopholes wherever they are that might be exploited by terrorists in the future. This includes reforming the Kenya Police Service, to the extent that is necessary. It is hard for me to imagine that the president would risk failing to secure reelection just to keep a few corrupt officials happy.

So on balance Westgate might actually lead to a major push to rid critical state institutions of the scourge of corruption and to strengthen them with a view of increasing state capacity.

I could also be totally wrong.

There is a scenario in which the response to Westgate is al-Shabaab-focused and purely driven by the military (which presently has a huge PR problem with the Kenyan public and would want to save face) and other security agencies with little input from the political class. Such an eventuality would be a double bad because of the risk of erosion of civilian control of the military in Kenya (at least at the policy level) as well as a failure to reform critical domestic institutions to reduce the likelihood of future attacks (or attempts to bring back the bad old days…)

All this to say that on the off chance that someone asks you the question in the title of this post, the simple answer would be probably.

Kenya’s Obscene Politician’s Salaries: Still a Problem

President Kibaki will probably not win the Mo Ibrahim Prize because of his questionable reelection but he sure will leave office a happy man.

According to the Star:

“When President Kibaki walks out of State House after the next elections, he will go home with a hefty gratuity—Sh50 million. The gratuity, the highest to be paid in the history of the country, has already been factored into the 2012/2013 budget by newly appointed Finance minister Njeru Githae.

Apart from the one-off payment of the gratuity, Githae also proposes to increase the annual allocation for retired presidents from the current Sh17.7 million to Sh30.2 million. The increase is meant to cater for the monthly pension which is due to Kibaki plus what taxpayers have been paying Moi since he left office in early 2003. The two will continue to draw the pension for the rest of their lives.”

“……Kibaki will also be entitled to get a monthly pension equal to eighty per cent of his current monthly salary. Kibaki is currently paid a basic monthly salary of Sh2 million (about $26,000) and earns an average of Sh24million ($200,000) a year under the current exchange rate.”

The figures are actually a bit off. Under current exchange ranges 2 million Shillings a month amounts to about US$300,000 annually. Not a bad deal at all.

These figures, however, raise questions about compensation packages for politicians in Kenya. Recently the treasury bribed MPs to pass the new budget and to be nice to the banks with a “gratuity” amounting to almost US$50,000. This on top of their already obscene annual salaries which stand at US$ 161,000, excluding other shady allowances that are never included under official pay. The last time I checked, all things considered, these MPigs (as they are derisively called locally) make upwards of US$174,000.

Per capita income in Kenya (in current dollars) stands at around US$800, with about 40% living below the poverty line.

I have argued before that paying MPs a decent salary may make them less amenable to executive manipulation (For supporting evidence see Barkan and Co. on legislative strength in Africa). But this just takes it too far.

william ruto suspended from cabinet

The road to Rule of Law in Kenya is just beginning to take shape. For sure, politicians will continue to flout the constitution but things are no longer the same. Today, as required by law, President Kibaki suspended higher education minister Hon. William Ruto because of the latter’s pending criminal trial over a fraudulent land deal. Section 62 of the Anti-corruption and Economic Crimes Act states: “a public office charged with corruption or economic crime shall be suspended at half pay, with effect from the date of the charge.”

Given the stature of Mr. Ruto as the ethnic chief de facto political leader of the vast Rift Valley Province, this is a big deal.

The next big test for how committed the ruling class in Kenya is committed to the Rule of Law will be when Ocampo and the ICC come calling with arrest warrants later in the year or early next year. Bigwigs in cabinet and close confidants of both the president and his prime minister are expected to be among those indicted.

more on the Mang’eli saga

It is now emerging that the Kenya Bureau of Standards MD, Kioko Mang’eli, falsified information while petitioning for a salary increase. The embattled director was asking for a salary hike from 480,000 shillings a month to 1.07 million. His reason was that he had contributed to the financial stability of the bureau of standards by turning a 300 million shilling deficit into a 1.6 billion surplus. But this claim, in addition to a job evaluation report favorable to the MD, have been termed as false by the office of the head of civil service.

The Nation has more on this.

And in other news, the Standard is back online.

is it time we had fresh elections?

So the weekend retreat in Tsavo of the big-wigs in Kenya’s coalition government failed. Instead of addressing real issues (reforms, corruption and Kenya’s land problem), the discussions veered into side-shows – like the Premier’s salary and the opening remarks of the president and his prime minister.

I am beginning to think that the coalition government has outlived its purpose. I am beginning to be persuaded by those who have been calling for fresh elections – most notably the clergy. The coalition government, as currently constituted, is dysfunctional at best. The prime minister and the president (and their respective camps) seem to be pulling in opposite directions on just about every issue. May be it’s time we went to the polls and gave a mandate to a single party instead of having the collective tyranny of ODM and PNU. I think we have a better chance with just one of these parties in power. May be then the government can act more responsibly on reforms instead of having cabinet ministers constantly pointing fingers at each other and blaming the other party.

On a different note, I hear rumours that Martha Karua might quit the government if she is not given more space in the Justice ministry. I hope she gets what she wants, i.e. more space to implement her brand of reforms in the judiciary. Hate her or love her, I think Martha Karua is one of the few Kenyan leaders who speak their mind and who have the balls to implement what they believe in. I remember reading somewhere that the problem with African politics is the lack of ideology. Many leaders act like blind men in the dark, constantly wandering around without any direction.

African social organization and politics have mostly been driven by contingency rather than ideology. The only country that ever produced a true ideologue on the continent was Tanzania. And for all its faults, Ujamaa helped Tanzania a great deal. God knows where the country would be had it not been for the commodity crises of the seventies and mandated structural adjustment programs of the eighties (yeah Gordon Brown, down with the Washington Consensus). I think Martha Karua may be Kenya’s real ideologue, and for that she is increasingly becoming one of my favorite politicians, even though she and I may not see eye to eye on her actual policies.

read more on the maize scandal

I just read this interesting post by Ory on Kenyanpundit.com. According to the post, there seems to be evidence that people high up in ODM may be implicated in the maize scandal that has rocked the country, even as millions of Kenyans continue to live on wild fruits and dug up roots (are we in 200,000 BC????).

It makes you wonder whether we really need the coalition government. As things stand, it seems like these clowns running the country know that they can get away with everything because no one wants to break up the coalition government. Martha Karua (the Justice Minister) herself admitted that ODM and PNU politicians would rather remain in the coalition than seek a fresh mandate from wananchi. Raila and Kibaki should be bolder than they are being and face those stealing from Kenyans, be they big men or not. The two of them can garner enough support from their bases (I don’t mean just central and Nyanza but rather their supporters from across the country) to run the country without having to compromise on issues of corruption and incompetence. Kibaki can make a name for himself as the man who saved Kenya and put it on the right path. And Raila can earn some political capital that he will need for the 2012 election. I am not a die hard fan of either man, but I think right now they are Kenya’s best hope.