High time for Kenya to re-evaluate bilateral deals

Tuesday, July 14th, 2020 17:43 |
Constitution of Kenya. Photo/Courtesy

James Mbugua 

The announcement that the UK Department for International Development (DfID) will be folded into the Foreign and Commonwealth Office (FCO) is as surprising as it is alarming.

Surprising because DfID is known as a more efficient and effective operator on the ground than the bureaucratic FCO, but alarming because of leeway it could give to UK private capital to operate in Kenya without necessary oversight.

Earlier this year, the UK signed some agreements with Kenya for increased cooperation especially trade and investment.

Much of this is expected to go into public-private partnership (PPP). On paper, this is good, as it could mean more foreign direct investments.

In practice, it has proven to be problematic especially because of weak regulations in Kenya for foreign investments. 

One of the things that DfID has been doing  is channeling UK taxpayers’ money for investment in Africa through its development fund, CDC Group, whose biggest investments in Africa are in Nigeria (Sh35b) and Kenya (Sh28b).

CDC’s  on its  website, says, “Our mission is to support building of businesses throughout Africa and South Asia, to create jobs, and to make a lasting difference to people’s lives in some of the world’s poorest places.” 

This, however, has not been the case. CDC has been criticised for the opaque manner it invests the funds and, importantly, the lack of accountability for how companies it invests in conduct themselves. 

Investigated by the UK Serious Fraud Office in 2012 for alleged corruption in Nigeria and illegal surveillance of a UK-based Nigerian whistleblower, Emerging Capital Partners (ECP, a private equity company in Africa), CDC and DfID came in for criticism and an investigation was launched.

Eventually, a former Nigerian governor, James Ibori, was extradited from Dubai after fleeing from justice in Nigeria and charged in the UK.

It turns out, companies in which he had laundered money had received UK taxpayers’ money through CDC and ECP.

That would have been treated as a one-off event until ECP ran into negative headlines recently for how it allegedly stripped Spencon of its assets and fled the country leaving employees without pay even as its executives paid themselves handsomely.

ECP later refused to pay these workers and claimed the fund it had invested in had reached maturity and been wound up.

A BBC investigative programme in April, highlighted that audit firm, PWC, described ECP executives’ behaviour as corruption and worthy of investigation under the UK Bribery Act. 

Ironically, ECP chief exucutive Vincent la Guennou, was recently quoted by CNBC calling for more development funds to bail out companies such as the ones ECP has stakes in.

In an opinion piece, he asks for cash from international donors to be channeled directly to high potential companies through debt, quasi-equity and guarantee instruments so that they have breathing space to survive Covid-19.

He adds that banks should be refinanced to roll over maturities of debts and to involve central banks and fund managers like ECP and shareholders.

Observers now worry that with DfID being merged into FCO, its operations and investments through CDC are likely to become more opaque and unregulated.

One of the British ECP executives accused of corporate abuse of office in the Spencon case, Andrew Brown, surprisingly, has recently been appointed a Managing Director in CDC Group.

This is deflating for former Spencon workers hoping for intervention from UK authorities to have their wage arrears settled.

While Ugandan authorities have involved Interpol to investigate ECP executives, nothing has been heard from Kenyan government agencies.

As Kenya gears  up for a bilateral trade deal with the US, it is high time to relook at other bilateral agreements with countries like UK, with which its last treaty was in 1973.

With DfID funding now likely to come through private equity companies, it is time for Kenya to work out a new agreement with the UK on how such investments will be regulated in Kenya.

In particular, executives of such entities should be liable under Kenyan law for corporate malfeasance and fly-by-night tactics that belong in the colonial era. —The writer is a Legal and Policy Communication Consultant

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