A monthly publication
of AFRICANEWS
For the period
covering February 16 – March 15, 2003
Part I: Analysis
Part III: Appendix
Euro Bank collapse: a tip of the iceberg? By Deremo Maiko
Kenya’s worst bank scam since the collapse of Trust Bank in 2001 threatens to tilt balance further against small banks in the country. Euro Bank’s collapse, withbillions of shillings of parastatal money could at the very least spark off another "flight to safety" and cause a creeping confidence crisis against the regulatory Central Bank of Kenya (CBK), analysts say. The saving grace this time is that CBK Governor Nahashon Nyagah has been replaced by another central banker Andrew Mulei — who thankfully will work under a completely different political regime. The cyclical banking crisis phenomenon has in the past served to swell the coffers of the big banks, largelytransnational subsidiaries, leaving the rest mainly African and Asian-owned banks on the fringes. Last year for example, subsidiaries of UK banks Barclays and Standard Chartered and the 35 per cent state-owned Kenya Commercial all reported double-digit deposit increases. By March, Central Bank of Kenya (CBK) monthly Economic Review showed the ten largest banks accounted for 77.5 per cent of the industry’s Sh360.7 billion (About US $46 billion) deposit liabilities, in a country dominated by commercial banks following collapse of the indigenous non-bank institutions in the mid 1980s. Profit sharing in the industry takes similar pattern, only that Barclays andStandard take a disproportionately bigger share compared to Kenya Commercial, which is badly managed. There are ten commercial banks, three non-banks, twomortgage firms and four building societies in the country. That International Monetary Fund had as far back as 2000 raised the red flag on five other small banks, beside the collapsed Euro Bank, is no comfort at all. They are yet to be closed down as recommended and CBK has in the past admitted it was only giving them time to recapitalise. Insecurity in the small banks has brought structural asymmetry in the system. This, apart from forcing small banks to pay astronomical deposit interest rates, has made big banks insensitive to customers, levying all manner of penalties and charges on both lending and deposits. Lending rates have stayed up leading to an attempt to control both supply and demand prices through the Central Bank (Amendment) Act 2000 popularly known as the Donde Act. It is not like Euro Bank was exactly a replica of an ordinary bank in the country: But public perception in the industry is everything. For instance, with parastatal deposits topping Sh1.8 billion (About US $ 24 million) or 67 per cent, it is clear the ill-fated bank was in the business of bilking state money not trading. Its dud assets piled at 260 per cent of their equity fund size. Some 92 per cent of the debts — certainly taken out by politicians and state firms’ heads who had pumped government funds into the dying bank — were non-performing. More disturbingly, the bank was known as a conduit for money laundering. It was its political connections, though, which kept the bank open. Amongst itsshare-holders were well-connected Chairman Julius Muthamia and Kenya Revenue Authority Commissioner General John Munge who has since resigned. Both at various times worked for Trade Bank, which collapsed in a similar manner in the mid ‘90s. Although CBK is largely autonomous, licensing for banks and closures are done with express authority of the Treasury, which is in the hands of the politicalclass. The final result is that governors have to wring their hands without raising a finger as banks grossly violate the Central Bank and Banking Acts. On one hand there should be no reason to worry; Euro Bank in theory accounted for just 0.3 per cent of the system deposits. But looking at the wider picture and the changed political climate, there are reasons to be wary. Banks in Kenya collapse when power changes hands and the protective veil is withdrawn. The first bank crash session was in 1986, soon after the Kikuyu elite had lost out to the so-called Rift Valley Mafia. The admittedly poorly capitalised banks came down without CBK trying any salvage measure. One of the owners, who has since died quietly, ran away to the Scandinavia and had most of his property inexplicably sequestered by government. The next crash related to the peccadilloes of the 1992 elections sucked in politically banks used to haul money off the CBK through devious schemes. This was in 1993. At least six banks mainly associated with Asian businessmen were put in liquidation. The next one followed the 1997 elections, in 1998. The banks had been stripped clean by politicians and shareholders leaving them on the brink. More disastrous was the bankrupting of the National Bank, a state bank with the furthest reach, putting at the tender mercy of the liquidator before the National Social Security Fund (NSSF) and government injected capital. IMF has since demanded the shell bank be closed without success. Kenya Commercial, had it not been better capitalized, would have been sailing in the same boat. Every time such an occurrence happens, the common denominator has been loss of parastatal funds. Euro Bank went down after a scandal where Sh256million (US 3.4 ) million of NSSF money disappeared in the institution was exposed. Others to lose out were National Hospital Insurance Fund (Sh493 million) – US$ 6.4million, Kenyatta Hospital (Sh492 million) – US$ 6.5 million, Postal Corporation of Kenya (Sh159 million) – US$ 2.1 million, Kenya Post Office Savings Bank (Sh66 million) – US$ 860000, Kenya Tourism Development Corporation (Sh61 million) – US$ 792000, Kenya Pipeline Company (Sh55 million)- -US$ 714000, Kenya Sugar Board (Sh55 million)- US$ 714000 and Postal Corporation of Kenya Sh53 million (US$ 688000).
