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On August 3rd this year, Abdullahi Mahat, 34, walked into the Dadaab District armed with an AK 47 gun and several bullets.
Security officers around the camp reacted to this by cocking their guns thinking he was an Al-Shabaab member on a terror mission. However, Mahat a resident of Dadaab District, was there to surrender the firearm following a government amnesty extended to individuals with illegal guns.

Until then, Mahat had been a notorious bandit on the Garissa County roads and by his own account, surrendered the illegal firearms after several of his comrades were gunned down. Mahat said he acquired the firearm 11 months earlier.

A holder of diploma in community development, Mahat said he decided to buy a gun from the savings made while on temporary government jobs. With the gun, he joined the dangerous, but profitable banditry sponsored by sugar smugglers. The now-reformed bandit completed his primary education at Dadaab primary school in 1997 and joined County High Secondary School in Garissa town, the following year and then graduate from the high school in 2002. He then worked for the defunct Electoral Commission of Kenya as registration clerk and as a field monitor for Garissa town based nongovernmental organization womankind. He also worked with the United Nations High Commissioner for Refugees (UNHCR) as refugee verification clerk, before joining the banditry with scores of other youth from Dadaab in August last year.

By his own account, there are several young educated youths like himself from Liboi and Dadaab areas who are into banditry, which offers them handsome and quick financial returns.

“Many youth in the Liboi and Dadaab areas, where smuggling goods from the war-torn Somalia is lucrative and provides quick attractive money, got enticed into the menacing banditry activities by its profitable nature”, he said. Our two months investigation has revealed a sophisticated new breed of youthful bandits encouraged by kickbacks from unscrupulous traders, who smuggle contraband goods from Somalia into
Northern Kenya.

Mahat says together with others, he was recruited into banditry by a notorious local bandit by the name Kassim Dubow who got killed in an operation by security officers on September 4 along Laba-Sigaley route, 25 kilometers from Dadaab town. Mahat said he bought his gun at Sh 85,000 and 500 rounds of ammunition each at Sh 80 from a gun runner in the Somali border town of Dobley introduced to him by Kassim.

“I took one of the lorries smuggling goods from Somalia into Ifo refugee camp to Dobley and met the gun merchant who took me to his gun shop. Upon satisfactorily testing the gun, I was provided with armed militia escorts who brought to me to where my boss (Kassim) was waiting” Mahat recalls. For four days they travelled deep in the bushes carrying with them their food and water from Dobley to an area next to Ifo refugee camp, where they met their fellow gang members.

The reformed bandit, who refers to the slain Kassim as their team leader at the time, says he was trained on how to fight, how to roll and escape when overpowered during a gun fight for a week before he officially joined the gang.

He says during an encounter with Kenyan security officers on patrol in May this year, one bandit in their group was killed. Two others surrendered to the authorities, taking advantage of a prevailing government amnesty to illegal arm holders in the country. He said during the same month, they broke into two camps after disagreeing over the amount to be paid to them by the smugglers.

“The Kassim camp preferred a negotiated approach to dealing with traders on matters of payment. They agreed in a meeting in Ifo, Hagdera and Dagley with smugglers to a payment of between Sh 3,000 and Sh 5,000 per vehicle depending on the tonnage.

“The second camp under ‘Biirlage’ (Metal chewer), a nickname given to him because of his notoriety, wanted a blanket sum of Sh 10,000 protection fees imposed on all vehicles irrespective of their capacity arguing that they were taking a huge risk in protecting the smuggled goods while the goods owners were comfortably sleeping in their homes” Mahat tells the Standard on Sunday.
According to the Kenya Focal Point on Small Arms and Light Weapons, proliferation of small arms contribute to between 70 and 90 per cent of crime committed in the country.
The director of the lobby group Patrick Ochieng says between 70 to 90 per cent of crime s related to the proliferation of arms,

Even as the move by Government to close of refugee camps in northern Kenya generates heated debate, reports about smuggling of goods in the region only add fuel to already burning fire.

Dadaab is indeed more than just a refugee camp. Over the years, it has mutated into a major smuggling hub for sugar, rice pasta and electronic goods. Investigations by The Standard on Sunday reveal that illegal immigrants, some of whom have acquired Kenyan ID cards, smuggle more than 15,000 bags of sugar worth more than Sh72 million daily through the porous border with Somalia.

More dangerously, the culprits sneak into the country illegal arms and ammunitions, posing a serious security threat. It is the latter threat that persuaded the Government, through Interior Cabinet Secretary Joseph ole Lenku, to order the refugee camps closed. Officials of the UNHCR have, however, vowed to defy the order maintaining that the refugees can only leave the country on assurance of their security and better life back home.

In the meantime, however, the activities of some of the refugees are only but helping to reinforce the Government’s case. Owing to the illicit trade in sugar in the north, Kenya loses Sh5 million in tax revenue daily. Most smuggling is accomplished through connivance of Government officials working in North Eastern including police, Kenya Revenue Authority, Customs officials, the Provincial Administration and the Kenya Bureau of Standards.

The smuggling is conducted in the vast Dagahley, Hagardera and Ifo refugee camps in Dadaab District in Garissa County. Refugees in the Dadaab camps have established links with their relatives back home in Somalia, who bring in imported goods such as sugar from Kismayu Port in southern Somalia.

Unlike in Garissa, where the sourcing of sugar is done by dealers in refugee camps, smuggled sugar which enters via Wajir and Mandera is procured by local Kenyan businessmen and Somali nationals, some of whom have illegally acquired Kenyan IDs. These traders have relatives in Somalia or connections through clan linkages. In an average week, 50 lorries with a capacity of 500 bags, each containing 50kg sugar, enter Wajir town, some offloading their cargo, while others proceed to Isiolo, Marsabit and Moyale towns in Marsabit County.

Smuggling has been ongoing along the Kenya-Somalia border since the fall of Siad Barre’s regime in the 1990s. It has created an ‘untouchable’ community of millionaires, mainly Kenyan Somali traders, who are protected by a ragtag army in their trade deals. The millionaire smuggling community also includes Government officials who receive huge kickbacks to let in the goods. An eight-week investigation by this reporter, with support from Africa Centre for Open Governance (AfriCOG), established sugar enters through the border towns of Liboi, Mandera, Elwak, Hullugho and Wajir.

Kenya produces 500,000 metric tonnes of sugar annually, while the consumption is approximately 800,000 metric tonnes, leaving a shortfall of 300,000 metric tonnes. This shortfall is supposed to be imported from the Common Market for Eastern and Southern Africa (Comesa) region.

It is this shortfall smugglers exploit when bringing in sugar. The sugar enters Somalia via the ports of Kismayu, Bosaso and Mogadishu and mainly originates from Brazil, having been packaged in United Arab Emirates (Dubai).

However, smuggled rice comes into Kismayu from Pakistan.

Smuggling is made attractive by the fact that the cost of sugar production in Kenya is about $600 (Sh51,000) per metric ton, which is way above the average production cost of $400 (Sh34,000).

Locally, milled sugar goes for up to Sh120 a kilogramme whereas the smuggled sugar costs as low as Sh50 a kilogramme in the towns of Wajir, Garissa and Mandera. It means smuggled and imported sugar is cheaper than locally-produced sugar.

Following frequent incursions by the Al Shabaab militia into Kenya resulting in sporadic killings, including the shoting of security agents such as administrative police officers, a number of security border posts have been closed down. This has led to major security gaps in the border.

Due to the increased sugar imports into the Kenyan market during the last six months, retail prices have slightly fallen compared to the same period last year as reflected in the price of sugar in North Eastern.

The smuggling is perfected by cartels that operate from refugee camps through links with their clans in Kismayu. They raise money and send it to their relatives in Somalia through forex bureaus locally known as ‘hawalad’. Their contacts in Somalia, upon receipt of the money, load the ordered quantities of sugar onto waiting lorries and trucks for onward transportation to the border points.

Illicit deals

It is at this point that Kenyan traders and brokers get involved in the smuggling. Once the lorries and trucks loaded with smuggled goods get to the border, the Kenyan dealers, who have established illicit relationships with Government officers and security agents, intercede. They pay these officials huge bribes to facilitate the trucks to cross the border.

