Category Archives: corruption

Forensic Audits and other Peculiar Kenyan words

One of the most used phrases this year has been forensic audit. But many people don’t understand what these special audits into past matters and closed files are,  or how they differ from regular / normal / annual / other audits.  e.g. MCA’s in Nairobi and Mombasa have asked for a forensic audit to look at car loans and imprest at their respect county assemblies.  Audit Files

One of the reasons why the public knows the  phrase “forensic audit” is because quite a few have been done, or are still ongoing this year, but are already in the news:

  • To investigate the losses, and revenue leakage, at Kenya Airways (The Board requested, and this was done by Deloitte)
  • Chase Bank – the Receiver Manager & Central Bank of Kenya have asked for one look at director borrowings and other factors in the shut down of the bank earlier this year.
  • Kenya’s auditor general has said he will do one to look at the proceeds of the 2015 Eurobond and his teams will travel to the US and UK to question bankers there about the deal, which opposition politicians have made allegations about.
  • Imperial Bank directors asked for one to look into hidden transactions at the bank after their Managing Director died (A report done was done by FTI Consulting)
  •  It’s been reported that all Kenyan banks have been asked to conduct external audits on insider loans.
  • One was done to review management decisions at Mumias Sugar (Report done by KPMG)
  • President Kenyatta has asked for one to look at how funds for Free Primary (and Secondary) Education have been used.
  • At Safaricom to look at recent procurement  (The CEO requested and a report was done by KPMG).
  •  At Uchumi to look at actions of the previous management (The Board requested, and a report was done by Deloitte).

Besides forensic audits, other peculiar Kenyans words & phrases elevated this year include sponsor, covenant, mood, lacuna, slay, blessee,  watershed, and “it is well noted“, “sent as received”, “major key alert”, and “Insert Inspirational quote”.

Corruption is Always a Good Story

Look at these quotes about corruption.

  • Material corruption of the highest magnitude seems to be flourishing in African public life (1)
  • The speed which with 
people in authority amass personal wealth can only point to the assumption that they use their public positions to get rich as soon as possible (2)
  • Although several governments have advisory commissions to suppress corruption and have anti-corruption officers, these measures are ineffective. (3)
  • The president has decreed that all ministers declare their wealth but has exempted himself  (4)
  • The prime minister has in 2 years since taking office, been able to purchase property ten times his net worth, and completed 4 houses. He also owns proportion Washington that he rents out t o the Embassy (5)
  • What worries me is that those in power are not really affected by what we are writing (6)

Obote coverThese are now new, but are from an article called Corruption in African Public Life, that was published in the East Africa Journal (does it still exist?) in November, 1967. That issue had Uganda President Milton Obote on the cover and cost Sh 2.25.

While it warned, in 1965, that corruption was the greatest single cause of the fall of governments in Ghana, Nigeria,  and Sierra Leone, it also noted, in a philosophical perspective, that corruption was not East African creation, and that Plato,  in his “Republic” had posed that leaders should not own any possessions except their power, they should live in communes and not marry. Also that, in East Africa, only Tanzania has taken concrete steps to fight corruption, through the Arusha declaration which banned capitalism &  feudalism, the holding of directorships in private companies, receiving more than one salary, and owning houses to be rented to the government.

 Re: the quotes above:

  • (4) was Kwame Nkrumah in Ghana.
  • (5) was Sir Albert, in 1967 Sierra Leone.
  • (6) was Kenya’s Sunday Nation quoting Chinua Achebe.

Bob Collymore Declares His Wealth

 A few days after President Kenyatta announced his latest salvo in the war on corruption, Safaricom CEO, Bob Collymore said that he, and other leaders, would soon declare their wealth in support of this – to show the way of embracing the lifestyle audit aspect of fighting corruption.

This has now been released on World Anti-Corruption Day. The statement shows assets of $2.7 million (~ Kshs 275 million) comprising mainly property, cash, and shares in Vodafone and Safaricom which he leads, and from which he earned $1.06 million last year as salary, and probably with bonuses included.

ION, a few years ago, some members of parliament, made wealth declarations as well.

$1 = Kshs 102

Other Constitutional Minefields

Kenyan parliamentarians were shocked last month when they realized that voted in last August contained a clause that required leaders to pay tax.

What other clauses in the new constitution are going to raise some headaches in the next few months and years?

1. Automatic Citizenship: Dual citizenship is allowed – and a born Kenyan does not lose citizenship by becoming one of another country. Also citizenship can be acquired an orphan who under 8 years, or by marriage to a citizen for 7 years, or by having lived in Kenya for 7 years. The 2009 census revealed an interesting dimension to Kenya citizen origins including the Somali Kenyan and other African numbers.

