EXACTLY 39 YEARS AGO THIS MONTH, 13 individuals assembled in Finance Minister Mwai Kibaki’s waiting room, at 2.30pm. Among them were three whites who had just arrived from Belgium. W.M Muguro was the chair of the assembly. He sat next to C.S Mbindyo and J.G Shamallwa, both from Kibaki’s office. The three whites had just arrived from Brussels, Belgium. They were M.A Train (Vice President, N-Ren) and J. Lariviere (N-Ren project engineer) and Dr Harper Johnson. Muguro welcomed them and explained his government’s decision to set up a fertilizer factory to cover for the shortfall in supply of this key farming commodity. He outlined requisite data to emphasize his point that Kenya is in serious demand of a fertilizer manufacturing plant. He then invited the N-Ren vice president, M.A Train. And from that moment, and by that gesture, a monumental scandal was born. This disgrace will have held Kenya at ransom for 40 years next June, when the government makes the last payment to the European financiers seeking compensation for the failed project. That apart, by that time, the taxpayer will have coughed over Sh10 billion on “hot air”, so to speak. The Ken Ren idea was meant to cost about Sh100 million in 1975. N-Ren’s Train had prepared well for the meeting; he awed his hosts to an extent they failed to undertake the requisite due diligence on his company. “The problem was about the Americans; they were doing the same thing all over Africa,” says Mwalimu Mati of anti-corruption lobby, Mars Group. N-Ren, Train said, was exclusively a fertilizer firm which not only markets the commodity worldwide. It does factories too. It was marketing one million tons of fertilizer annually in US alone. He seemed to prepare ground for his colleague’s presentation. In hindsight, he had scoured the feasibility study done by the Tennesee Valley Authority, in November-December 1970. Yet this study was flawed, for it projected the use of fertilizer to hit 243,000 tons in by 1980 – just ten years later. The feasibility study had rubbished the country’s fertilizer subsidy programme, arguing that it was a drain of the meager resources Lariviere, the N-Ren project engineer, said his delegation wanted to carry out an on-the-spot survey of the requisite resources – water, electricity, gas and other infrastructural elements – for the fertilizer plant. Ken-Ren was ready to pour money in to the project as long as the government of Kenya was the key shareholder. Construction would take just two years.. The resultant fertilizer would be 50 per cent cheaper than the world market prices, Train told the meeting. And in just four year, the factory would have recovered its costs. N-Ren would arrange for enough fertilizer supply to Kenya until the plant was ready, Train made it known. The meeting would close at 4pm. The 11 state officials were totally smitten. They in fact prepared a programme for the visitors to meet other senior Government officials – to spread the same gospel about N-Ren’s ability to make Kenya fertilizer production country. They also met heavyweights from the private sector. Now companies such as Albatross Fertilizers (EA) Ltd and Windmill East Africa Ltd both based in Nakuru, Nairobi-based Hoechst AG, and Norsk Hydro that had earlier expressed desire to undertake the job were overlooked – although they had proposed better terms than N-Ren. Later, N-Ren presented its proposal to the Industrial Survey and Promotion Centre (ISPC) in which it claimed that it was formed in 1973, produces in excess of one million tonnes of fertilizer yearly. It had factories in Venezuela and Mauritius. It proposed to offer Sh33.2m while the government and local investors were to contribute Sh77.8 m. The company would procure a seven to nine year loan at 9.5 per cent per year from European countries. While other bidders proposed import of ammonia, a key ingredient in the fertilizer manufacture, N-Ren offered to manufacture the raw material locally. It would construct two small plants for that purpose, it suggested. “Hoechst and other sponsors have not included small scale ammonia production as they consider it unreliable and uneconomic,” according to a paper by ISPC, February 1975. The report continued, thus “other sponsors and consultants have declared small-scale ammonia production to be problematical and uneconomic compard with anticipated future