A notorious smuggler in Ifo refugee camp, who spoke on condition of anonymity for fear of being victimised for betrayal by his colleagues, says on average, 60 lorries of mainly 25 tons, popularly known as ‘miguu kumi’, carry 500 sacks each weighing 50kgs across the Kenya/Somali border at Dobley, every week.

Usually, 30 trucks offload their cargo in the three camps, while the remaining 30 proceed to Garissa, Modagashe and other small towns on the outskirts of Garissa town, in a process coded as ‘Warabiis’ (feeder) by the smugglers. According to information we gathered, those found transporting 200 or more 50kg bags of sugar bribe senior security officials with at least Sh130,000, whereas those trafficking 200 bags and less part with a minimum of Sh85,000.

Smugglers prefer ‘sorting out’ the police before the trucks arrive instead of allowing the vehicles to be impounded. Our smuggler source said: “We usually pay the ‘baraxat’ (pseudonym for bribe in the Somali language) through Kenyan brokers.

These brokers usually have good contacts and are highly trusted by Government and security personnel because of their long established relationships. Bribes amounting to between Sh100,000 and Sh130,000 are paid out to be shared among some Government officials and security agents along the route from Liboi to Dadaab, which include refugee camps of Dagahley, Ifo and Hagardera.”

When the intermediary agents pay bribes, the money is shared between officers at roadblocks and amongst their seniors.

Investigations established that there are about 17 organised brokers from Liboi to Dadaab as well as in Garissa and Modagashe areas, whose responsibility is to ‘smooth’ the way for incoming trucks as soon as the drivers report their departure from Kismayu. The Kenyan brokers and many Somali nationals with illegally acquired Kenyan identification documents usually drive around in Four Wheel Drives with tinted windows.

They enjoy unlimited access to many security areas and get preferential treatment at police stations and KRA offices. They move in and out of police stations, customs and KRA offices to pay off bribes so that their vehicles are allowed to cross unimpeded.

The vehicles travel in convoys of 10-20 lorries at night when there is less movement along the routes getting through security roadblocks uninterrupted and unchecked. In order to reduce the frequency and amount of ‘baraxat’, smuggling is conducted through five main routes popularly known as ‘cut lines’ or ‘panya routes’ used to transport ‘barmuda’ (Somali for smuggled goods). The preferred routes are Karuraax 1 and 2.

The other routes

Others are Dobley (Somalia) -Madax-Baagey- Ifo- Garissa- Modogashe (99 kilometers) Dobley-Degelema –Abdi Sugow-
Balambala-Ifo or Garissa or Dagahley or Hagardera (110 km). They also include Dobley-Degelema-Hameey-Welmarer Waldena- Amuma – H/dera- Fafi–Garissa and the 150km Shabah- Dedejabula- Sarif-Biyamadow-Dagahley.

The latter route is lately being avoided because of increasing mobile patrols and road barriers erected by bribe-seeking security officials who may not necessarily be on duty. The smugglers’ journey from Kismayu port city to refugee camps in Kenya may take about 10 to 12 hours and they usually travel at night to avoid security personnel. They avoid security not for fear of arrest, but extortion. Kenya Defence Forces (KDF) in conjunction with forces from the African Mission in Somalia (Amisom) have since taken control of Kismayu port. It would be expected that with their control, smuggling would subside. On the contrary, facts on the ground indicate that this is not the case. Financing of sugar imports in Somalia is through the export of huge amounts of charcoal from Somalia to the Middle East.

According to a UN report two years ago, charcoal worth between $35 million (Sh 1.5 billion) and $50 million (Sh4.2 billion) is exported from Kismayu per year. The export of charcoal is thus the bloodline that brings other contraband into Kenya.

When KDF took over Kismayu, it disregarded a UN request to uphold the ban of the export of millions of tons of charcoal at the port.

Consequently, the importation of sugar and hence its smuggling to Kenya has continued unabated despite the take-over of the port by military personnel.

For instance, Dadaab Acting Deputy County Commander, Bernard ole Kipury, acknowledges that smuggling of contraband goods, mainly sugar from Somalia, is a big problem that cannot be overlooked.

He blames the smuggling in Dadaab on its proximity to the border and the involvement of wayward Government officers. He says the Government is committed to fighting the menace. According to Kipury, “efficient policing of our porous borders with Somalia is a very tasking endeavour.” He says there are more than 40 routes which smugglers use interchangeably to sneak in illegal goods. To adequately fight this, he said, the Government would require about 1,500 soldiers to cordon off the borders or install high-tech surveillance cameras “which may be impossible at the moment.”

But the fact remains that the challenge is not that of numbers of officers required for deployment.

The challenge is corruption, lack of patriotism and indiscipline by officers deployed in the region.

As a consequence of illegal imports of arms and ammunition, banditry has for many years become rampant in the region. Further, the illegal trade in charcoal and sugar is believed to be funding the activities of Al Shabaab, the Islamist militia that has been fighting Somalia authorities amd causing insecurity in Kenya, including the recent Westgate Mall in Nairobi.

Osman Abdi Ibrahim, the Chairman of Dadaab District Peace Committee says smugglers bring in firearms and ammunition hidden underneath smuggled foodstuffs, taking advantage of the fact that their vehicles are not inspected by security officers. These firearms are later used in criminal acts in Kenya.

Wajir County Police Commander David Kuria says he is liaising with other stakeholders in the county to come up with fresh strategies to deal with the menace. Wajir East Deputy County Commissioner Jacob Warengo says security stakeholders are working on new ways of dealing with the smuggling by making random and incognito crackdowns on business premises.

Story by Adow Jubat

Link to the story on the Standard Newspaper

As far as aviation standards go, Jomo Kenyatta International Airport is a hub of flying. Planes take off and land one after the other, leaving a buzz and hum of smooth travel and an organisation at peace with itself.

Yet unknown to the millions of people who use this facility every year, a good chunk of the land that Africa’s busiest airport sits, including a planned runway, is owned by private individuals who can wake up one day and claim their plots.

Our investigations have revealed that more than 250 plots have been hived off land belonging to various airports in the country – more than half of them at JKIA – and sold to private individuals, most of it during the era of President Moi.

If the demolition of upmarket homes in Nairobi’s Syokimau shocked the nation last November, the grabbing of land belonging to Kenya’s key airports is deeper and unprecedented.

This development raises questions about plans by the Kenya Airports Authority — the quasi-statutory corporation in charge of the country’s airspace and air facilities — to expand and modernise its key aviation facilities countrywide, given that private developers have taken up plots earmarked for airport expansion and modernisation.

Extensive investigation and examination of documents, The Nairobi Law Monthly can reveal that land merchants have targeted nearly all airports countrywide. Our investigations show that the scandal that was Syokimau stretched beyond the allocation of Jomo Kenyatta International Airport (JKIA) land to just three parties — Mlolongo Brothers Association, Jumbo Housing and Uungani Settlement Scheme.

In fact, 152 parcels have been hived off JKIA — the principal aviation hub in East and Central Africa. Implicitly, while the evictions at Syokimau affected just three allocations — Mulolongo, Jumbo and Uungani — KAA still has lots of land still in private hands.

Sensitive parts of the airport (registered as LR no. 21919) are actually in private hands. Indeed, portions of the apron — the tarmacked area of the airport on which planes are turned, loaded and offloaded — is owned by private individuals, according to documents in our possession.

Also in private hands is the land earmarked for the airport’s second runway and parts of the main flight path (the route a plane follows in the air to take off and land), thanks to underhand dealings by individuals and staff at Ardhi House. The apron and the runway are essential to the smooth functioning of an airport, and if those who received titles were to claim and develop, their parcels of land, operations in Kenya’s airspace and at its airports would face serious disruptions.

Private land developers have taken up close to 250 parcels that previously were the property of the KAA: JKIA (152 parcels), Wilson Airport in Nairobi (25), Kisumu (23), Moi International Airport in Mombasa (11), Eldoret (13), and Malindi (1).

Documents show that two pieces – LR no. 9042/632 and LR no. 22405 – have been shaved off the JKIA cargo apron and another apron at the Old Airport, 18 pieces off the main flight path at JKIA including LR no 23232 and LR no.25799), and 10 parcels have been excised from the proposed second runway, the parcels now claimed by Mulolongo, Jumbo and Uungani.

Plot NRB/EMBAKASI/KATANI/LR no.13512 (allegedly owned by Mulolongo Brothers) and plot LR 14231 (claimed by Uungani) have been earmarked for the second runway whose construction is being funded by the World Bank.