2. Political Parties are Irrelevant/Term Limits ill end Career Politics: Many members of Parliament have set their sights for 2012 on becoming Governors, but these carry term limits (maximum of two). There are now term limits for the Presidents (& Deputy), county, judiciary and government officers e.g. the Inspector General of police will can serve only one 4-year term (which is not enough time for an ambitious leader to carry out reforms), but oddly, there are no term limits for parliament.

Also, in running for any of these offices, independent candidates can avoid messy, expensive, party elections by running without joining a political party; all it requires is obtaining 1,000 signatures for MP and 2,000 for Senate from their constituents. Political parties have one year to comply with political parties act or be disbanded (and time is almost up)

3 Amnesty for corruption: Parliament is yet to enact creation of an ethics and anti-corruption commission, which should be able to review un-ethical actions such as conflicts of interest actions. However for all the talk about extradition of Anglo Leasing and KPLC cases, suspects can’t be tried for acts that were not offences in Kenya, or under international law. These may include corruption-related crimes, which were legislated – in 2003 (for economic crimes) and 2010 (for money laundering). The it wasn’t a crime at the time defence has already been brought up.

4. Raise Local Taxes to support Counties: There will be 47 County Governments that will receive and share at least 15% of revenue raised by the state. Using the 2011 numbers announced this week, based on tax revenue of Kshs 634. billion ($7.5 billion), the county governments will split Kshs. 95 billion. Counties may collect property, entertainment and other taxes approved. However, while counties like Mombasa, Nairobi, Narok etc., have significant sources of revenue from (permits, tourism), many counties governments are not currently, self sufficient and will have to obtain new revenue streams. County government may take loans if their assemblies approve, but only if the national government guarantees them.

5 Civil Servants can’t own Matatu’s or Kiosks : Corporate governance is set to improve as the number of state directorships is implied and directors can’t be involved in politics (e.g. chair a company and a political party). Also a person who has been removed from a state office for a violation is not eligible for any other and crucially state officers will not be allowed to have other gainful employment – is this a repeal of the (controversial) Ndegwa Rule that allowed civil servants to engage in private business?

6. Land Use Restrictions: There was a story in the newspapers this week about a land grab in the Tana Delta. The new constitution requires that Parliament ratify concessions of land and mining agreements. This effectively puts an end to the practice of Desert states, foreign universities and corporations signing up farmland for their own food production. Parliament will also set other rules on land investment, minimum and maximum land holding, matrimonial sharing and inheritance

Cheque Truncation Part II

The deadline of new cheque modernization passed this week, on June 1. Yet many bank customers had not yet received new chequebooks, and many more were not fully versed with the process, which entailed a change of chequebooks.

The Kenya Bankers’ Association (KBA) left the public relations of the process to its’ member banks resulting in low awareness and did not communicate till May 31 with adverts in the newspapers re-assuring customers and the public that the old cheques will be used for an indefinite period. This paled in comparison to the introduction of mobile number portability (MNP), in which the regulator (CCK), service providers, and mainly mobile companies carried numerous advertisements about the transition to the new service. (Mobile companies ran extensive promotions to retain their customers or win over their competitors’ subscribers).

There are still many unresolved questions, even with the extenstion:

– Old chequebooks were issued though the month of May, but customers then had to get the new chequebooks at month end. Who bears the cost of printing books that were about to be phased out?
– Do the new cheques clear faster? e.g. 1-day for Nairobi cheques? Speed is important for payments in the age of M-Pesa. The last statistics from the Central Bank (CBK) showed that in 2008, about 50,000 cheques were being cleared daily. Many suppliers now insist on getting paid by M-Pesa (which takes less than a minute) or by real time gross settlement (RTGS a.k.a corporate m-pesa done by banks – but this also carries a high risk of fraud risk of fraud – at 69% of bank crimes)
– What happens to post-dated cheques? These are used for debt repayments and for motor insurance loans (some banks use these for collateral over up to 10 months)
– There is no apparent difference in the design of the old and new cheques. So what has changed to warrant the exercise?
– Are cheque printers (mainly De la Rue) able to print enough chequebooks for a smooth roll out next time?
– Some banks said that old cheques will still be honoured in-house i.e. if drawn to people who also use the same bank, while others told their customers they would not be honored. KBA should communicate a clear deadline when all banks & customers must switch.

For now, the old and new chequebooks are in circulation, but more information has to be provided to resolve the cheque truncation process.