17 December 1999 Vol 40 No 25 AFRICA CONFIDENTIAL KENYA 2 KENYA Sorry, wrong number Going for broke Civil service chief Leakey's anti-corruption drive could bring in just The bizarre saga of Kenya's cellular phone licences raises questions enough aid to rescue the government about the government's anti- Kenya is almost broke. And the International Monetary Fund, which has been expertly teased with corruption campaign. Although promises of reform by President Daniel arap Moi’s government several times before, is thinking Nairobi officials claim the bidding about restarting the flow of aid. On 16 December, as we went to press, an IMF board meeting was was 'World Bank-monitored', some companies report gross to consider reopening negotiations (with several provisos) on US$175 million of low-interest credits irregularities and say the state has under its Poverty Reduction and Growth (formerly Structural Adjustment) facility. An IMF deal lost $50 million revenue. could trigger a further $250 mn. of credits from the World Bank and bilateral donors. The Fund’s Nairobi staff have sent a favourable report, and if the board says yes a mission from SOUTH AFRICA 3 headquarters in Washington will visit Kenya within a month. Aid could be resumed as early as next March, but negotiations are more likely to drag on until mid-year. Without help, the government Dealing with would probably default on several debts next year. If the IMF reopens its cash box, it will be a tribute to, and a boost for, Richard Leakey, the former wildlife director and opposition activist who was dissenters appointed by Moi as Head of the Public Service and Secretary to the Cabinet on 23 July, bringing President Mbeki is piling on a team of other Kenyan professionals with him into senior civil service posts. pressure on Inkatha leader and Leakey has notched up some notable administrative reforms. British officials helped organise the Home Affairs Minister Buthelezi June meeting between Moi and World Bank President James Wolfensohn which led to Leakey’s and Democratic Party head Tony Leon. Buthelezi is in the ruling appointment. If Whitehall backs Kenya on the IMF board, the aid talks will get serious, and Kenya’s ANC's suffocating embrace, and diplomats, coordinated by Sally Kosgey, Permanent Secretary in the Foreign Ministry, have done under fire for ministerial errors. their best. Britain’s new Minister of State for Africa, Peter Hain, was (like Leakey) born in Kenya; Leon, spoiling for a debate with his trip there in October included a visit to the house where he lived as a child. Even Hain, who first Mbeki, is kept at arms' length. came to public notice as an anti-apartheid activist and is tough on corruption and human rights, may have been touched. Within days of his appointment in July, Vice-President George Saitoti had EQUATORIAL GUINEA 5 visited him to explain the bgorn-again Moi government’s reformist credentials. British officials remembered past promises broken, but also know that financial collapse could mean disaster for Obiang's heritage Kenya’s people. The government denies that President Obiang is gravely ill but Have you been Leakey-ed? recent sightings of him in Nigeria IMF credits were suspended two years ago, after the government failed to investigate seriously the show him thinner and more tired Goldenberg affair (in which more than $300 mn. of state funds were lost, with several senior officials than before. Obiang has confirmed implicated) and to close down its network of ‘extra-budgetary’ accounts. The Fund and the World visiting a renowned US clinic for a 'check-up'. Bank also pressed Nairobi to clean up the way it awards contracts, but questions are still being asked about recent deals, especially the award of the second mobile phone licence (see Box) and other parts of the proposed telecommunications privatisation. RWANDA 6 No one doubts Leakey’s energy and determination. He usually starts work at 6 am and is often there 15 hours later. He has subjected the corruption-riddled coffee and tea boards to a full audit for Advantage, Kigali the first time in years; several senior officials have since resigned. He has strengthened the Anti- At home an anti-corruption drive Corruption Authority, put a finance officer in each ministry to monitor spending, and restarted gathers pace; regionally, lack of privatisation. All of the Kenya Reinsurance Corporation and 35 per cent of Kenya Commercial Bank progress in tracking down are to be sold next year. genocidaires makes Congo peace prospects bleaker; and Kigali has Civil servants take Leakey seriously because he aims to cut the public payroll by a third, and has scored a win in its battle with the unearthed plenty of skullduggery: ‘Has your department been Leakeyed yet?’ civil servants ask each UN over the genocide tribunals. other. Those tempted to skim a contract or divert