State House

According to our sources at Ardhi House, the headquarters of Ministry of Lands, the allotees include ministers and senior public servants, and political operatives. Others include savings and cooperative societies (popularly known as saccos) of key parastatals. Some of the parcels are owned through proxies and private companies.

Among the notable allotees is a business side-kick of a once-powerful State House Controller. This individual is a director in dozens of companies linked to a former top politician.

Indeed, among the beneficiaries were individuals who were influential during the regime of President Moi. Some were directors of fleets of companies and state corporations. One of them formed a company that dealt exclusively in giving out airport land.

Instructively, and as is with the case with Mulolongo case, some of the land allocation files have disappeared from Ardhi House – and at the Registrar of Companies as well.

KAA concedes that its land has been “illegally allocated to private developers in spite the fact that the same had been previously reserved for airport purposes”, according its chief executive, Engineer Stephen Gichuki, in a letter to Lands and Settlement permanent secretary Dorothy Angote dated December 24, 2010.

Corruption

In the letter, Engineer Gichuki praises the PS for revoking some titles through Gazette notice 15579 of November 26, 2010 and urges her to annul more, which he lists. “We … request for revocation of land titles … for the reason that those parcels of land fall within the land titles of the airports (LR 21919).”

Contacted, sources at Ardhi House said the Ministry was awaiting communication from the Ethics and Anti-corruption Commission. “Once we get the requisite response, we will let you know,” said a highly-placed source who declined to be named until the Ministry received a “substantial” response from the anti-corruption body. The Ethics and ant-corruption commission is reportedly pursuing the case.

KAA is seeking nullifications of the titles on the grounds that their being held by private parties represents a security risk to Kenya’s airspace. According to an internal memo by KAA lawyers, the failed terrorist attempt to bring down a chartered Israeli airliner that had taken off from Moi International Airport in February 2002 compelled several airlines to withdraw from the JKIA circuit, leading to a loss of revenue.

“One of the reasons cited for the (withdrawal) was the lack of sufficient security measures at the JKIA,” says a brief by KAA lawyers.

After the attempt on the Israeli airliner in 2002, the World Bank gave Kenya a $10 million loan to develop a perimeter wall around JKIA, and to help construct the second terminal, which is almost complete. The tender for the construction of the wall went to Nyoro construction company for sh100 million but the company couldn’t proceed after Uungani went to court claiming that KAA was encroaching on its land.

The International Civil Aviation Organization, say sources at KAA, had threatened to declare JKIA unsafe following the Mombasa incident.

Double Allocation

KAA has moved to fence off part of the Syokimau land recovered from land developers last November although it is yet to embark on the development of a second runway.

It is still not clear to what extent the allocations of KAA land are legal. However, a source at Ardhi House claimed a number of them have titles through what has come to be known as “double-allocation”, a euphemism for irregular registration of land owned by state corporations. Implicitly, the government risks entering a legal minefield were it to move to annul titles its own agents issued to the current holders.

The fact that the KAA chief Engineer Gichuki is seeking to annul the allocations implies that the allocations were indeed made; that the contentious pieces have received LR numbers just shows that the
questionable dealings took place in the offices of the Lands Ministry, says the source.

“What will be the government’s argument (in seeking revocation)? This is a case of double-allocation. The titles were given out by the authority of the Commissioner of Lands. They are not forgeries,” said a State counsel who does not want to be named owing to the sensitivity of the matter. “It’s a huge dilemma for the State,” he said.

KAA has put three notices in the media (November 14, 2003, October 7, 2008 and September 25, 2010) about the assault on LR no. 21919, a parcel of JKIA land.

Experts in land matters say that any land set aside for a particular purpose is strictly, in legal terms, not available for re-allocation. “When the Commissioner of Lands gives out alienated land, then it’s an illegality,” said lawyer Paul Ndung’u, who served as the chairman of the 2003 Ndung’u Commission that was appointed by the new NARC government to look into illegal or irregular allocation of public land in Kenya.

He said “in excess of 300,000” titles to such land throughout the country are illegal, and that “is a conservative figure”.

KAA land had already been acquired and paid for by the mid-1990s. It wasn’t available to anybody, Mr Ndung’u said. “There must have been a conspiracy between private individuals and planners and people in the Ministry of Lands.”

Airport Personnel

Indeed, the allocation of airport land wouldn’t have been possible without the involvement of influential people in Ministry of Lands. “It is a case of people entrusted with safeguarding public property robbing the public,” said Jotham Okome Arwa, a lawyer who is an expert in land matters.

“Indeed, there was high-level conspiracy in the Ministry of Lands that require thorough investigations,” according to the report of the Mutava Musyimi Parliamentary committee on Syokimau Allocation.

This is a story of an intricate network that operates in several state offices and is linked to land- buying agents, public servants, lawyers and surveyors. Ardhi House is in the thick of the deal-making. As will be seen in the following story about Syokimau, files were created and then made to disappear inside the ministry’s walls; requisite payments were made; and government institutions gave out conflicting information.

But the key question is: Did KAA personnel knowingly abet the fraud? The Mutava Commission tends toward blaming KAA for inertia.

(The KAA Communication/Corporate Affairs Department failed to respond to a questionnaire this writer sent it almost three months ago. It called off three interview appointments at the eleventh hour)

As early as the 1990s during the tenure of Peter Kipyegon Lagat, the chief executive officer, KAA had placed itself on a collision course with land grabbers. As the authority dilly-dallied, private developers, together with unscrupulous Ardhi House staffers, had positioned themselves to grab plots of land. By failing to fence off its assets, the authority exposed them to the grabbers.

The story begins in June 7, 1994 when the new KAA absorbed the now-defunct Kenya Aerodromes Department through Kenya Gazette Legal No. 201. Earlier through notices 439 and 440 of February 25, 1982, the Aerodrome Department had Syokimau Farm Ltd (L.R 7149/11/R), a former sisal plantation owned by a white Kenyan, with an eye towards the expansion of the airport.

(It is still not clear how much land KAA acquired from Syokimau Farm, nor how much was inherited from the Aerodromes Department)

By 1995, the assets transferred from Aerodromes had “not been valued and transferred” to KAA, according to Parliament’s Public Investments Committee (PIC) report. “Under the circumstances I have been unable to confirm that the fixed assets are fairly stated in the accounts,” the committee chair, Anyang’ Nyong’o, stated.

The following year, the PIC revisited the issue. “The … correctness of the stated fixed assets figure (given by KAA chief executive) is doubtful,” the watchdog committee concluded. Four years earlier, the chief executive had confirmed to the Auditor-General (Corporations) that KAA “did not maintain an up-to-date fixed assets register”.

KAA, despite contributing about 10 per cent to the country’s Sh2 trillion (about Sh200 billion) annual income, had failed to secure its assets and for a long time did not even have a register of its fixed assets. Basically, KAA did not know how much land it owned and may still not know.

Confusion can create a propitious environment for unscrupulous public servants—and their hirelings. It is an all-too-familiar opportunity for fraud and explains why many public sector employees have fought against the computerisation of state registries. In the case of land management, Ardhi House has been the stumbling block to the establishment of the Kenya National Spatial Data Infrastructure that would facilitate information-sharing among institutions.

The confusion over the title only served to attract speculators.

Yet even as the letters passed to and from Ardhi House, the KAA did little to stop further encroachment on its land. It would appear that influential officials within the KAA were not in a hurry to expedite the court cases the Authority had filed against Mlolongo Brothers and the Uungani Scheme way back in 2004.

“Evidence adduced indicates that (KAA) has not been ready to prosecute the case, having been seeking adjournments citing lack of preparation and filing a list of witnesses among other issues,” the Mutava Musyimi committee noted .

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As far as aviation standards go, Jomo Kenyatta International Airport is a hub of flying. Planes take off and land one after the other, leaving a buzz and hum of smooth travel and an organisation at peace with itself.

The Government is tightening the noose around tax leakage. In the finance bill 2012, Finance minister, Njeru Githae gave Kenya Revenue Authority powers to issue further guidelines on transfer pricing — which happens whenever two related companies – parent company and a subsidiary, or two subsidiaries controlled by a common parent firm trade with each other.

Transfer pricing is not, in itself, illegal or abusive.