Fears are now that owing to the ethnic nature of the Kenyan politics, some of the parastatal heads that threw money into a sure hole might get away with it.
More often than
not, they had financed the politicos now singing the song of transparency. At
the end of the day, autonomy of the CBK will reassure the banking industry. But
small banks will certainly feel the pinch.
ENDS
By Zachary
Ochieng
Former
president Daniel arap Moi must be reeling in shame following the exposure of
the skeletons in his closet two months after leaving office. Even as he claims
to champion regional peace after establishing the so called Moi Foundation
immediately upon retirement, the crimes that his regime committed against
humanity have finally been brought to bear, casting doubts over his ability to
arbitrate in regional conflicts when he could not tolerate dissent in his own
country.
Following the
removal of the Kenya African National Union (KANU) from power, former detainees
and political prisoners have come up with revelations of how the former regime
used to torture them to extract confessions on alleged crimes committed, or to
implicate an individual perceived to be a dissident. At the heart of the
revelations is the existence of secret torture chambers where victims would be
interrogated for months before being hurled to detention.
The torture
chambers came into existence in the early 80s and are housed at the basement of
Nyayo House, ironically named after Moi’s philosophy of peace, love and unity.
Situated in the heart of the city, Nyayo House is also the headquarters of
Nairobi province. During the Moi era, hints on the existence of the torture
chambers would be dismissed as untrue by the authorities. But the truth finally
came out early February when the doors to the chambers were flung open to the
public, with the outgoing Nairobi provincial commissioner Cyrus Maina leading
the way.
Former victims
of the torture chambers, who visited them this time round as free men, wept as
they recounted their ordeal at the hands of mean interrogaters. Shem Ogola, 56,
could not hold back his tears as he showed his torture scars to the press. The
torture squad was constituted immediately after the abortive coup of 1982,
which was staged by disenchanted Kenya Air Force soldiers. Although the squad
had been existing dormantly as an intelligence unit since Moi came to power in
1978, the coup attempt was used as an excuse to give it a mandate to crack down
on political dissidents.
The squad was
drawn from the Special Branch (security intelligence officers), derisively
referred to as the political police, the Criminal Investigations Department
(CID), the Kenya police and the armed forces. When the squad was formed, every
security agent wanted to be part of it, as the task was politically glamourous
and lucrative. Their zeal was driven by the fact that the political atmosphere
after the coup attempt was such that clipping the wings of anyone posing a
threat to the government assured one of career progression and financial gains.
Their targets
included politicians, radical university lecturers and student leaders and
lawyers who dared represent the perceived dissidents. Any lecturer who espoused
Marxist-Leninist ideas was put behind bars. Charges ranged from possession of
seditious publications to plotting to overthrow the government. It was also
during this period that the government curtailed press freedom by proscribing
any publications deemed to be supportive of opposition figures.
It was with
the promise of cars and other luxurious gains in mind that the squad embarked
on a crackdown on perceived dissidents on a scale only then known in former
communist bloc nations. The crackdown was also reminiscent of the hunt for
communists in the US in the 1950s.
