Mr President, why is Kenatco still under receivership 24 years later?

Some four years ago, and on the 20th anniversary of Kenatco’s fall into the hands of receivers, I raised this question. But it appears that there is no roadmap to resuscitating this company, which at one point wanted to run the public transport sector in the country.

Recently, President Kenyatta appointed John Ngumi as the new chairman of the Industrial and Commercial Development Corporation (ICDC), the parent company that was running Kenatco before it was gnawed to near-death and its sherds handed to a receiver in 1996 to glue together the pieces.

But why the receiver was unable to repay an initial Sh17 million loan even after selling Kenatco’s prime properties in Nairobi and Mombasa is something worth investigating. How that loan grew to more than Sh1.2 billion is akin to the fairy tales associated with hobgoblin, albeit with a veil of secrecy.

Organised company

Perhaps looking back, and as the government tries to look for an organised transport company, the state should have supported the initial privately run Kenya National Transport Co-operative Society Limited.

Founded by, among other people, Mr Simon Peter Mbacia, its first general manager, in 1965, Kenatco was the first indigenous transport business society in Kenya and it hoped to snatch a business hitherto run by Indians, Arabs and Europeans. It had also intended to take on giant transport companies like the Overseas Trading Company, OTC – a British firm that pioneered bus transport in Nairobi in 1930s after it introduced a fleet of 13 buses on 12 city routes before expanding to other towns.

Two vehicles

The company’s first Transport Licensing Board (TLB) licence No 6314 was issued on August 25, 1965 and the Mbacia-led company was allowed to operate only two vehicles on the Nairobi-Gilgil-Nyahururu route, and two on the Nairobi-Namanga route. By October 1965, it was seeking a licence to operate 82 buses, aiming to enter into the lucrative haulage business, buy some boats and a plane to serve the local tourism market. After the October 1965 application, the company was allowed to operate 82 buses “on all routes within Kenya on a co-ordinated timetable,” according to records. It was also given a “B Carriers’ licence,” issued to carriers of commercial goods.

With these licences and a new petrol station next to Kipande House Nairobi (it still exists) and another in Race Course, it seemed that nothing could stop the growth of this company.

Mr Mbacia had started touring various towns recruiting shareholders and by 1965 he had 2,028. He expected to have 155 vehicles on the road, comprising 49 taxis, 62 buses and 44 lorries by the end of that year.

Licence withdrawn

But the Class B licence, which allowed the company to operate trucks, was withdrawn in December 1965, leaving the founders in limbo. While no reason was given, the shareholders increased to 9,000 by 1966 and brought some taxi drivers on board.

The new entrants in the transport sector were not getting the required support from the TLB under J.K. Gatuguta, who in 1964 declared all the indigenous passenger transport vehicles within Nairobi “illegal”. And then there was the unresolved question on what to do with East African Road Service (OTC) and the Kenya Bus Service, which had some monopoly of sorts.

Perhaps that could explain why Mbacia, during the company’s first anniversary, felt that the odds were stacked up against the company: “Since the company’s inception, we have been applying for loans to boost our business but we have not received any satisfactory reply from the minister concerned and this puts us in a very desperate position.”

And that is where the ICDC came into the picture. According to then minister for Commerce and Industry, Mwai Kibaki, the government was “invited” by the shareholders to save Kenatco from collapse.

Three months

“This was the very first national transport society of Africans, and if it was not to be allowed to collapse, it became essential that the government, in fulfilment of its policy of African Socialism, should prop up, buttress and help support Kenatco”.

That was three months after Kenatco’s road licence for all its buses was deferred. The then opposition, Kenya People’s Union protested the move to nationalise Kenatco with secretary-general Zephaniah Anyieni arguing that the government should have nationalised either OTC or Kenya Bus Services. Mr Kibaki had promised that the government would walk out of Kenatco soon after it was turned around.

“As soon as the management is set up properly, we shall be asking every co-operative, every ordinary member in Kenya who wants to buy a share in Kenatco to do so, so that it may represent the broadest public and be truly to the liking of Okuto Bala, MP Nyando, who believes in this form of socialism.”

To ICDC

It was after this takeover that Kenatco was handed over to ICDC, which owned 90 per cent leaving 10 per cent to the previous shareholders. The new company was renamed Kenatco Transport Company Limited.

Although Mr Kibaki argued in Parliament that the takeover was done in good faith — to “protect public’s faith in co-operatives” — there were murmurs inside Parliament that it had been taken over to protect foreign transport companies that were being threatened by the new kid on the block. These were two British companies, Kenya Bus Service, which had a monopoly on Nairobi routes, and OTC, which commanded the major Nairobi-upcountry routes and Mombasa.

The first chairman of the new Kenatco was the 34-year-old Kenneth Matiba, then the permanent secretary in the Ministry of Commerce. Although Matiba was supposed to grow the company into a national transport parastatal, he first sold all the buses he had inherited from the original shareholders to Akamba Bus Service, Twarka Transport, Kiambu Transport and Ruaraka Bus Service. He claimed they were too old to run.