What is illegal or abusive is transfer mispricing, also known as transfer pricing manipulation or abusive transfer pricing. Previously, only the minister could prescribe rules under the Income Tax Act.

According to PricewaterhouseCoopers Kenya (PwC), the changes could have far-reaching implications on taxpayers. “But will the Commissioner’s changes make compliance easier for taxpayers or make the waters murkier?” poses PwC in its Budget 2012/13 analysis document.

The Income Tax (Transfer Pricing) Rules 2006 have been amended to enable the Income tax Commissioner to prescribe conditions and procedures to guide taxpayers on the application of the transfer pricing methods as set out in the current rules. This will affect taxpayers engaged in transactions with non-resident entities.

The transfer pricing rules currently allow taxpayers to choose which method to apply taking into account their particular circumstances in line with international best practices and allows taxpayers to choose the most appropriate method.

“The change may be aimed at directing taxpayers, albeit not so gently towards how the KRA would like particular methods to be applied,” says Deloitte East Africa.

An investigation carried out with the support of Africa Centre for Open Governance (AfriCOG) through its Investigative Journalism Programme (I.J) found out that more than a dozen firms are under probe for possible abuse in transfer pricing.

The taxman zeroed in on these firms after scrutinising about 300 of them in an attempt to combat abuse of the practice that involves drastically reducing payable tax so as to transfer profits to associated companies in tax havens outside Kenya.

According to a source at KRA, hundreds of firms with multinational links have received letters from the taxman since November 2009 asking them to formulate and defend their transfer pricing policies.

Those under investigation are three horticulture firms while others are in tobacco, telecoms and manufacturing business. Some have been found to have evaded tax through irregular transfer pricing practices.

In a past interview, KRA Commissioner-General John Njiraini, confirmed that he was indeed investigating some companies for possible abuse of transfer pricing. However, KRA has not given a figure of how much it could have lost or recovered through transfer pricing.

In 2009, KRA auditors found that some Sh1.76 billion had been irregularly evaded with just one company responsible for half the amount.

Fredrick Omondi, head of transfer pricing practice in East Africa at Deloitte & Touche, in a past interview said KRA has targeted most of the large multinationals in Kenya and says the audits are at various stages.

“The increasing focus on transfer pricing means that multinationals — taxpayers with related parties outside Kenya — face an increased risk of tax adjustments,” Omondi said, in an earlier interview.

He says it is likely that there will be many contested cases in the initial period before precedents are set and both parties adjust accordingly. KRA plans to triple staff at the transfer-pricing unit in the next few years to handle the rising abuse of transfer pricing. The unit was set up in place in 2009 and has 17 staff.

Global Financial Integrity estimates that the country loses close to Sh17 billion annually in tax revenue, with significant amounts benefiting European and North American countries. The amount can finance free primary education for two years, taking into account the Sh8.25 billion budgeted for 2011/12 fiscal year.

It is also about half the amount used to rebuild Nairobi-Thika highway into an eight-lane super highway. Other figures from Tax Justice Network show that the country lost about Sh156 billion ($1.7 billion) between 2000 and 2008. The UK-based charity, Christian Aid says in a report that Kenya loses up to Sh130 billion annually in untapped tax from corporates.

Fourteen years ago, someone at the Kenya Revenue Authority (KRA) found out that Unilever was selling its Nairobi-produced Omo washing powder and Close-Up toothpaste at lower prices in Uganda than in Kenya.

The local committee of the Income Tax Department on September 17, 2003 ruled against the multinational for diverting part of its profits to its Ugandan subsidiary, denying Kenya taxes. Unilever Kenya Ltd moved to High Court in the same year to appeal against KRA decision.

Unilever Kenya Ltd and Unilever Uganda Ltd had entered into a contract dated August 28, 1995 whereby the Kenyan unit was to manufacture on behalf of the Unilever Uganda and supply to it such products, as it required in accordance with the orders issued.

Unilever Kenya supplied such products to the Uganda unit during years 1995 and 1996. According to KRA, Unilever Kenya charged lower prices to Unilever Uganda than it charged its domestic buyers and importers not related to Unilever Kenya.

The Commissioner of Income Tax raised assessments against Unilever Kenya in respect of years 1995 and 1996, in respect to the sales made to the Uganda unit on the basis that Unilever Kenya’s sales to Unilever Uganda were not at what is called at “an arm’s length” prices — which means that any transaction between two entities of the same firm should be priced as if the transaction was conducted between two unrelated parties.

KRA noted major differences in prices offered by a related party — Unilever Uganda with exclusive marketing rights — were approximately 25 per cent lower than those offered to the independent third parties in Kenya exporting to the Tanzanian market.

KRA formed the opinion that the prices offered to the related subsidiary in Uganda offended the arm’s length principle, which states that the amount charged by one related party to another for a given product must be the same as if the parties were not related.

What the law says

Section 18(3) of the Kenya Income Tax Act says “Where a non-resident person carries on business with a related resident person and the course of that business is so arranged that it produces to the resident person either no profits or less than the ordinary profits which might be expected to accrue from that business, if there had been no such relationship, then the gains or profits of that resident person from that business shall be deemed to be the amount that might have been expected to accrue if the course of that business had been conducted by independent persons dealing at arm’s length.”

According to Section 18(6) of the Act, the two companies were related by virtue of the fact that a third person (Unilever Plc) participated directly or indirectly in the management, control or capital of the business or both.

“On examination of the sales account and invoices, major differences were noted in prices offered to related parties against local customers and independent (third-party) exporters of the same commodities to the Tanzanian market,” KRA official said, in its submissions. But the taxman faced a major obstacle: at the time there were few people on its staff familiar with these transactions, and there was inadequate regulatory framework in place to deal with what is commonly known in accounting parlance as transfer pricing. Unilever won in the appeal.

High Court Judge Alnashir Visram sitting in Nairobi on October 5, 2005 ruled that due to the absence of Kenyan transfer pricing legislation, a major manufacturer and distributor of popular, fast-moving consumer goods like Omo could not be faulted for having applied internationally recognised principles in setting their transfer pricing policy.

Transfer pricing refers to the pricing arrangements set by multinational-related entities in transactions between themselves such as the sale of goods, provision of services, transfer of intangible assets, lending or borrowing of money and any other transactions that could affect the profit or loss of the entities.

Single parent firm

This happens whenever two related companies – a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other. All transactions within the corporations are subject to transfer pricing including raw material, finished products, and payments such as management fees, intellectual property royalties, loans, interest on loans, payments for technical assistance and know-how, and other transactions. The rules on transfer pricing requires multinationals to conduct business between their affiliates and subsidiaries on an “arm’s length” basis.

If two unrelated companies trade with each other, a market price for the transaction will generally result. This is known as “arms-length” trading, because it is the product of genuine negotiation in a market. This arm’s length price is usually considered to be acceptable for tax purposes.

Taxation woes

But when two related companies trade with each other, they may wish to artificially distort the price at which the trade is recorded, to minimise the overall tax bill. This might, for example, help it record as much of its profit as possible in a tax haven with low or zero taxes.

After losing the case, it was back to the drawing board for KRA. It was forced to suspend audits of other companies. This gave rise to a raft of regulatory changes aimed at roping in firms that were abusing their tax obligations.

The tax agency would later drop a similar case against Sara Lee before it developed national rules on transfer pricing in the 2006/7 financial year that have guided self-evaluation by companies to the present time.

KRA then went back to the drawing board and in 2008 formed a transfer pricing team that focuses on transfer pricing audits. The agency then resumed the transfer pricing audits from 2009. KRA says although Kenya has been among the most aggressive in pursuing transfer pricing cases, it has not been easy.

Every year, Kenya foregoes more than Sh100 billion in tax exemptions in a bid to attract foreign investment.

This is despite indications the Government is losing revenue in export processing zones through incentives.
Studies by the International Monetary Fund (IMF) and tax analysts suggest that tax exemptions also lead to loss of foreign direct investment.

A new study by the Tax Justice Network-Africa and Action Aid International indicates that despite being the country with the most generous tax incentives in the region, Kenya was also the biggest loser in foreign direct investment (FDIs) inflows compared to Uganda and Tanzania.

According to the study, while Kenya’s FDI inflows stood at $133 million in 2010, Uganda and Tanzania $848 million and $700 million respectively over the same period.

