By Leonard Wanyama

Ongoing revelations of corruption in state institutions, are drawing massive citizen indignation as details on the scale and magnitude in new incidences of public theft continue to emerge.

News of the second scandal at the National Youth Service (NYS), coupled with other reports such as the nefarious maize and fertilizer issues at the National Cereals and Produce Board (NCPB), payment irregularities at the Kenya Power and Lighting Company (KPLC), controversy at the Kenya Pipeline Company (KPC) among others, are enraging Kenyans.

This is, however, resulting in growing resentment towards financial institutions which are now being viewed as major accomplices to mega- corruption on account of being conduits for stolen public funds from state institutions.

Banks are being particularly singled out for facilitating this vice despite being able to prevent or even stop illegal monetary dealings based on knowing the owners of accounts in their facilities, and the ability to detect suspicious transactions by use of customer identification or profile data in their custody.

However, it seems that the banking sector’s hubristic concern for bottom- lines alone, has blinded it to how mega corruption is detrimental to the crucial implementation of trade and investment activities needed to spur widespread growth across Kenya.

Corruption, and the illicit financial flows that accompany it, cause massive losses to the country owing to how they distort revenue collection, allocation and expenditure processes thereby perpetuating the vicious cycle of poverty within the country.

This phenomenon not only jeopardises development programmes, but it also damns the country by entrenching structural and systemic inequality plus undermining socio-economic institutions. It also prevents opportunities for international cooperation due to a loss in foreign investor confidence.

Kenya’s economy is transitioning from its informal cash based systems- which are confounded by the country’s weak regulatory structures and poor supervisory frameworks- in order to restrict the proceeds from crime being infused into its financial system.

As a means of institutionalising transparency and accountability within the system, the government established the Financial Reporting Centre (FRC), a financial intelligence unit within the Central Bank of Kenya (CBK), under the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA 2009).

However, further amendments to the law in 2017 heightened financial surveillance and enabled the prosecution of individuals and organisations facilitating corruption, money laundering and illicit financial flows especially bank officials who fail to comply with reporting obligations, thereby abetting these financial offences.

Banks should therefore be at the forefront of implementing these national disclosure processes and mechanisms in order to help curb white- collar crime by encouraging transparency that lifts the veil of secrecy that has enabled, for a long time, state thievery.

Following the exposés, the Kenya Private Sector Alliance (KEPSA) was quick to issue a statement distancing itself from the named individuals and their business entities, clarifying that they were not members of KEPSA in any way, shape or form.

However it also noted a high possibility that some of its members, within the banking sector, were likely to have been involved in siphoning funds stolen from state coffers and would therefore be available to support efforts in identifying them.

As Phase II of these investigations gets underway, it is important to not only identify the business entities that benefited from these fraudulent payments but also name the commercial banks that were complicit.

KEPSA should therefore take advantage of POCAMLA 2017 amendments to heavily penalise any of its members who get involved in graft.

The Kenya Bankers Association (KBA) should also complement this by tightening their internal and external measures in order to curb money- laundering especially in light of the fact that under the new law, individuals and corporates found guilty can be fined up to  KES 5 million and KES 25 million respectively.

The author is coordinator of the East Africa Tax and Governance Network Follow @EATGN Email: lwanyama@taxjusticeafrica.net

By Leonard Wanyama

Listening to government officials explaining policy positions exposes how out of touch they seem to be with the public’s concerns about how their country is run on a daily basis.

Sitting in on the recent Kenya Alliance of Resident Associations (KARA) bi-monthly meeting on 20 March 2018, it was clear that state functionaries need to communicate their policies a lot better than is currently the case.

The meeting examined the options for Kenya’s debt sustainability in light of existing debates which have unfortunately slipped into the typical dichotomy of whether the issue at hand is simply good or bad.  

Obviously, such a subject that is likely to affect 40 million plus Kenyans is never that clear-cut.

While it is commendable that government officials are taking time to explain economic policy in line with the spirit of public participation; they are still not adequately responding to citizens’ fears over how the acquisition of these loans will directly impact them.

Kenyans are concerned that much of the economic brunt of continuously- borrowed money will negatively affect the majority poor and the middle classes significantly more than the rich in relation to the proposed increase in taxes.

They are also worried that the country is getting into a cycle of debt in which it is taking up one loan to pay off another thereby leaving very little or no resources available for the required investments to uplift its citizens from poverty.

Public scepticism, critique and complaints over debt are therefore well founded in a long history of always getting poor returns on investments whether it is in terms of implementation of projects or administration of previous debt that has led to growing inequalities within Kenyan society.

Knowing your audience is therefore a very important aspect of any public engagement.

Bureaucrats should therefore not respond to members of the public by labelling them as intrinsically unpatriotic, pessimistic, overly political, ungrateful, or downright lazy, as it happened in not so many words.

This not only smirks of a very dismissive attitude towards the democratic mechanics of Kenyan political processes but is also very disrespectful of citizens who have taken time to engage on such subjects in a constructive manner.

Consequently, officials should consider taking note of the following when they discuss issues of Kenyan debt.

Much of the public cynicism arises from the fact that as the country borrows more money there are people-both within or outside government-who are always angling to steal large sums from state coffers. This thereby jeopardises the ability to service payments of these loans in one form or the other.

While it is clear that the country’s debt is still within constitutional, legal and international best practice thresholds, it doesn’t help to insist on using outlandish comparisons to make the point that all is well in the country.

Using the example that Kenya’s debt is okay just because its loans are way below those of Japan, the United States or Singapore without any reference to the fact that these countries experience much lower levels of corruption is disingenuous.

Secondly, government officials should learn to answer immediate citizen policy queries more directly.

Kenyans are eager to know what effect the acquisition of these new loans will have on current policies towards income tax and value added tax (VAT), because this is where the shoe pinches.

Not speaking to these taxation dynamics increasingly offends public sensibilities about government priorities.

Therefore, if these issues are continually not addressed conversations around debt sound more and more like a story of a man who has a crack in his water bucket. While fetching water in this cracked container the man tells everyone he is better off than his poor neighbour who has a hole in her pail.

Meanwhile, he also claims that because his bucket is the same colour as his neighbour’s Jacuzzi, it holds water just as well the rich man’s bathtub and therefore no one has any right to point out that his bucket is leaking.

Government officials should therefore stop acting like the imprudent man and listen carefully to the citizens’ interrogations on the crack in the bucket, so that they can address public concerns adequately.

The author is the acting coordinator of the East African Tax and Governance Network (EATGN). Email: lwanyama@taxjusticeafrica.net Follow on Twitter @lennwanyama