To buttress the squad’s actions, the
political establishment and the security apparatus invented a nondescript
underground movement going by the name “Mwakenya” (Mzalendo wa Kenya) –
Kiswahili for a Kenyan patriot. All the victims rounded up allegedly belonged
to this underground movement whose existence remains a mystery to date. While
the victims maintain that “Mwakenya” was a creation of the security agents, the
latter insist that the movement actually existed before and after the 1982
abortive coup.
What cannot be
disputed, however, is that the torture methods used were very dehumanizing and
degrading. Tales emerging from the victims can only be associated with the
torture chambers of Romania and Augusto Pinochet’s Chile. Upon arrest, the
victims would be blindfolded, bundled into a car boot and driven to Nyayo
House. On arrival, they would be stripped naked and held in dark, waterlogged
cells for weeks and would be sprinkled with cold water from a powerful
hosepipe.
Sometimes a powerful light would be flashed
on their faces. They would also be forced to spend the night with dead bodies
of those who had succumbed to the torture. A number of victims claim that they
lost their manhood after their testicles were crushed with hammers. Many died
in the process and their kin were never informed. Some victims would be hurled
to death from the 24th floor of the building, after which the
government would claim that they committed suicide.
The most
dehumanizing treatment that the victims underwent was being forced to drink
their own urine and eat their faeces. The minister for Public Works, Roads and
Housing Raila Odinga, who served three detention stints under the Moi regime
sadly reminisces: “I spent ten days standing in water. That is when you know
how long the night is. They would then pour very cold water on me at midnight
and at 5.00 am”. Little wonder that very few victims failed to plead guilty
when they were finally hurled to court.
The court
procedure itself seriously violated the rights of the perceived offenders as
they were taken to court after hours, with no legal representation. Besides the
victim, only the prosecutor and the magistrate would be available in court.
There was a lot of interference with the judiciary as the government ensured
that only magistrates who would hand over sentences as directed presided over
the cases. The prosecutor at that time was Bernard Chunga, who Moi later
rewarded with the post of Chief Justice, though he was not qualified for the
job. Chunga finally resigned in February when public pressure mounted on him
over the crimes he committed against humanity, but not before President Mwai
Kibaki had appointed a tribunal to investigate his conduct.
In spite of
the stunning revelations, opinions are sharply divided over what action should
be taken against Moi and his torture squad. While some victims want all those
involved to be punished, others feel that this may destabilize peace in the
country, considering that some of those who perpetrated the crimes are in the
current National Rainbow Coalition (NARC) government. They include a number of
MPs, assistant ministers and the Attorney General Amos Wako, who is also under
pressure to resign.
“I have
forgiven Moi. But that doesn’t mean he should not face the law. We were
tortured and some of us were killed, yet his government kept saying the torture
chambers never existed”, says former MP Njeru Kathangu, once a “guest” at the
chambers. However, Odinga, while condemning Moi’s atrocities, says he is not
for revenge. Says he:” I do not want to revenge. What I can say is that the
threat to Moi was imaginary. He embraced torture to pacify the kind of
opposition that was mounting and went ahead to ban multi-partism. There was no
justification at all for the kind of force the regime used against us”.
Most victims, however, want a truth and reconciliation committee, similar to the one set up in South Africa at the end of apartheid. It is only after the perpetrators of the heinous acts confess that they can be forgiven. But still, there are those who are not willing to forgive and have threatened to sue and demand compensation from the government. Former Nyeri town MP Wanyiri Kihoro – one of the victims forced to drink his own urine is adamant: “I am unable to forgive the Moi administration because whatever it did to me it did deliberately. I spent 74 days in the cells, 24 of them in cold water and was then detained for three years”.
The victims are
unanimous on one point; that such kinds of atrocities should never be
perpetrated again against government critics. Subukia MP Koigi wa Wamwere, a
survivor of the torture chambers beseeches the NARC government never to resort
to such crimes against humanity. “If the NARC government wants to remain in
power, let it not repeat the same mistake”, says the NARC MP.