In the study, export processing zones (EPZ) represent the largest sector where the Government is losing revenue through tax incentives.

It s emerging that many EPZ firms are closing shop after their 10-year tax holiday and re-registering under new names or relocating to other countries to avoid taxation.

EPZs employ about 30,000 people, down from 38,000 in 2005, which the study highlighted as an indication that the businesses were relocating.

Some tax benefits available to investors include zero-rated corporation tax holiday for a year and 25 per cent tax thereafter, 10-year withholding tax holiday, stamp duty exemption and 100 per cent investment deduction on initial investment applied over 20 years.

Textile industry

Dereje Alemayehu, the chair of the Tax Justice Network, said EPZ firms, notably those in textiles, accounted for 70 per cent of the exports under the US African Growth and Opportunity Act (AGOA).

At least 61 per cent of the firms operating in Kenya’s EPZ are from China, UK, US, Taiwan, Qatar and The Netherlands among other countries.

Kenya’s textile exports to the US remain limited — they represent fewer than 100 of the 6,500 eligible categories in the AGOA framework.

However, the Government is in the process of implementing special economic zones (SEZ) to expand the range.

But the SEZs are not the answer, Tax Justice Network – Africa Coordinator Alvin Mosioma argues, as they are just geographically defined regions where any company can operate tax-free.

“De La Rue (the currency printing firm) is registered in Ruaraka as an EPZ, and there is no logical explanation why it should be operating as an EPZ,” Mosioma says.

“It is a question of what the rationale of designating specific companies to operate in a geographical area where they are not paying tax,” he said.

To curb such practices, the study recommended the removal of tax incentives granted to attract FDI, particularly those provided to EPZs and SEZs, a review of all tax incentives on an annual basis, as well as tax coordination among East African Community (EAC) member countries.

Treasury is reported to be reworking its tax exemption policy, and a number of incentives are likely to be scrapped.

Estimates show that trade-related tax incentives amounted to at least Sh12 billion in 2007/08 and may have been as high as Sh47.6 billion ($566.9million).

In 2010/11, the Government spent more than twice the amount on providing tax incentives than on the country’s health budget – a serious situation when 46 per cent of Kenya’s 40 million people live on less than $1.25 a day.

“Tax holiday is a form of subsidy which distorts the market. Given a tax holiday means that you get higher profits than would be expected,” says Dr XN Iraki, a University of Nairobi lecturer.

Kills competition

“This may lead to lack of innovations as firms feel they are “protected” from competition.”

“Firms could also time their exit with the end of tax holidays so that they “harvest” maximum. This reduces long-term commitments.”

Ragnar Gudmundsson, the IMF resident representative in Kenya, says existing studies on developing countries show that while tax incentives can stimulate investment, and FDI in particular, a more important factor in determining investment and FDI is a country’s overall economic characteristics, including the quality of institutions, the size of the market, and location-specific factors, notably those linked to natural resource wealth.

“The cost of tax incentives are numerous, including budget revenue foregone, administrative and compliance costs, rent-seeking behaviour and corruption, and economic distortions that favour one industry at the expense of another,” says Gudmundsson, who has been vocal in pressuring the Government to rethink its tax incentives policy.

“There are genuine concerns about their effectiveness, but the review should take into account the bigger picture in terms of the overall economic goals of the government rather than just tax collection,” says Fredrick Omondi, a partner at Deloitte.

Omondi says the recent debate on the strength of the shilling has brought out that fact that Kenya relies ‘excessively’ on imports due to limited local production.

Local manufacturing

“Therefore, it is evident that we need to make Kenya an attractive country for productive industries. And taking into account our uncompetitive environment in terms of critical factors such as infrastructure, taxation still remains a key tool for providing incentives for sectors that are assessed as key to unlocking our economic potential,” he adds.

He says there is need to define specific parameters or set thresholds that should be attained by the beneficiaries such as employment creation (minimum number of employees, minimum wages…) in line with current priorities of the nation.

“It would be counterproductive to do away completely with tax incentives bearing in mind that we are in a globally competitive environment, and due to the mobility of certain factors of production, companies can locate their activities in other countries,” Omondi says.

“Other countries are focused on attracting investment, and we must do our bit to remain attractive.”

South Africa, for example, set aside an estimated Sh200 billion last year to provide tax incentives to promote investment and expansion in manufacturing.

“If incentives are used to correct features in the tax system that impede investment, it is preferable to correct these limitations through appropriate tax reform,” Gudmundsson said.

“If incentives are used to address weakness
es in the macro-economic or structural environment, it is preferable to implement sound policies or undertake specific reforms.”

“And if incentives are used to correct for regulatory or administrative weaknesses, it is preferable to correct and remove the deficiencies. If incentives are used for social policies, it is more efficient targeting beneficiaries directly.”

Gudmundsson says Kenya needs to be particularly wary of tax competition, where neighbouring countries or countries with similar economic structures compete to attract FDI by offering increasingly generous incentives to foreign investors.

“Such tax competition generally ends up leaving very few benefits to the host country. This is a race to the bottom that should be avoided at all costs, including by enhancing collaboration between revenue authorities at the regional level,” he adds.

“It is clear Kenya needs more foreign direct investment, especially in manufacturing. This is the lesson from East Asia,” says Wolfgang Fengler, the lead economist at the World Bank’s Kenya office.

Attract FDI

Iraki, also the MBA programme coordinator at the University of Nairobi, says to attract FDI, the county can simply make it easy to do business in Kenya by reducing bureaucracy and corruption, and investors will flock in. Investors can make much more money in a business-friendly environment than from tax holidays.

“If tax holidays must be used, they should be part of incentives, not the only incentives and should focus on long-term commitment,” he says.

“They should be based on solid economics, not politics.”

Link to the story in the Standard Media website
Every year, Kenya foregoes more than Sh100 billion in tax exemptions in a bid to attract foreign investment.

They all believed the plots were legitimate.

After getting transfers from the Mavoko Town Council as well as approvals from the lands office in Machakos and permanent buildings come up, Arthur Omollo, like thousands of other eager home-seekers, knew all was well with Syokimau plots that they had just bought.

Samuel Isiaho and Ben Avaga did a title search at Ardhi House, the headquarters of the Ministry of Lands and Settlements, before buying their parcels from the 950-member Jumbo Housing Scheme. They were made to believe that the allocations were clear.

Everything at Syokimau estate appeared to be in order — until the monster-like demolition machines began tearing down multi-million-shilling residences last November. Mr Omollo and 600 others discovered too late that they had built houses on land belonging to the Kenya Airports Authority (KAA).

The Syokimau allocations were a grand con scheme. Public officials insinuated themselves between dishonest land agents and land buyers, many of whom were unsuspecting, with the aim of enriching themselves. The officials may have been privy to the scheme and therefore colluded in the shady deals.

For four months, this writer has attempted to gauge the involvement of state officials and institutions in one of the country’s biggest land scandals in which 3,000 people bought land earmarked for the expansion of Jomo Kenyatta International Airport (JKIA).

Investigations have uncovered organized forgery and complicity of state employees. The fraud was easy to execute. One, the vast land was unsecured.

Two, state officials were ready to create phantom files and respond to public searches. Three, the government lacked a system for information-sharing so the right hand didn’t know what the left was doing. Four, KAA did not have a register for its assets.

How the scam was executed

At the centre of the questionable deal were three land-buying companies: Uungani Settlement Scheme self-help group, Jumbo Community Self-Help Group, and Mulolongo Brothers Association (Company). Together, the groups “owned” 1,200 hectares contiguous, adjacent to JKIA.

They hived off LR no. 13512 (Uungani), LR no. 143231 (Mulolongo), and LR no. 143231/2 (Jumbo) off LR no. 21919 (4459.1ha) belonging to KAA.

The three claim to have been allocated the parcels variously between 1988 and 1998. However, if available documents are anything to go by, the groups may not have been legal entities when they acquired Syokimau. The Ministry of Sports, Culture and Social Services registered Uungani in 2008, while Mulolongo was registered on June 8, 2008.

Why the three land merchants waited until 2003 to start subdividing the land they had acquired 15 years earlier – or putting up houses – has raised questions.

What has emerged is that the large parcel was allocated to them by State officials who knew that KAA was the real owner of the land in question. Ardhi House then sanctioned the deals. The process wasn’t regular, but the resultant documents are hardly forgeries. “It is a case of double allocations,” a senior official at Ardhi House, who requested anonymity, said.