costs of imports. Investigation is required of these conflicting claims”. Inexplicably, Treasury failed to follow up on this. Yet this wasn’t the only red flag. The N-Ren proposal didn’t deliver any information about its finances. “Reports and accounts are not yet available to the sub-committee so the company’s financial standing is not known,” the ISPC report said. Indeed, there was enough reason to doubt the company’s capability to deliver. However, Kenyan officials declined to undertake due diligence on the American company. Rather, even with the apparent flaws, the Industrial Survey and Promotion Centre went ahead to recommend N-Ren for the job. And that was the genesis of Kenya’s oldest scandal, which opened the floodgates for mindboggling corruption deals drawing state officials. Of interest is that the World Bank felt the Ken Ren project suffered “small-scale effect”. Correspondence this writer recently acquired from the Kenya National Archives shows that the World Bank wrote to the government expressing its wonder at the minimal amount of money Ken Ren was ready to place in the project. The Bank appeared concerned that Ken Ren was releasing scant information about its intended process. “Before these plants (such as one proposed by Ken Ren) are seriously considered a thorough evaluation of their reliability should be made by visiting these plants with particular emphasis on their use in developing countries,” International Finance Corporation (the funding arm of the World Bank) official Michael Dixon wrote to E.W Espenhahn, the project manager, Industrial Survey and Promotion Centre, Nairobi, dated March 13, 1975. He said the fertilizer production process proposed by Ken Ren was likely to “carry relatively heavy burden”. But, it would appear, the architects of the project in the ministry of Finance, were not ready to listen to such counsel. Indeed for the Kenyan offcials, this counsel and caution didn’t matter. The stage was set to form a partnership with N-Ren. They would later call t Ken-Ren, which has now become a symbol of shame and revulsion. The Americans fled the country when they realised that the project had stalled in 1978. NOT TO BE OUTDONE, the next Kanu regime created a scandal to inherit a scandal – they formed another fertilizer company and poured millions of shillings in it. National Agricultural Chemicals and fertilizer Ltd (NACAF) was created to inherit Ken Ren, to take over the responsibilities of the collapsed company. As would be seen below, it was wound up in 1985 following recommendations by a UNIDO expert. NACAF establishment was based on “unrealistic assumptions” and was thus “unviable”, the expert concluded. And just like the Ken Ren, NACAF didn’t last long. It was liquidated in 1985, having guzzled millions of shillings. Even the government itself found the Ken Ren/NACAF project “over-ambitious for the level of our country’s development”, in the words of W.P Godo, a senior official in Ministry of finance, writing to permanent secretary, Ministry of Commerce and Industry in July 1986. SOMETIME IN 1988, the Ken Ren financing banks and suppliers secretly sued Kenya five times in three different locations: London, Paris, and Cyprus. The London court felt Kenya had been deceived by one of the supppliers, Voest Alpine of Austria, and awarded $3 million to the country. But in Cyprus, Voest was awarded ATS 300 million. Kenya is yet to follow up on the award. The rest found Kenya had breached its obligation. Armed with the anti-Kenya rulings by Paris and Cyprus courts, the banks kept mum until 2000 when Kenya went to renegotiate its external debts with the so-called Paris Club, in Paris. They sprung a surprise on the eve of the talks – pay us or we scuttle your plans with donors, they demanded. Voest Alpine and the financier bank were backed by it government, Austria – a member of the Paris Club. Kenya agreed to pay Bank Fur Arbeit Und Wirtschaft (BAWAG) of Austria 16 million euros (Sh2 billion, at the current exchange rate) between 2003 and 2013, and the Banque Bruxelles Lambert (BBL) and National Du Decroire of Belgium about 21 million euros (Sh2.5 billion) by June 2015. Part of this money has been paid. The last tranche is expected to be repaid in March 31, 2014 and in June 30, 2015.
Posted on: Mon, 27 Jan 2014 13:31:59 +0000
Trending Topics
Recently Viewed Topics
© 2015