The term ‘Anglo Leasing’ as used in Kenya’s public lexicon is from ‘Anglo Leasing & Finance Limited’, a dubious company that in 2002 bid for two security contracts worth Sh90 billion.
When NARC got into power it started an audit in a bid to fight corruption and discovered that on these two contracts the government had been taken for a ride. The contracts were cancelled, but another 18, worth a total of Sh56.1 billion, were flagged because they had a similar structure.
These contracts became known as ‘Anglo-Leasing-type’ contracts, and a recommendation was made to audit them in detail.
The audit revealed that four contracts (Sh18.9 billion) were as dubious as the Anglo Leasing & Finance Limited one, and they were also cancelled. Another three contracts (Sh6.7 billion) were found to have been delivered on, and paid off. The remaining eleven contracts (Sh30.5 billion) were found to be partly completed and it was recommended that they be re-negotiated. Of these eleven contracts two (Sh7.9 billion) were paid off between 2008 and 2012 and efforts are underway to recover Sh16.6 billion from another six. One more contract is being re-negotiated and the remaining two are the subject of the ongoing ‘Anglo Leasing’ public debate.
The two contracts are ‘First Mercantile Securities Corporation’ and ‘Universal Satspace LLC’, worth Sh2.9 billion, entered into in 2002 and relating to the Kenya Postal Corporation. ‘First Mercantile’ was contracted to supply VSAT equipment to connect all the post offices across the country while ‘Universal Satspace’ provided bandwidth.
The audit confirmed that the two companies delivered as required, though their services were over-priced. The Kenyan government delayed payments and the two companies filed cases in Britain and Switzerland demanding their pay. They won and got orders instructing Kenya to pay Sh1.6 billion, or have their international property attached in lieu.
Kenya appealed, and lost. The government then negotiated the amount and it was agreed that it pays Sh1.4 billion.
This is the money that Hon Kabando wa Kabando and his team of political cheerleaders have declared that the government ‘Can’t Pay, Won’t Pay’; despite the existence of a valid court order.
Incidentally Kabando Wa Kabando, Cecily Mbarire and Kareke Mbiuki, the Jubilee politicians that led the ‘Can’t Pay, Won’t Pay’ choir were Assistant Ministers in the Coalition government that paid two other similar contracts.
The three CORD principals were Prime Minister, Vice President and Minister of Foreign Affairs in the Cabinet, and CORD Senator Amos Wako was Attorney General. All these politicians know the details of these contracts, but will not admit it because it is unpopular.
Kenya needs honest politicians who will explain to the public that no government in the world can long survive while ignoring court orders against it, especially those demanding it meets financial obligations to third parties. (Cuba tried, it is still recovering).
However our leaders need to also publicly admit that paying the two contracts is not because they agree with them, but because they understand they have a responsibility of assuring the world that Kenya can be trusted to meet contractual obligations even when it is politically expedient not to. Otherwise we can only guarantee contracts for the five years of each regime, and we will not achieve much this way. Political leaders are elected to do that which is necessary, not popular.
When America faced its financial crisis, the US government realised they had to bail-out banks (the same institutions that had caused the crisis in the first place), or face a financial melt-down. Obama publicly admitted that doing this was as popular as a root canal; but it had to be done to avoid America’s financial system collapsing. He told Americans that ‘ … When I ran for President, I promised I wouldn’t just do what was popular – I would do what was necessary’.
Kenya plans to float a Sovereign Bond worth Sh125 billion. This is an easy venture for a country discovering oil and other minerals, growing its infrastructure, and politically stable. However investors dislike people who do not pay debts, especially when the debts are supported by a court order (however the debt was incurred).
Paying the Sh1.4 billion might be unpopular, but it is necessary if we are to avoid jeopardizing the Sh125 billion. It is also what is expected from a country with a B international credit rating. Let us also avoid sending the wrong message to our new partners.
We have just signed 17 contracts with China. Are we telling them that a few years down the line some Kenyan politicians might decide the contracts should not be paid, whether or not China has a court order?
Finally let us distinguish between investigating the contracts, and respecting court orders. They are mutually exclusive in this case.