In fact, the Director of Surveys at the Ministry of Lands once questioned the transaction. “It is significant to note that the Commissioner of Lands gave a letter allotment, and a new grant survey was performed that caused the new parcel to be born, i.e. LR no 14231/1 (claimed by Mulolongo Brothers),” B.K Gitonga, an official in the Nairobi Provincial Office, wrote to the Deputy Registrar of the High Court, W.M Muiruri, on November 3, 2009.

Mr. Joseph Kabilu, the secretary of Jumbo, says the then Commissioner of Lands, James R. Njenga gave his group the letter of a llotment for LR no. 14231/2, a 200-hectare piece next to Uungani, in 1986. (Mr. Kabilu says he is under instructions from the CID not to disclose any documents.)

As for the 1,800 member Uungani Scheme, it is the Commissioner of Lands official Wilson Gachanjah who issued them a letter of allotment for LR no. 14231 on September 15, 1996, within weeks. This ‘allotment’ was certified by the Registrar of Lands, despite the fact that KAA had already acquired the title the previous month.

A letter of allotment is a formal offer by the Commissioner of Lands to enable an applicant to purchase land; it does not in itself prove ownership.

And before Jumbo, there was the 1,600 member Mulolongo Brothers Limited, whose directors are Stephen Nzuki Mwania, Muteti Musombe, John Mutuku Muinde, James Njoroge Murigi, Solomon Mwinzi Mwau and Vijaykumar Kantilal. The government sats Mulolongo fraudulently acquired 100 hectares registered as LR no. 13512.

Involvement of public officials

Investigations indicate that the land buting companies took advantage of loopholes in Kenya’s land transfer process to perpetrate a scandal. Working with Ministry of Lands officials and the Attorney General’s Chambers, they ensured that potential land buyers would not suspect a thing.

The involvement of Ardhi House was crucial to lend credibility to the transactions and to make it easy for the ministry to give potential land buyers the greenlight. Uungani even managed to have a land transfer file created at Ardhi House.

In this way, Uungani – whose listed directors are Wambua Mila, Elijah Runo and Charles Agutu – could now pay statutory fees. On April 12, 2002, Uungani paid Sh 1,123,124 as a legal conveyance fee and Sh 120,090 for stamp duty, rent and survey through cheque (no. 014384 and no. 0148110) and was given receipt no. F256373. This couldn’t have happened without the knowledge of lands officials.

With the requisite file established at Ardhi House, potential property developers could not doubt the availability of Syokimau land. “Uungani Settlement Scheme may have been in collusion with the Ministry of Kands officials to prepare, authenticate and grab public land,” says a report by the Parliamentary Committee on the Syokimau allocations.

Unlike Uungani, Mulolongo Brothers used a different route to seek “legitimacy”. It decided to relocate the transaction documents from Nairobi to Machakos by converting their parcel from Registered Title Act (RTA) to Registered Land Act (RLA) through a legal notice.

“To avoid deeper scrutiny, somebody thought it wise to move files from Ardhi House to the Machakos Lands office,” a source at Ardhi House said.

All transactions under the RLA are done in the respective Districts while those that fall within the jurisdiction of RTA are done in Nairobi and/ Mombasa. There is a disagreement over the location of Syokimau, although section 5 of the Local Government Act (Chapter 256) gives Machakos control over Syokimau.

Judging from correspondence, it would appear that some elements in the government were asked to fast-track the request. In one such attempt, the Chief Land Registrar’s office certified Mulolongo’s application for conversion, filed by J.R.R Aganyo, a licensed land surveyor based at Old Mutual Building, Kimathi Street, Nairobi. The letter was referenced ARA/23/1X/58.

Upon receiving the letter and certifying it as CLR/R/47/A on May 5, 2009 in the Land Registry, A.W Kuria, wrote to the director of Surveys Ephantus Murage to seek the viability of the conversion in terms of the law. Somehow, the same office of Director of Surveys that had surveyed the plot for KAA way back, confirmed that the conversion was indeed viable.

“This is to confirm that it will be possible to produce a Registry Index Map (RIM) for (LR no. 135120) upon your conversion of the same,” H.F Jumba, an official in the Director of Surveys office, wrote to the Chief Land Registrar on June 16, 2009. Jumba copied the letter to J.R.R Aganyo & Associates, the Mulolongo Company surveyor.

Mr Kuria had purportedly written to the Attorney General Amos Wako three weeks earlier, appearing to lobby for the conversion. “The conversion is meant to facilitate the issuance of the title under (RLA). Please approve and return for signature by the Minister before publication in Kenya Gazette,” he stated.

Mrs E.N Gicheha, the Deputy Chief Land Registrar, tried in vain to stop the process on claims that it was irregular because a copy of the title had not been authenticated. She wrote to J.R.R Aganyo: “I note that the copy of the title you forwarded is not registered and request, for a certified copy of the same to enable me proceed.”

Somehow, and inexplicably, the Gazette notice (no 157 of 2010) was eventually published on August 26, 2010. Ardhi House claims somebody forged the signature of Lands Minister James Orengo as well as that of Ms Gicheha to facilitate the publication, according to our contact at Ardhi House.

J.R. Aganyo now distances himself from the deal. “They (Mulolongo Brothers) had asked us to do some work for them, but when we inquired about the survey plan, approvals from Commissioner of Lands and the search documents to ascertain the authenticity of the transactions, they just disappeared,” Mr Aganyo said. “We asked for all these things, but they didn’t give us anything. We didn’t work for them.”

When contacted, Mr James Njoroge Murigi, a director of Mulolongo, said: “What else do you want to know? You people (of the Press) have written everything you want. The matter is before Parliament. It is not the people to judge; it is the courts.” Then he hung up.

Nonetheless, with the files safely in Machakos, it was easy for the buyers to acquire the requisite part developments plans (PDP) from Mavoko Municipal Council. Machakos lands office personnel and a government surveyor strategically placed themselves to respond to any search queries about the Mulolongo land. They judiciously justified the availability of the land for potential buyers who made searches at the Machakos Lands office.

PDPs are used for land allocations. They are prepared by the Director of Planning and show the exact site of any development on a parcel of land – whether for residential, agricultural, industrial or business use.

“Officials at the Machakos Lands office confirmed the title (belonged to Mulolongo) on April 25, 2006,” according to Mr Tubman Otieno, who was Mavoko Town clerk at the time. “We thus had no reason to doubt.”

Why Syokimau was a target

The fact that the commissioner issued allotment letters for land already earmarked for the public good is striking. In law, alienated government land can only be placed in private hands through an elaborate process involving the public.

Now, the million-dollar question is: Why was it so easy to give out State land? Or better still, why was state land an easy target?

Land fraudsters know that the government does not have an information-sharing mechanism among its various offices and bodies. Thus, one could undertake “double allocations” without raising eyebrows. And in the case of land management, Ardhi House has been the stumbling block in attempts to establish the Kenya National Spatial Data Infrastructure, which would facilitate information-sharing among institutions.

Secondly, State employees often take advantage of confusion to target public land. And, naturally, by virtue of their positions in government, they will be equipped with information about land that can be grabbed without kicking up a storm. Syokimau was vast, uninhabited and had no developments to prove it belonged to anyone. In fact, KAA had leased it to livestock ranches, including Pokeny Ranch of Kajiado, in what it called “temporary occupation”.

KAA inherited the land from the defunct Kenya Aerodromes Department on June 7, 1994, through Kenya Gazette legal notice no. 201. Earlier, through other notices, 439 and 440, of February 25, 1982, the department acquired Syokimau Farm Ltd (L.R 7149/11/R), with an eye on expanding Jomo Kenyatta International Airport.

KAA, despite contributing about 10 per cent to the country’s Sh2 trillion GDP (about Sh200 billion), failed to fence off its land. What’s more, it did not have a register of its fixed assets. &nbs
p; So, implicitly, KAA hardly knew the size of land it owned. “Under the circumstances, I have been unable to confirm that the fixed assets are fairly stated in the accounts,” the parliamentary Public Investments Committee (PIC) committee chair, Prof Anyang’ Nyong’o, stated in 1995.