Justice and
Constitutional Affairs minister Kiraitu Murungi - also a survivor of the
torture chambers – is quick to assure the public: “There are a lot of us in the
government. We share the bad experiences. I don’t think this is something we
will allow to happen again”. Murungi said the torture chambers would be
preserved as “a national monument of shame”. Among the survivors who are now
members of the cabinet include Murungi, Odinga, Planning minister Prof Anyang
Nyongo, Trade and Industry minister Dr Mukhisa Kituyi several assistant
ministers and MPs.
What cannot be
gainsaid, however, is that it will take time before the wounds are completely healed,
considering permanent injuries that some of the victims sustained. Former
leader of official opposition in parliament Kenneth Matiba, who was detained in
1990 for championing multipartism suffered a stroke and is paralysed on one
side of the body. His mental faculties are also not intact. His colleague in
the struggle for democracy – first African Nairobi mayor - Charles Rubia – lost his voice in detention
and has not recovered to date.
ENDS
NARC’s dilemma on tackling graft By Fred Oluoch The National Rainbow Coalition (NARC) that won the elections with unprecedented popular mandate in the landmark December 27 elections, could have bitten morethan it could chew. Having routed the long-serving Kenya African National Union (KANU) on the anti-corruption platform among other pre-election promises, the two-month old government is now facing a situation where what was seen as a fashionable winningstrategy could turn out to be its Waterloo. The byword in Kenya today is war against corruption. But neither the new government that is highly expected to correct the economic ills of committed by KANU in the last 24 years , nor the targets, can clearly tell the course it is likely to take in the face of overzealous public that has only one message—fight the runaway graft to the bone. The government, despite hauling a number of "big fish" to court on charges of corruption, has not quite blended with the public mood that expected a swift anddecisive action on the scourge which they see as the main cause of dwindling living standards. Questions still linger whether the government, unlike the previous KANU regime, has the necessary political will to rid itself of corrupt politicians and public officials. Hopes were raised early this month when the government appointed a new Chief Justice—the respected former Court of Appeal judge—Justice Evans Gicheru. The movearoused optimism that the government is set to clean up the much maligned judiciary, widely seen by most Kenyans as the citadel of corruption. The government, besides keeping its election pledges to clean up the rot in the public sector, is in great need to seal the corruption taps to finance some of its expensive policies such as free primary education and effecting the long-delayed increase insalaries and perks for over 240,000 teachers. Yet, the speed at which the government is moving is causing concern and raising allegations that it is adopting short-term measures in fighting corruption in the name of carrying out investigations, instead of anall-out war. The public is baying for the blood of certain individuals that they strongly believed were the mastermind of corruption in the past 24 years. The question is whether it is the dog wagging the tail of the tail wagging the dog, with opposition members accusing the government of being prompted by the public to act in certain cases. The government maintains changes are coming and that Kenyans should not be in a hurry to see the benefits and fruits of a change of guard. Notably, the NARC government inherited the systems and institutions that served the KANU regime, and many individuals previously implicated in corruption are still holding high public offices. Analysts argue that the seed for chaos was sown when president Mwai Kibaki— a one time deputy to Moi for 10 years—decided to retain a big chunk of Moi’s appointees in his government. The public is getting restless, as their continued stay in the office could give them a chance to destroy evidence or use their ill-gotten wealth to buy their freedom. Just like the previous government that played a cat mouse game with Bretton Woods institutions for almost 10 years over the intermittent suspension and resumption of donor aid, the current government is also facing allegations of resorting to knee-jerkmeasures to please donors. On March 13, the government was forced to temporarily withdraw a crucial anti-corruption bill that will open the door for the resumption of donor aid, mainly dueto squabbles of power-sharing deal that was agreed on before the elections. KANU, with 68 MPs, led by official leader of the opposition, Uhuru Kenyatta, had earlier vowed to team up with disgruntled elements in the government to oppose the legislation on grounds that it amounted to piecemeal amendments to the constitution whileKenyans are awaiting total overhaul of the constitution. Besides stemming corruption, the new government also has the task of unravelling the widespread belief that key members of the former government stashed awayover Ksh 60 billion ($750 million) in Swiss banks and Cayman Islands. Years of appeals by various interest groups for monies kept in