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Lights Under The Procurement Table for Kenya Power

“Who let the dogs out?
Who, who, who, who, who?
Who let the dogs out?
Who, who, who, who, who?”

The above lyrics from the song released in the year 2000 by the Baha Men form part of a catchy, dance floor chorus that sticks in one’s mind like a screen saver on permanent loop. They also aptly describe the unrelenting attack currently taking place on the board of directors of the listed utility, Kenya Power (KP).

Mr. Bernard Ngugi, who had been head of procurement by the time he procured the promotion (cheesy pun fully intended) was appointed as KP chief executive officer, in October 2019. Bernard’s lights were turned down low in early August 2021 when his resignation was accepted by the Board and an acting CEO Ms. Rosemary Oduor, appointed to replace him.

Just like night follows a day of resignation, and zebras follow wildebeests, the current Board [which was only appointed in July 2020] suddenly started getting bad press in the media and negative mentions in parliament culminating in the summoning of board members last week to the Ethics and Anti-Corruption Commission to answer to questions of “corrupt” procurement. The chairperson, Ms.Vivienne Yeda, was also summoned last week to the Energy Committee of Parliament to answer to several questions that were so all over the map that Google would have a problem trying to point anyone to find the actual direction that the Committee was heading. From asking for the distinction between an executive director and a non-executive director (something which a parliamentary intern would happily research in all of five minutes), to asking about the details of why Mr. Bernard Ngugi resigned, to the applicable law used by the Board in its refusal to procure meters which had been already approved in a procurement plan and budget, to the implementation status of the human resource structure that had been submitted to the State Corporations Advisory Committee.

Can you procure the key issue that is being hidden in plain sight here, obfuscated by other non-issues such as HR structures and meaningless definitions of directors? Jumping into last week’s attack fray was the secretary general of Kenya Electrical Trades and Allied Workers Union, which represents KP workers, who accused the directors of undermining top management and over reaching on procurement matters. I’m actually quite confused as I have never seen Union officials coming out in defense of non-Union members in the form of senior management. But perhaps I will procure some discernment in due course.

Section 15(1) of the State Corporations Act states that a Board shall be responsible for the proper management of the affairs of a state corporation and shall be accountable for the moneys, the financial business and the management of a state corporation. KP falls within the ambit of the Act as it is controlled by the government who have a majority shareholding of 50.086%. Whereas a Board is not involved in the sausage making part of the procurement process, they are well entitled – as the fiduciary responsibility holders – to give direction on what is to be procured, ask questions on why it should be procured and determine how much the procurement should cost in total through a budgetary process. The board does not get involved in the actual procurement nuts and bolts such as requesting for proposals as that is a management operational function.

When the Board exercises its oversight responsibility, and in this case such responsibility is guaranteed by the State Corporations Act, one starts to wonder why so many noses are being put out of joint. Having listened to the cries of Kenyans who have ceaselessly questioned their high electricity bills, and having scratched the surface and found stock obsolescence and inflated stock purchasing which have to be paid for by hitherto unsuspecting consumers, the new KP Board has drawn a line in the sand and said the days of blindfolded oversight end here. As the late cabinet minister John Michuki aptly said, “When you rattle a snake, be prepared to live with the consequences.” The KP Board has rattled a venomous procurement snake and is currently living the nightmare of dodging its fangs which are emerging disguised in various forms because, after all, the best defense is a strong offense.

The best that we can do, as observers of this nightmare on Kolobot street, is rally behind a Board of directors that is being crucified at the altar of corporate governance and having their individual reputations sullied as a result. It bears noting that people of good integrity will now be highly reluctant to join parastatal boards. But that’s exactly what the venomous snakes want and, in this animal corruption kingdom, more dogs will be let out as we watch.

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Twitter@carolmusyoka

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Banks and Corruption make for strange bedfellows

[vc_row][vc_column width=”2/3″][vc_column_text]On April 13th this year, I opined quite loudly about the role being played by the banking sector in Kenya’s institutionalized corruption culture. In case you missed it, my observations were as follows:

“Picture this scene: Mr X has been banking at Bank Y for the last 10 years. His account turnover is about an average of Kshs 250,000 on a monthly basis. The account suddenly begins receiving deposits and withdrawals ranging from Kshs 20 to 100 million, which moves his average monthly turnover to about Kshs 50 million. The Anti Money Laundering officer, usually a skinny, bespectacled recent university graduate, flags these movements to his boss the Compliance Manager. The Compliance Manager flags it to his boss, the Risk Director. The Risk Director walks over to the Retail Director and shows him the transactions as he’s a smart chap who doesn’t want to put anything in writing, just yet. The Retail Director, who is royally chuffed that his liability targets are constantly met since his team’s successful senior civil servant recruitment drive last year, rubbishes the report and dares the Risk Director to take it higher, “Weeeh, even the Managing Director knows we have these accounts, can’t you see how they are helping our deposits to grow?”

