Bone and structure of Sh45 billion Safarigate scandal

In 2001, Tetra Radio won a tender to roll out a digital communication system for security and emergency services. This would never come to be. What followed instead were mega-con deals between Safaricom/Huawei and government in what has come to be known as the Safarigate scandal

2
292

By TNLM Writer

Never has Kenya been in billion-dollar feeding frenzies as is happening now. Every conceivable law is being broken; structures and procedures are being trampled on; the public interest does not matter. It is truly “our time to eat”.

Where the money is too much to carry in sacks, there are now Chinese companies keen and willing to act as conduits for the payment of kickbacks. The loot is transferred to Dubai from where the loot trickles back to Kenya. Multinational companies from the West now invariably partner with Chinese firms in order to allow for consummation of these deals.

The anatomy of this modern-day corruption network is best illustrated by the scandalous Police Communication contract that was recently awarded to Safaricom and its Chinese partner Huawei. It was a single-sourced contract. It seeks to roll out a communication system for Sh45 Billion when the same contract had been competitively tendered and awarded to Huawei at Sh15 Billion less than six months earlier! There is Sh30 Billion ready to be distributed. The government pays Safaricom Sh45 Billion for the Sh15 Billion contract.  Safaricom pays Huawei Sh45 Billion for rolling out the system and Huawei in turn pays the Sh30 billion difference into an agreed overseas account. Safaricom – and its mother company Vodafone – comes out “clean” and in return obtains a massive benefit: preferential 4-G frequency spectrum which enables it to permanently have a chocking monopolistic hold over Kenya’s telecommunication sector.

The Genesis

In 2001, the then Communications Commission of Kenya (CCK) decided that all analogue users of security and emergency services should be migrated to a new digital platform, and an international tender was issued. Tetra Radio Limited won this tender and over several months all stakeholders were engaged, including police officers being sent on overseas benchmarking trips to the United Kingdom and Port Elizabeth in South Africa.

The police then compiled a report indicating that they were committed to being on the new digital system to be rolled out by Tetra Radio Limited under the CCK licence. A contract was drawn between the Office of the President and Tetra, which was subsequently approved by the Attorney-General. It is then that mandarins at the Office of the President (OP) saw an opportunity to mint money. These operatives decided to cannibalise the Tetra business by parcelling out the various aspects of the business, and single-sourcing these separate segments to shadowy companies in contract, which infamously came to be known as the Anglo-Leasing contracts. In order to facilitate these mandarins, CCK demanded that Tetra pay the licence fee of US$5.2 million (Sh521 million) before the licence could be issued, contrary to the express provision of the tender and the law, which provided that a winning bidder has to be supplied with the licence first before payment is made.

Tetra went to the High Court to complain about this illegal encroachment of its business by entities that had not participated in a tender process. The High Court agreed and decreed that Tetra was the only company that could competently offer this security and emergency communication system. CCK appealed to the Court of Appeal.

Determined to partake of this lucrative security communication business, the OP mandarins sought ways to go round the High Court order. This is when they decided to rope in the former President, Mwai Kibaki. They prepared a presidential brief to be used for Kibaki’s 2011 trip to China and managed to include a request for the Chinese government to grant Kenya a loan of US$100 million (Sh 10 billion) to roll out a security communication system.  The Chinese government obliged. The Office of the President quickly issued a tender in early 2012 restricted to Chinese companies. Tetra issued a notice advising the Office of the President that there was a High Court order that expressly stated that this service could only be offered by Tetra. The Office of the President did not even bother to reply to the notice.  Clearly, the mandarins must have laughed at Tetra; they were the Office of the President after all, Tetra was in no position to stop them!”

Brute Force

When the tender was closed, two companies emerged as the leading contenders to supply the system: ZTE and Huawei. Huawei had quoted Sh14 billion and ZTE Sh17 billion to roll out a countrywide system for the police. The tender documents showed clearly that both companies had merely cut-and-pasted Tetra’s original bid and that both were competing for Tetra’s technical partners. It was that fraudulent.

ZTE were declared the winners at Sh17 billion. Huawei contested the tender award. The two Chinese firms started an uncharacteristically un-Chinese-like fight that quickly degenerated into a brutish bare-knuckle war. It was clear from the outset that the Sh3 billion difference between the two tender sums was the facilitation fee to be paid to OP mandarins. Both Chinese companies were using Tetra specifications and Tetra’s technical partners whose bid (adjusted for inflation) was in the order of Sh9 billion.

When the ZTE/Huawei fight got to the High Court, Tetra was waiting for them. Tetra applied to be enjoined in the proceedings and produced the previous Court Order showing that Tetra was the only company that could provide this service and that by coming to court, ZTE and Huawei were clearly in contempt of court. When the matter came up for hearing before Justice Odunga, ZTE and Huawei quickly withdrew their respective court cases, accepting that they would clearly be in contempt of Court.

Determined to get this contract by hook or crook, Huawei arranged for ZTE managers to be picked up by police late one evening on the instructions of then Interior CS Joseph ole Lenku who signed their deportation orders. They were locked up in a container at Jomo Kenyatta Airport overnight and led in handcuffs to a waiting Qatar Airways flight to Qatar with instructions never to return to Kenya. Clearly Huawei wanted its competition removed so it could enter an arrangement with the Office of the President for the lucrative police contract.  It was clear that the team at Office of the President were going to bag this contract and were determined to run roughshod over anyone who would attempt to stop them. The stakes were that high.

Having bundled out ZTE, the next huddle for Huawei and their OP mandarins was how to get round the Tetra problem. The Tetra matter was still in court and if a tender was issued, Tetra was sure to go to court to stop such a tender. To circumvent this problem, Huawei and the Office of the President came up with an ingenious yet highly irregular solution: create a single-source avenue to get the contract.