secret foreign accounts to be returnedto help "patch up' the ailing economy, have fallen ondeaf years. The public is now looking up to the government for the return of the funds, mainly believed to have been looted from public coffers. Recently, the minister for Justice and Constitutional Affairs, Mr Kiraitu Murungi, announced that the government has managed to recover Ksh 15 billion ($188 million). Also encouraging is the recent report by Transparency International (Kenyan Chapter), which showed a significant reduction in bribery index in 2002 compared to 2001. The survey revealed a drop in expenditure on bribes from Ksh 8,000 ($100) per urban respondent per month to Ksh4,900($61.25). This, however, does not give roomfor complacency given that it did not cover looting by public officials in privileged position, and the fact that it was conducted under the previous regime. The report also revealed that Kenya was in 2002, the world's sixth most corrupt country according to perception of the business community of public officials and politicians. But more worrying is how NARC—a conglomeration of 15 parties with disparate interest but who came together with the common goal of defeating KANU—will rout out bad apples within its midst. It is faced with task of exposing persons currently in the government but who had been previously mentioned in corruption. KANU operatives are not making the task any easier, with continuous assertions that most of those who brought the country to its knees are now in government having shifted from the ruling shortly before the December 27 elections. Top government officials have often repeated that the new government will not tolerate the habit of "sacred cows", yet the approach in its war against graft is raising eyebrows that the government is somewhat cautious in going for the jugular of some individuals. This perception recently led to huge outcry by a section of KANU members who accused the government of selective and discriminative approach in the fight against graft, besides engaging in witch-hunt against members of the former government. The public is also awaiting the pre-election promise where those who have been appointed to cabinet positions are supposed to declare their wealth and howthey acquired it. President Kibaki recently announced that he would declare his wealth within a month. But of great test for the new government, will be the 10-year old Goldenberg scandal in which the previous government is said to have lost $1 billion in fictitious exports of gold and diamond jewellery. A judicial commission of inquiry kicked off on March 14, and is set to be the most intense and protracted in the country’s 40 years of independence, and where key personalities in the current and previous government are expected to testify.ENDS
By Zachary
Ochieng
In what
appears to be Kenyans’ desire to end unjust and corrupt practices among public
servants, embattled former Chief Justice Bernard Chunga found himself on the
receiving end when he was forced to resign late last month. For a public
prosecutor whose appointment as Chief justice three years ago generated a lot
of controversy, his exit was equally controversial and unprecedented.
He was
appointed Chief justice despite the fact that he had never served on the bench
and bypassed senior Court of Appeal judges who merited the post. It is also the first time in Kenya’s history that
a tribunal was set up by the president to investigate the conduct of a judge.
Not one to be pressured to resign, he ignored a public outcry even as it became
increasingly evident that his days were numbered. However, he eventually
resigned five days after a tribunal had been set up by President Mwai Kibaki to
investigate his conduct.
Pressure to
have the Chief justice removed was first brought to the fore in early January
when Tigania East MP Peter Munya (Safina) said Chunga was unfit to hold the
office, given the role he played in the torture and subsequent detention of
perceived dissidents when he was the Deputy Public Prosecutor in the 80s.
There was no
relenting as 17 organisations, including the Law Society of Kenya (LSK), human
rights workers, former prisoners and detainees and lawyers joined the fray in
citing his role during the infamous trials of members of an alleged underground
movement known as “Mwakenya”. Earlier, a group of former detainees led by lawyer
Rumba Kinuthia and Subukia MP Koigi wa Wamwere issued Chunga with a seven day
ultimatum which required him to either resign or have a complaint about him
lodged with the president.
But Chunga was
adamant. He decided to remain mute over the matter and only broke his silence
early February when, in his characteristic arrogant style, he dismissed the
charges levelled against him as “petty propaganda”. Said he: “Apart from lofty
talk and petty propaganda, those who make such claims have made absolutely no contributions
to judicial reforms”.
It did not
help matters that even after Chunga broke his silence, a former prisoner Mr
Akelo Onyango, who served a three- year jail term over his alleged links with
“Mwakenya”, filed a private prosecution against him before the Nairobi Chief
Magistrate Boaz Olao. Olao, however, threw out the case and refused to summon
the chief justice to answer the charges. But the matter did not end there.