state funds to a relative’s account now face a real risk of being caught. Moi has told visitors that Leakey’s anti-corruption remit extends to the top. POINTERS 8 Asked if that includes Moi’s business-minded sons, Gideon and Philip, we hear that the President replied: ‘If there is evidence against them . they must be taught to behave’. South Africa/ But nobody knows how far up the political food chain Leakey’s power runs. Some hard-nosed ministers and deputies regard his appointment as a smart move by Moi’s tough ally, Nicholas Biwott Zimbabwe, Angola, - even though Leakey, whose first language was Kikuyu, is not an obvious ally for Moi’s friends. Uganda and ACP/EU Kenya needs aid, and if anybody could persuade the donors to unblock it, Leakey is the man. Yet his supporters foretold a purge of old-guard ministers and a merging of ministries when Moi 17 December 1999 Africa Confidential Vol 40 No 25 Sorry, wrong number To enliven Kenya’s official anti-corruption campaign comes the bizarre fixed its cellular phone strategy. Leakey’s team’s failure to stop the saga of the cellular telephone licences. The licence to operate a second licence going cheap shows its political limits. cellular system was awarded last month to a consortium led by Biwott insisted that the announcement, made five months earlier Vivendi, an ambitious French sewerage contractor, and Kenya’s than scheduled, proved that the government was serious about Sameer Investments. The Vivendi-Sameer consortium bid just US$55 privatising telecommunications but ministers are refusing to answer million for its licence. Two competitors submitted bids, for $94 mn. questions in parliament about the award. Naikuni and his Minister, and $120 mn. On the face of it, that cost the Treasury about $50 mn. Wycliffe Musalia Mudavadi, have now set up a tribunal to investigate The all-powerful Trade and Industry Minister, Nicholas Biwott, who complaints, both from major companies eliminated in the early stages has taken a very close interest in the matter describes the award as of the competition, such as Deutsche Telekom and Malaysia Telecom, ‘good for Kenya’. and from five of the short-listed companies. The complainants hope It is surely good for Vivendi (with 40 per cent of the new company, the International Monetary Fund and World Bank will use their Kencell) and Sameer and a cluster of unnamed local interests (60 per leverage over aid funds to insist that the pre-qualification and bidding cent). Apart from an apparent $50 mn. discount on the licence, Kencell rounds are re-run according to international competitive standards. should earn a minimum $50 mn. a year. The local Managing Director We hear that all six short-listed companies had recruited senior of Sameer, Naushad Merali, is regarded as a competent and serious politicians, formally and informally, into their consortia. In one businessman whose career took off after he bought Firestone East consortium, United States’ GTE joined forces with Egypt’s Orascom Africa. His Sameer Investments has a nominal capital of KShs10 mn. and the Kenyan Flying Academy (which has good contacts with the ($133,000); the majority of its equity is controlled by an investment Biwott family). We hear that competition among Kenya’s elite for syndicate, Yana Developers Ltd. Another syndicate, Yana Investments, participation in the phone licences was so intense that Intelligence and Sameer hold equity in local banks. There is deep interest in the Director Wilson Boinet found it necessary to tap the telephones of the identity of the senior political figures linked to these syndicates. main contenders, as well as Biwott’s. A considerable chilliness has Vivendi has just paid $510 mn. for a second mobile phone operating developed between the two since then. licence in Egypt. Officials at the Communications Commission of Orascom insist that GTE came under political pressure to withdraw Kenya had confidently predicted that their second cellular licence from the race and so sabotage their higher $94 mn. bid. Another would raise at least $100 mn. Neguib Sawiri, Chairman of a rival powerful contender was the consortium of France-Télécom, IPS bidder, Orascom, confronted the CCK chairman, Samuel Chepkong’a, Diamond Trust and Jubilee Insurance (the latter is run by Amin Juma, at the public announcement: ‘You have just rejected a bid of $94 mn. an Asian businessman close to Kenyan intelligence). South Africa’s How can you throw away this kind of money?’ This murky affair is a MTN, in partnership with Scandinavia’s Telia and Kenya’s Triton, great embarrassment to the World Bank. Government officials were convinced they had won the contract. Not only had they got repeatedly claim the tendering process was ‘World Bank-monitored’. Moi’s sons Gideon and Philip involved, they also seemed to have Unsuccessful bidders say that is patently untrue.