Auditor barred from KSh12.5bn spent on Telkom and bank shares

Auditor-General Nancy Gathungu has said her office was denied access to transaction records of KSh12.5 billion share purchases in Telkom Kenya and 2 development banks, raising questions on the legitimacy of the deals conducted in the last financial year.
The KSh12.5 billion in question relates to the Treasury purchase of KSh6.19 billion Telkom shares from Jamhuri Holdings Limited (JHL), KSh5 billion shares from the Africa-Export Import Bank (Afreximbank), and KSh1.29 billion shares from Eastern and Southern African Trade Development Bank.
The expenditures were done under Article 223 of the Constitution, which caters for emergency spending not factored in during Budget making.
“However, a review of documents on the purchase of shares revealed that the government bought shares in Eastern and Southern African Trade and Development Bank and Afreximbank in order to increase its influence and relevance in the bank’s activities. This was especially on investment decisions, with the intention of having the banks channel more investments to Kenya,” the audit indicated.
The other purchase related to the government’s buyback of 60 percent Telkom Kenya Limited shares from JHL during the last days of former President Uhuru Kenyatta, which has since raised serious concerns in government, with the Cabinet reversing the transaction in October.
Ms Gathungu, however, raised concerns over the three transactions and expressed doubts that there was value for money in the spending of KSh12.5 billion after her office was denied access to the banks and JHL.
“Requests to visit the 2 banks’ headquarters in Burundi and Egypt, respectively, as well as the registered offices of the company that sold off the Telkom Kenya Limited shares in Mauritius and the United Kingdom were either declined or not responded to,” Ms Gathungu stated.
The Auditor-General said she was unable to confirm that the Treasury actually bought the shares “and to determine whether there were any benefits that may have accrued to the Government of Kenya for the purchase of the shares.”
The audit also notes that the National Treasury did not provide proper justification for the purchase of the shares under Article 223 of the Constitution, which is reserved for unforeseen emergency spending.
The National Assembly’s report on the first supplementary budget for the financial year 2022/2023 indicated that there was no justification for Telkom Kenya’s shares buyback under Article 223 of the Constitution.
“Further, there was no reason why the payment could not have been budgeted for in the normal budget process. As a result, the amount of KSh6,196,584,631 paid to JHL was not approved by the National Assembly,” the audit noted.
The Telkom shares buyback has elicited criticism since the Controller of Budget (COB) Margaret Nyakang’o revealed how she was pressured to authorise the KSh6 billion withdrawal by former Treasury Cabinet Secretary Ukur Yatani.
In August, the Ethics and Anti-Corruption Commission asked the Director of Public Prosecutions (DPP) to charge Dr Nyakang’o, Mr Yatani, former Treasury Principal Secretary, former director-general of Public Investments and Portfolio Management, Telkom Kenya CEO, chairman, chief operating officer, chief strategy and business development officer and CFO and a transaction adviser for Helios, with more than twenty counts, including conflict of interest and money laundering.
“Investigations established that the Communications Authority of Kenya did not grant approval for the acquisition of 60% shares of Telkom Limited by the Government of Kenya in the transaction under inquiry since part of the conditions given by the Authority were not met by Telkom Kenya Limited,” EACC stated.
“Investigations revealed that despite the correspondences between the former Attorney-General (AG) and the former Treasury CS, the office of the AG did not issue a legal opinion, neither were the AG’s comments and advice incorporated in the contractual documents.”
The High Court last week, however, restrained the DPP from arresting, charging, or prosecuting Dr Nyakang’o, in a ruling by Justice Chacha Mwita.
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