As if that was not enough, KAA’s asset management was suspect. For five years from 2001, the authority maintained two titles for the same land. LR no. 24937 (4,674.6 ha, registered in 1996) was not surrendered when KAA acquired a new one, Title LR no. 21919 (4459.1 ha) following the excision of JKIA from Mombasa Highway.

In fact, scrupulous officials at Ardhi House had cautioned KAA about the irregular transactions. G.L. Mukofu, an official in the office of Commissioner of Lands, wrote to John Tito, the KAA chief legal officer, in December 2005, saying: “Please note that all the purported allocations as depicted in Letters of Allotment to M/S Uungani Settlement Self-Help group and Mulolongo Brothers Association are not genuine”.

Were the KAA actions deliberate? The KAA management declined to be interviewed for this story and did not respond to questions sent to it two months ago. “Failing to maintain a fixed assets registrar is deliberate, so that land is available. You can shop small pieces on the edges,” said lawyer Paul Ndung’u, the chair of the 2003 Commission of Inquiry into the Illegal/Irregular Allocation of Public Land whose damning report was presented to President Mwai Kibaki in June 2004.

Instructively, the land deals happened during the tenure of Mr Peter Kipyegon Lagat as CEO, who is facing a court case over abuse of office in which business people colluded to acquire land belonging to the Moi International Airport. He is charged jointly with Wilson Gachanjah, the Commissioner of Lands at the time. It was during Lagat’s tenure that KAA was scandal-ridden, including a fraudulent scheme in which Anglo Leasing suspect Merlin Kettering failed to fully implement a $760,000 computerisation programme despite receiving the payment.

“(The government) should be held responsible,” said the Mutava Committee. “The Lands registry, Ministry of Lands, Machakos, provided certified copies of land documents and in collaboration with the Mavoko Municipal Council approved land allocation and development plans.”

Lawyer Ndungu adds, “Corporations would write to the commissioner of lands and say they didn’t think they needed ‘all this land’. By the time the letter was done, they would have made arrangements with the commissioner to fast-track the issuance of documents (such as letter of allotment). There would be people already on the land, waiting to transfer the same to other individuals or corporations.”

From the interviews, KAA only moved against the encroachers following the terrorist attack on an Israeli airline at Moi International Airport, Mombasa. The International Civil Aviation Organisation had threatened to declare JKIA unsafe, subsequent to the incident.

“Following the attempt on the airline, many airlines … pulled out of JKIA with attendant (revenue) losses. One of the reasons cited for pulling out was lack of sufficient security measures at the JKIA,” says a brief prepared by KAA lawyers.

Consequently, the World Bank gave Kenya $11.5 million loan to develop a perimeter wall around JKIA and to assist in constructing the second terminal, which is almost complete. The tender for the construction of the wall (contract KAA/ES/JKIA/658/CON) went to Nyoro Construction Company for Sh100 million, but the company could not proceed after Uungani went to court claiming that KAA was encroaching on its land. The project is still stalled.

The World Bank cautioned that if construction of the perimeter wall was delayed, it would cancel the loan. JKIA was first used in 1958, then known as Nairobi Airport. It was designed to handle 2.5 million passengers a year; today it handles more than 7.5 million.

Syokimau is a classic example of how thousands of Kenyans fell prey to fraudsters working jointly with corrupt public servants. Mr Ndung’u says “in excess of 300,000” titles countrywide are illegal. And that, he adds, is a conservative figure.

“It is a case of people entrusted with safeguarding public property robbing the public,” said Jotham Okome Arwa, a lawyer and expert in land matters.

“I can only guess that it was the work of smart conmen,” said Mr Ndung’u. “Normally (fraudsters) don’t act alone. They incorporate various public officials. It is often a cartel.” His 2004 report warned about possible transactions like Syokimau. The recommendations of the commission of inquiry that he chaired have yet to be properly implemented.

— This piece has been published with the support of Africa Centre for Open Governance (AfriCOG) through its Investigative Journalism Programme. The views expressed in this article are not necessarily endorsed by AfriCOG.

Link to the story in The Nairobi Monthly Law website
At the centre of the questionable deal were three land-buying companies: Uungani Settlement Scheme self-help group, Jumbo Community Self-Help Group, and Mulolongo Brothers Association (Company). Together, the groups “owned” 1,200 hectares contiguous, adjacent to JKIA.

The AfriCOG Investigative Journalism Fellowship is a competitive fellowship aimed at supporting talented journalists to investigate topical public interest cases that lie within AfriCOG’s anti-corruption and good governance mandate.

The Fellowship seeks to give practicing journalists the requisite logistical and financial support to investigate, follow-up and publish a compelling story of public interest in the area of governance and anti-corruption reform.

Context of the Fellowship

When compared to previous political regimes, the overall assessment of media performance since 2002 is cautiously positive, despite significant setbacks during the
period. There are more media outlets (particularly in broadcasting) following the liberalisation of the airwaves in the late 1990s, and the media’s voice has been essential in drawing attention to corruption and abuse of power. However, there is pronounced concentration of ownership, with negative consequences for diversity of opinions. During the post election crisis, the role of the media also came under critical scrutiny.

On the legal front, while the constitution provides for freedom of expression, access to information is limited by a string of exceptions and laws such as the Official Secrets Act. Some provisions of the recent Kenya Communications Amendment Act (2008) fall in line with this repressive trend.

Internal Challenges

The impact of the highlighted legal and institutional barriers is deepened by problems inherent to media houses, which face challenges relating to skills development and internal governance. These tend to inhibit them from effectively playing their public information, awareness and watchdog roles. There is insufficient investment in training by media houses as well as limited capacity for investigative journalism. Stories that expose corruption and poor governance require detailed analysis and sustained commitment. Yet the headline rush and reporting culture of media houses globally tends to erode editorial interest in lengthy reports and single-issue investigations. The result is that drawn-out ethical issues and anti-corruption challenges are rarely tackled effectively.

The Fellowship Project

By providing short fellowships to a selection of journalists, the Investigative Journalism Project seeks to enhance expertise in investigative journalism and generate a body of incisive investigative reports on key governance, anti-corruption and public interest issues. This is in keeping with AfriCOG’s vision of promoting permanent civic vigilance, and a strategic approach that seeks to address the structural causes of governance and anti-corruption challenges.

By supporting investigative journalism, AfriCOG will help advance the struggle for greater access to information by exposing corruption and bad governance, thus driving
home the need for freedom of information to prevent or mitigate the abuse of power.

Eligibility: The Fellowship is open to professional journalists, qualified to work in Kenya, with at least three years experience in print or broadcast journalism on a full time/freelance basis.
Selection: A call for applications will be published in the local media after which submitted entries will be vetted by a panel of experts. The panel will evaluate entries based on the journalist’s capacity to undertake the investigation, and the potential for high positive impact and public benefit.
Duration of Fellowships: It is envisaged that up to five fellowships of varying length will be awarded in the pilot phase of the Investigative Journalism Project. The length of the fellowships will be determined by the complexity of issues to be investigated.

The Africa Centre for Open Governance (AfriCOG) congratulates Anthony Nyandiek, Production Manager at Safari Africa Radio; Jevans Miyungu, Business Writer at Standard Media Group aand Ken Opala, Correspondent at Nation Media Group for being selected to participate in the second phase of its Investigative Journalism Fellowship Programme. The three fellows have chosen to conduct their research topics on specific areas that fall under the themes of regulatory failures and misuse of public resources.

In October and November 2011, calls for applications were advertised in the local press, the AfriCOG website, media listserv’s, notice boards and selected social media sites. Interested applicants were asked to submit a fellowship application form, curriculum vitae and references. Out of this process, 125 applications were submitted by local and internationally based journalists, and a rigorous vetting process conducted by a selection committee membership whose expertise spans Kenya’s media/communication industry.

The fellowship award includes financial and technical support. The selected fellows will work closely with their respective line editors and the fellowship advisor, an experienced journalist, who will guide them in conceptualizing, developing and implementing their investigative concepts and work. Peer-review workshops will also be conducted to evaluate the progress of each fellow’s work. Additionally, a training seminar will be hosted through partnership with a well-established and respected media development company in Nairobi.

The fellows have chosen to conduct their research topics on specific areas that fall under the themes of regulatory failures and misuse of public resources.