More pressure
mounted when for the first time, the government opened to the public the Nyayo
House torture chambers where the “Mwakenya” dissidents would be held for weeks
before being hurled to detention. When they visited the dark cells this time
round as free citizens, the former detainees could not hold back their tears
and insisted that whoever was responsible for their incarceration there must be
called upon to explain why they had to be treated that way. They wondered why
such a person should continue to hold a public office.
Apparently all
the while, the government was listening. It is instructive that the National
Rainbow Coalition (NARC) government won the December 2002 election on a
platform of reforms in the judiciary, which was tainted with corruption and
other severe malpractices.
But a clear
indication that the government was about to honour its pledge came when Kibaki
appointed 19 advocates as senior counsel. Judges enjoy security of tenure and
can only be removed from office through a tribunal whose membership must
comprise a senior counsel among others.
As pressure continued
to mount on the chief justice to resign, Justice and Constitutional Affairs
minister Kiraitu Murungi – who had earlier insisted that he had no evidence to
warrant the establishment of a tribunal to investigate Chunga – finally told
parliament on February 20 that he had gathered enough evidence and that the
tribunal would soon be constituted. “Now I have the evidence and a tribunal to
investigate the conduct of the chief justice would soon be constituted,” he
told parliament.
But only a day
after Murungi had issued his statement, President Kibaki suspended Chunga from
office and named a tribunal to be headed by the National Assembly speaker
Francis ole Kaparo, with senior counsel Gibson Kamau Kuria, retired Chief
Justice Abdul Majid Cockar and Appellate judge Justice Richard Kwach as members
among others. The dye was cast. The composition of the tribunal was seen by
Chunga’s sympathizers as an attempt to intimidate him to quit office,
considering the long -standing enmity between him and Kamau Kuria and Justice
Kwach.
The charges
levelled against Chunga included allegations that he had been corrupt and
dishonest while in office, that he conducted himself disgracefully and
dishonourably and doesn’t deserve to be the chief justice and that he no longer
commands the respect and confidence of Kenyans as the Chief justice and
therefore he ought to be removed. These were just but some of the eight charges
levelled against him.
But Chunga,
probably fearing that his name would be tarnished further, tendered his
resignation, which was promptly accepted by President Kibaki. The resignation
marked the end of his over two -decade career as a public prosecutor and chief
Justice. Many former detainees hailed his exit as a good riddance. In the
judicial circles, Chunga’s resignation mirrors a similar scenario in 1971 when
the first African Chief Justice Kitili Mwendwa was forced to resign after a
series of condemnations at public rallies, where he was linked to a group that
was
planning to
overthrow President Jomo Kenyatta’s government.
Following
Chunga’s exit, two other senior public officials have bowed to public pressure
and relinquished their posts. They are former Commissioner General of the Kenya
Revenue Authority (KRA) John Munge, who was forced to resign following his
close links with the collapsed Eurobank, which went under with millions of
Kenya shillings belonging to state corporations. He was followed by former
Central Bank of Kenya governor -
Nahashon Nyagah - who was
equally blamed for failing to advise the state corporations on Euro bank’s
liquidity problems.
ENDS
·
Feb. 21 Euro
bank is put under liquidation as it goes under with over Shs 3 billion
belonging to the public.
.
Part III:
Appendix – Kenya’s cabinet
Office of the
president:
President
Mwai Kibaki
Dr Chris
Murungaru
Geoffrey
Parpai
Vice President
Wamalwa Kijana
Mrs Lina
Kilimo
Ochilo Ayako
Kalonzo
Musyoka
Eng. Raila
Odinga
Mrs Charity
Ngilu
Moody Awori
Prof. Anyang
Nyongo
Kipruto arap
Kirwa
Prof. George
Saitoti
John Michuki
Karisa Maitha
Ms Martha
Karua
David Mwiraria
Raphael Tuju
Dr Mukhisa
Kituyi
Amos Kimunya
Dr Newton
Kulundu
Vacant
Peter Ndwiga
Kiraitu
Murungi
Najib Balala
Amos Wako