Auditor-General Nancy Gathungu has said her office was denied access to transaction records for the Sh12.5 billion purchase of Telkom Kenya shares, raising questions on the legitimacy of the deals conducted in the last financial year.
The Sh12.5 billion relates to the National Treasury’s purchase of Sh6.19 billion worth of Telkom shares from Jamhuri Holdings Limited (JHL), Sh5 billion shares from Africa Export Import Bank (Afrexim Bank), and Sh1.29 billion shares from Eastern and Southern African Trade Development Bank.
The expenditures were undertaken under Article 223 of the constitution, which caters for the government’s emergency spending, which had not been factored in during budget formulation.
“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 Afrexim Bank 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 report indicated.
The other purchase related to the government’s buyback of 60 per cent Telkom Kenya shares from JHL in the last days of former President Uhuru Kenyatta’s administration, has since raised serious concerns in government, with the Cabinet reversing the transaction in October.
Ms Gathungu expressed doubt that there was value for money in the spending of the Sh12.5 billion after her officers were denied access to the banks and JHL.
“Requests to visit the two banks’ headquarters in Burundi and Egypt, respectively, as well as the registered offices of the company that sold off the Telkom Kenya shares in Mauritius and the United Kingdom were either declined or not responded to,” Ms Gathungu stated.
She said she was unable to confirm that the Treasury actually bought the shares and has ownership of them “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 Treasury did not provide proper justification for the purchase of the shares under Article 223 of the Constitution, which caters 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 Sh6,196,584,631 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 Margaret Nyakang’o revealed that she was pressured to authorise the Sh6 billion withdrawal of public funds by former Treasury Cabinet Secretary Ukur Yatani.
The Ethics and Anti-Corruption Commission (EACC) asked the Director of Public Prosecutions to charge Dr Nyakang’o, Mr Yatani, former Treasury principal secretary, former Director-General Public Investments and Portfolio Management, Telkom Kenya CEO, chairman, chief operating officer, chief strategy and business development officer and chief finance officer, and a transaction advisor for Helios, with more than 20 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 per cent 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. Investigations revealed that despite the correspondences between the former Attorney-General and the former Treasury CS, the office of the AG did not issue a legal opinion, nor were the AG’s comments and advice incorporated in the contractual documents,” EACC stated.