He brought in a new fleet of vehicles and, in 1968, he had more than 200 vehicles, which included high-end limousines that were used to transport visiting dignitaries.

Mr Matiba was replaced in 1968 by J.G. Kibe, who expanded the fleet of cars for hire and set up a system where vehicles hired in Mombasa could be handed back in Nairobi and vice-versa. The government also hired Peter Arthur Spencer, a former government bureaucrat, as the general manager.

With hindsight, we realise that Spencer started bringing down Kenatco by first selling its two petrol stations and abandoning the passenger transport business.

Kenatco’s new buses were then sold to Ivory Safaris, which were associated with Mr Spencer, while the Kenyatta Avenue Petrol Station was sold to Avis, an American firm that was looking for an entry into the rent-a-car business. The then Commerce minister James Osogo approved that sale.

Mr Spencer said that he wanted to concentrate on long routes such as Zambia, where it was hauling copper to the Port of Dar es Salaam. There was uproar in Parliament over the deal and the matter reached State House.

The public is so annoyed by what the government is doing.

“Many delegations have been sent to see the Minister for Commerce and Industry and also another delegation was sent to see His Excellency (President Jomo Kenyatta) on this particular matter, because the public is so annoyed by what the government is doing,” Embakasi MP Mwangi Karungaru told the House.

What was not known publicly was that to run Kenatco, the government had hired 19 expatriates, led by Mr Spencer, who owned another company, Lowland Wood Company, based in Industrial Area, which was selling spare parts to the firm.

“Not only that, some people who have been rejected in other government statutory boards have now been employed by Kenatco,” said Mr Karungaru.

The MP was referring to Mr Spencer, whose position at the Ministry of Home Affairs had been Africanised and Parliament was told the aim of selling the Kenatco buses was to make sure that Kenya Bus Services had the opportunity to operate in all parts of the country.

Although the minister admitted that a “lot of bad things” had happened at Kenatco, Parliament was told by Nakuru MP Mark Mwithaga that the minister was speaking “humbly because he knows how guilty his men are” in running down Kenatco.

Transport copper

That is how corruption ate some parts of Kenatco under Spencer’s watch. What now remained was the haulage business, as Kenatco lorries were used to transport copper from Zambian towns of Ndola, Lusaka, Kitwe and Mufuliira to Tanzania.

By 1969 it had opened an office in Zambia and there was a fleet of about 60 lorries on that route alone. By this time, Zambia was the largest producer of copper in the developing world and the third-largest producer in the world. Kenatco was the official road transporter – taking a majority of import goods such as lubricating oils and bitumen and paper packaging materials.

Had it survived, it would now be the largest transport company in Africa.

Kenatco also entered into a partnership with the Winston Morrow rent-a-car business, Avis. That business was given to a new company Kenatco Rent-A-Car Limited, which was expected to have 150 cars by the end of 1969. The main Kenatco was to restrict itself to road haulage and town taxi business.

With the exit of the expat general managers, the government in 1971 appointed John Gitao and Chris Kirubi to drive the company. It was the duo who expanded the haulage and taxi business, with the Mercedes-Benz becoming the symbol of Kenatco for the taxis and lorries.

Integration problems

The East African Community then began to having integration problems after Idi Amin deposed Milton Obote in Uganda and the relationship between Kenya and Tanzania started to deteriorate. In 1977, Tanzania closed its borders with Kenya and so the Zambian business collapsed. This time Kenatco had invested in refrigerated trucks that ferried meat, butter and pork to Zambia from the Kenya Meat Commission.

The last time I spoke to Chris Kirubi about this, he told me that he decided to seek transport business from Idi Amin’s Uganda. “I negotiated with Ugandans to transport their coffee under police guard, since most of it sent through the railway was always stolen,” he said.

Balance sheet

Mr Kirubi is always angry that people blame him, personally, for the collapse of Kenatco. Actually, it appears he carries somebody’s cross. He left a very healthy balance sheet, 50 Mercedes-Benz saloons and 25 Mercedes trucks. The man who drove Kenatco down was Yuda Komora who, in 1980s, allowed people to abuse the trust transporters had on Kenatco and goods were stolen in transit. Some vehicles disappeared and loans were never repaid.

 I recall Mr Kirubi telling me: “He allowed people to do magendo (smuggling) using Kenatco vehicles… I warned him not to allow people to mess the company but he never listened to me.”

Soon, Kenatco was put in receivership in October 1983. But before then, a new company, Kenatco Taxis Limited, was incorporated to run the taxi business, which was still profitable.

The receivers were accused of selling Kenatco business for a song to allow politically connected companies to take its place and that is how some politicians entered into the transport business. The taxi business took loans from the National Bank of Kenya, then a politically run bank, and never repaid. In 1996, unable to pay Sh17 million, it was also put under receivership. Today, 24 years later, the loans have grown to over Sh 1 billion. Why?

John Ngumi should look into this.