Well, in my typical smug armchair analyst fashion, I have been unequivocally vindicated. Far be it for me to say I told you so, but the Sunday Nation on July 5th reported some interesting court findings. An article titled “Suspended city official deposited Sh 1 bn in two years” written by Andrew Teyie caught my eye. In it tells the story of an extremely industrious public servant who allegedly deposited close to a billion shillings in nine accounts spread in five local banks within two years. This information is sourced from documents tabled in court by his accusers, the Ethics and Anti-Corruption Commission (EACC). First off, I have to doff my hat to the industrious public servant for mitigating concentration risk by opening accounts at five different banks. Baba attended risk assessment 101 and passed with flying colors. It is never advisable to put your eggs in one basket, spreading them to three is wise and to five is brilliant. It also helps to reduce the risk that in case one of the five banks cottons on to what you are up to and reports you, there are four other banks to keep fooling.

According to the court documents, industrious public servant had declared his income at Shs 831,840 (although it doesn’t quite say to whom the declaration was made) yet deposits were being made on at least twice weekly ranging from Sh 1 million to Shs 13 million. Yet the banks are required to have established Anti-Money Laundering (AML) processes to capture abnormal transactions. An abnormal transaction would be anything that goes against the norm for the type of activity a customer has been registered as undertaking. So for example a salaried customer would be expected to have a one major credit into the account, followed by a slew of debits as he withdraws his salary in dribs and drabs over the course of the month. If the salaried customer has multiple credits, especially those that significantly exceed his stated salary, this would typically raise a flag.

A way around this, for the experienced money launderers, is to open a hotel, restaurant or casino. All these businesses deal with cash such that an inordinately high number of deposits would hardly raise anything other than a bored eyebrow over at the compliance team in the bank who never quite get off their cushy behinds and go look at the actual customer turnover within these joints.

Now it is highly likely that an enthusiastic compliance officer raised the flag, drew compliance manager’s attention who drew risk director’s attention who cast a baleful glance at retail director before heroically blowing the whistle to the Central Bank team who then ran pell-mell in the direction of Integrity Centre with the file in hand to knock the sky and our expectations open with the news of this chap’s accounts. Somehow I don’t think you believe that, which is quite funny because neither do I. Truth of the matter is that industrious public servant is one of the small fish that can be pan fried in the rather tepid fight against corruption and he laid himself wide open by not covering his standard gauge tracks when banking his proceeds. He relied, quite safely, on his banks that did not report the suspicious transactions to the regulator. He also unwittingly relied on a regulator that was snored quietly on the sidelines as these AML breaches happened, and continue to happen, on their watch.

A couple of paradoxes that arise from this case are noteworthy. First off, that the Kenya Revenue Authority appeared and decided swoop in for the tax evasion kill is nothing short of comedic. How do you tax corruption proceeds of a public servant? A public servant in many cases is only taking what are public funds hence it beggars belief that one can tax what one has already collected as tax and has been misappropriated by public officials. Is that not taxing the tax that’s been taxed? The second paradox is the sand that is being thrown in the public’s eyes. Industrious public servant is a tiny little goldfish in an enormous fish tank. The EACC has demonstrated publicly that they can get historical data on the banking activities of public servants. So why isn’t the Central Bank’s supervision unit being used to assiduously partner with EACC to hunt down these nefarious characters? EACC knows where all the corruption proceeds are. Our Central Bank knows (or can exercise a tiny bit of supervision to find) where all the corruption proceeds are. You and I are foolish pawns who lap up the piddling little stories of corruption arrests. Meanwhile the big fish don’t do their banking in Kenya: it’s too pedestrian.

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Twitter: @carolmusyoka[/vc_column_text][/vc_column][vc_column width=”1/3″][/vc_column][/vc_row]