Fact check: Does Kenya really lose Sh2 billion to graft daily?

‘‘Even those talking about the cost of a referendum, I don’t know where they are getting those figures from. We are waiting for the signatures to be verified then take the process to the counties. These people are misleading the public that Sh2 billion will be spent, yet what they steal every day is more than Sh2 billion.”

— President Uhuru Kenyatta, speaking during a joint Kikuyu vernacular radio stations interview on January 18.

Corruption continues to undercut productivity and development in Kenya despite government efforts to fight the vice.

The country ranks worse than average in almost every dimension of corruption involving business interactions with public officials, according to a World Bank diagnostic report.

Kenya was ranked 124 out of 180 countries in the Corruption Perceptions Index 2020 released by Transparency International in January, with a score of 31 out of 100, with 0 being the most corrupt. The score was below the Sub-Saharan average of 32 and global average of 43. A score below 50 indicate serious levels of public sector corruption.

A review of the last two Auditor-General’s reports on the financial statements of the national government reveals troubling levels of possible corruption. For instance, the national government could not account for about Sh514.6 billion, equivalent to Sh1.4 billion daily, in the fiscal year 2017/2018, while in the previous financial year the unexplained amount was Sh381.7 billion (over one billion every day).

The expenditure that was not justified was equivalent to one in five shillings that the national government budgeted to spend in the 2017/2018 fiscal year, and one in six shillings of what was allocated the previous financial year.

National and county budgets have increased significantly since the audits, with the 2020/2021 approved national and county budgets amounting to about Sh3.29 trillion. Assuming that the public funds that will be uncounted for this year will be the same proportion of the budget as in the last few years, then Kenya could lose about Sh722.8 billion, which is equivalent to about Sh1.98 billion a day. This amount is close to what President Uhuru Kenyatta claimed was lost to graft daily.

The problem of misleading and incomplete financial statements was pervasive in most various government departments and parastatals, concluded the Auditor General a situation that fuels corruption. 

The impact of corruption affects the quality of life of every Kenyan. The money that received adverse opinion in the last two Auditor-General’s reports was more than the money the government said it had spent on the Mombasa-Nairobi phase of the Standard Gauge Railway project, Kenya’s most expensive infrastructure project since independence, constructed with loans from China.

Today, China is Kenya’s second-biggest external creditor after the World Bank, having lent the country billions of dollars for the construction of rail lines and other infrastructure projects in the past decade.  Struggling to repay the debts, Kenya sought relief and China postponed the debt repayments due over the first six months of 2021.

Routinely stolen

In 2016, former Ethics and Anti-Corruption Commission Chairman Philip Kinisu announced that about Sh600 billion was lost to corruption every year. This was equivalent to Sh1.6 billion a day.  Mr Kinisu said at the time that a third of Kenya’s budget was routinely being stolen. If Kenya were to lose a third of the national budget to corrupt deals at this year, the funds would be worth Sh820.4 billion, or Sh2.2 billion daily.

According to highlights of the annual reports by the Office of the Director of Public Prosecutions (ODPP) covering four years, a total of 77 high-impact corruption cases involving more than Sh157 billion in public funds were registered in court between 2018 and the first six months of 2020. In 2019 alone, 26 corruption graft cases involving top government officials valued at Sh140.2 billion were pending in court. The amount was about five per cent of the 2018/2019 national budget.

The amounts involved may be shocking but the findings of public funds audits suggest that the suits are just a tip of the iceberg as most cases are not reaching the courts, let alone a verdict being reached.

The value of graft cases involving top government officials registered in court in 2019 was nearly double the amount allocated to the actualisation of President Uhuru Kenyatta’s Big Four agenda in the fiscal year 2018/2019, which was Sh73.75 billion. Implementation of the projects has been dogged by lack of funds.

In their first term President Kenyatta and his deputy pledged to build five state-of-the-art stadiums, which would have cost much less than the value of the cases registered in court in the first half of last year.

For instance, Ivory Coast in October last year inaugurated a new 60,000-seat stadium that cost $257 million (Sh28.3 billion), in preparation for the African Cup of Nations football tournament to be held in 2023. The amount lost through the high impact corruption scandals that were registered in court between 2018 and mid-2020 (Sh157 billion), could have built five 60,000-seat stadiums. 

Kenya would improve the average input- and output-oriented efficiencies of the manufacturing sector by three to four percentage points if it reduces its corruption to the level of Ghana, reveals a study on the effect of corruption on productivity in Africa by US Economists Hasan Faruq of Indiana University Bloomington and David T Yi of Xavier University.

Government figures show that the value of the manufacturing output in 2019 was Sh2.57 trillion, therefore a three percentage point increase would add about Sh77.1 billion to the output.
Ghana was  ranked 75 with 43 points in the Corruption Perceptions Index 2020.

Kenya’s competitiveness is held back by rampant corruption abetted by a weak judicial system and corrupt police force, according to the Risk and Compliance Portal by GAN Integrity, which helps companies manage regulatory and legal compliance.

Based on audit, prosecution reports, President Kenyatta’s claim that the country losses Sh2 billion daily  to corruption is mostly true.