Anthony Nyandiek’s fellowship topic will shed light on the accountability processes at the Mombasa Port and illustrate how this is affecting the country economically and socially. Anthony will produce a two-part radio talk show interviewing selected principal actors and stakeholders in the Port business which are planned to be aired frequently by Safari Africa Radio. Anthony will also write an Investigative article that will be published by the radio company on their official website.

Jevans Miyungu’s fellowship topic will take a critical look at tax leakages through tax incentives given to the horticulture sector. His fellowship report will make inquiries into this sectors’ impact on our economy and seek to identify how the Government of Kenya can address the challenges identified. As a Fellow, Jevans will produce three articles that will each address a number of issues within the horticulture sector in Kenya. These articles are intended to be published in the Standard Newspaper.

Ken Opala’s fellowship topic will focus on how Kenya continues to lose billions of shillings through abuse of office by Kenya’s senior public officials. His investigative article will look into specific ways in which public officials abuse their positions for their private benefit and explore some of the impacts of this on the country. Further, Ken hopes to point out and analyse a number of ways that could counter these problems and promise success. This article will hopefully be published In the Nation Newspaper.

At the end of the fellowship, each fellow will be expected to deliver a well-researched Investigative report that is of public interest and which falls under AfriCOG’s good governance and anti-corruption reform mandate.

By supporting investigative journalism, AfriCOG stands firm in its endeavor to advance the struggle for greater access to information by exposing corruption and bad governance, and consequently driving home the need for freedom of information to prevent or mitigate the abuse of power.

A report published under the first phase of AfriCOG’s Investigative Journalism Programme can be found here. For more information, please contact: The Investigative Journalism Fellowship Programme, Email: admin@africog.org

Link to the story on the FAIR website

The Africa Centre for Open Governance (AfriCOG) congratulates Anthony Nyandiek, Production Manager at Safari Africa Radio; Jevans Miyungu, Business Writer at Standard Media Group and Ken Opala, Correspondent at Nation Media Group for being selected to participate in the second phase of its Investigative Journalism Fellowship Programme.

In October and November 2011, calls for applications were advertised in the local press, the AfriCOG website, media listserv’s, notice boards and selected social media sites. Interested applicants were asked to submit a fellowship application form, curriculum vitae and references. Out of this process, 125 applications were submitted by local and internationally based journalists, and a rigorous vetting process conducted by a selection committee membership whose expertise spans Kenya’s media/communication industry.

The fellowship award includes financial and technical support. The selected fellows will work closely with their respective line editors and the fellowship advisor, an experienced journalist, who will guide them in conceptualizing, developing and implementing their investigative concepts and work. Peer-review workshops will also be conducted to evaluate the progress of each fellow’s work. Additionally, a training seminar will be hosted through partnership with a well-established and respected media development company in Nairobi.

The fellows have chosen to conduct their research topics on specific areas that fall under the themes of regulatory failures and misuse of public resources.

Anthony Nyandiek’s fellowship topic will shed light on the accountability processes at the Mombasa Port and illustrate how this is affecting the country economically and socially. Anthony will produce a two-part radio talk show interviewing selected principal actors and stakeholders in the Port business which are planned to be aired frequently by Safari Africa Radio. Anthony will also write an Investigative article that will be published by the radio company on their official website.

Jevans Miyungu’s fellowship topic will take a critical look at tax leakages through tax incentives given to the horticulture sector. His fellowship report will make inquiries into this sectors’ impact on our economy and seek to identify how the Government of Kenya can address the challenges identified. As a Fellow, Jevans will produce three articles that will each address a number of issues within the horticulture sector in Kenya. These articles are intended to be published in the Standard Newspaper.

Ken Opala’s fellowship topic will focus on how Kenya continues to lose billions of shillings through abuse of office by Kenya’s senior public officials. His investigative article will look into specific ways in which public officials abuse their positions for their private benefit and explore some of the impacts of this on the country. Further, Ken hopes to point out and analyse a number of ways that could counter these problems and promise success. This article will hopefully be published In the Nation Newspaper.

At the end of the fellowship, each fellow will be expected to deliver a well-researched Investigative report that is of public interest and which falls under AfriCOG’s good governance and anti-corruption reform mandate.

By supporting investigative journalism, AfriCOG stands firm in its endeavor to advance the struggle for greater access to information by exposing corruption and bad governance, and consequently driving home the need for freedom of information to prevent or mitigate the abuse of power.

A report published under the first phase of AfriCOG’s Investigative Journalism Programme can be found here

For more information, please contact:

The Investigative Journalism Fellowship Programme

Email: admin@africog.org

Tel: +254 20 4443707 or +254 737463166

Investigative journalism distinguishes itself from regular journalism by its depth and subject matter, often involving crime, political corruption or corporate wrongdoing. It can play an essential role in a country’s governance by keeping corporations and government accountable. However, the political and economic environment in some regions of the world present specific challenges for investigative journalists: countries that score low on governance and transparency present particular risks and underline the need to build investigative journalism capacity. This Brief analyses the obstacles to investigative journalism in the East African region, focusing on Kenya and Uganda, and discusses what can be done to help address these barriers.

Click here to download the brief

This investigation was carried out under a competitive fellowship awarded to Otsieno Namwaya by Africa Centre for Open Governance (AfriCOG), a civil society organization dedicated to addressing the structural and institutional causes of corruption and bad governance in Kenya.

Download Full Report Here

The AfriCOG fellowship is intended to enhance expertise in investigative journalism, generate a body of incisive investigative reports on key governance, anti-corruption and public interest issues and promote permanent civic vigilance. AfroCOG believes that partnership with the media is critical in promoting permanent civic vigilance because the media plays a key watchdog and agenda-setting role which is necessary for good governance. Yet the media faces capacity constraints, including limited skills development to undertake investigative journalism.
This investigation was carried out under a competitive fellowship awarded to Otsieno Namwaya by Africa Centre for Open Governance (AfriCOG), a civil society organization dedicated to addressing the structural and institutional causes of corruption and bad governance in Kenya.

Malaria still remains the biggest killer in Africa, especially of pregnant women and children and is estimated to kill 3000 people every day. While it is manageable using drugs and insecticide-treated bed nets, drug resistance continues to pose a major problem.
Currently in Africa, many drugs have become virtually useless for treating malaria. Consequently, these drugs have been replaced by artemisinin combination therapy (ACT), considered the last frontier in the fight against drug resistant-malaria.

There is great concern that if resistance to ACT occurs, the fight against malaria in Africa will be set back irredeemably. In Asia, ACT resistance has already been documented. The resistance is driven by drug misuse and an even bigger problem, fake malaria drugs. Scientists now fear that if this occurs in Africa, there will be a major human catastrophe.

It is currently estimated that as much as 70 per cent of all drugs being sold in some African countries are fake. These fakes are reported to be sourced from China, the major manufacturer of artemisinin. This is not surprising when one takes into account the phenomenal increase in trade between African countries and China.
The extent of the fake malaria drugs trade in China was reported by Reuters in a story published by the Daily Nation of Nairobi, Kenya, on February 14, 2008. It reported that scientists and police had exposed a major Asian trade in life-threatening fake malaria drugs, resulting in the seizure of hundreds of thousands of tablets and the arrest of a dealer in China.

Details of the unique collaboration highlight the growing threat posed by the trade in counterfeit medicines and the difficulty of tracing the suppliers. “The problem is acute in Southeast Asia, where researchers have identified counterfeit versions of the malaria drug artesunate as a problem since 1998,” the report says. Artesunate is part of an ACT that is available as arsucam, a combination of artesunate and amodiaquine that is widely used in Africa.

The other is coartem, a combination of artemether and lumefantrine, which is the most widely used ACT in Kenya. The investigation, which was coordinated by Interpol, with input from international researchers, found that as many as half of the malaria tablets sampled in Vietnam, Cambodia, Laos, Myanmar and on the Thai/Myanmar border were counterfeit. They were disguised with authentic–looking packaging, including 16 different types of fake holograms.

Most of the counterfeits examined contained no active drug and some had potentially toxic ingredients, including banned pharmaceuticals and even raw material used to mask ecstasy. Possibly, some tablets also contained small amounts of artesunate, possibly to foil screening tests.

The doses were too low to be effective but high enough to contribute to the development of resistance in malaria parasites, adding to the problems of fighting the mosquito-borne disease, which still claims more than a million lives a year. At least some of the counterfeit supply came from China.

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