Safaricom is roped in

Huawei are the sole providers of hardware and software products to Safaricom. Huawei was aware that Safaricom was desperate to gain a first-mover advantage in the next generation 4-G network roll-out and to lock out its competitors. A scheme was then devised in which Safaricom would achieve its goal of upstaging its competitors in the 4-G battle and allowing Huawei and Office of the President to achieve that which had been blocked by Tetra and the subsisting Court Order.

It was indeed a clever and witty solution albeit one of the most corrupt manipulations of systems, processes and institutions for pure commercial and personal gain. It was setting the stage to fleece the Kenyan taxpayer a whopping Sh30 billion.

Huawei agreed to have Safaricom front it in the next part of the scheme.

The OP mandarins prepared a single-sourcing request under the pretext that there was a security emergency which required urgent and immediate attention. The police needed a new digital security system to help the Police deal with the emergent terrorist threat. The system needed to be up and running urgently and could only be undertaken by an entity owning a telecommunication network. In addition, the single-sourced entity needed to be able to finance the police network; all elements were tailor-made specifically for Safaricom.

Safaricom was then “approached” to see whether they could provide this solution. A meeting was quickly arranged for Safaricom to visit State House to demonstrate their ability to provide this system. Safaricom “magnanimously” agreed to finance the entire system, and in exchange for this magnanimity, it was to be given exclusive access to the much-prized 800MHz 4-G frequency spectrum. The cost of the spectrum and the payment for the police system would be bartered in future and accounts taken to determine who would owe the other after the network had been rolled out and the 4-G frequency spectrum allocated and utilised.

A media blitz was put in place, pitying the hapless President Kenyatta appearing daily in TV and print ads pushing the narrative that the government was launching a new system for the Police which would have novel features (including facial recognition features) to aid the police in the fight against terrorism. A very loud message was being sent to all and sundry: the President was behind this project and anyone fighting the project was in effect fighting the President; classic Kenyan case of how to shield corruption.

Parliamentary storm

When Parliamentarians saw the TV and print ads, they quickly saw through the charade: it was another Anglo-Leasing contract being undertaken right under their eyes. Parliament immediately objected to the project and convened hearings over this project.

When ole Lenku and his Principal Secretary Mutea Iringo appeared before the Parliamentary committee in charge of security, they were unable to satisfactorily answer questions regarding the rationale for this contract arrangement with Safaricom. But during the entire process, it was clear a clique of MPs who were in attendance were pushing a narrative, which had been scripted for them. Whereas critical procurement issues were being raised, these MPs kept repeating the line that Safaricom was a big and reputable company, which should be given an opportunity to contribute to the security infrastructure of the country.

Try as they may, however, something had to give because a majority of MPs were very sceptical of this Anglo-Leasing-type of contract.

The first breach in the armour was provided by officials of CCK, who confirmed that Safaricom was to be awarded the coveted 800MHz 4-G frequency spectrum in exchange for rolling out the police security network. However, the price for this frequency spectrum had not been determined but would be assessed in future and an offset done. Frequency spectrum was being bartered for the rollout of the system. As will be demonstrated below, that arrangement was clearly illegal and Treasury later disowned it.

Busted

The second and fatal disclosure was literally wrenched out of Bob Collymore at the intense Parliamentary hearings. When it became clear from the questioning by MPs that Safaricom had zero competence in security communication systems, Collymore was forced to admit that they were merely fronting Huawei for this project and that Safaricom’s only interest was in the 800MHz 4-G frequency spectrum. The truth was out.

This disclosure caused a storm in the committee hearing because it was evident that what Safaricom was doing was fronting for Huawei to obtain what Huawei had tried but failed to achieve in a competitive tender just a few months earlier for the exact same project. It was a clear manipulation of the law to aid an unsuccessful bidder.

Safaricom and Huawei were not about to lose this deal and MPs were quickly “persuaded” to nonetheless approve the contract. Tetra was asked to “match” Safaricom/Huawei if it wanted to throw out this Safaricom/Huawei tender. Tetra refused to get involved in any corruption bidding war with Safaricom and Safaricom won the day.

Worse than Goldenberg, Anglo-Leasing put together

The Safaricom/Huawei scandal eclipses Kenya’s infamous scandals of the past: Goldenberg and Anglo-Leasing. Safarigate, as the scandal has come to be known, however epitomises the incessant greed of Kenya’s political class. That Safarigate was conceived and executed at the precise time when the Anglo-Leasing suspects were taking pleas in court in the new Anglo-Leasing case is telling. The charges James Mwiraria, Chris Obure, Deepak Kamani and the rest of the co-accused are facing relate to the alleged single-sourcing of security systems in 2003; it is the exact same contract Safaricom/Huawei has been granted by the Office of the President. How ironical.

This is a clear testament to the fact the fight against corruption is not related to the breach of the law for self gain but is a mere avenue to punish those who are not part of your current “eating” clique.

The Public Procurement Oversight Authority

The Notice of objection filed by Tetra Radio.
The Notice of objection filed by Tetra Radio.

Mega scandals can only be executed with complicity of institutions. Institutions turn the other way to facilitate mega corruption.

PPOA was served with an urgent application to approve the Safaricom/Huawei single sourcing contract on the basis that there existed an urgent need to roll out a police communication network. PPOA endorsed and approved the request. In its presentation to Parliament, PPOA stated that the Office of the President had fulfilled all the requirements necessary to be allowed to single-source the police communication network.

This was a clear abdication of PPOA’s mandate and disregard of constitutional obligations placed on the agency. How can a contract that has been competitively responded to only a few months earlier qualify for single sourcing? Huawei and ZTE had, a few months earlier, been embroiled in a vicious tender competition, in which the companies had quoted Sh14 billion and Sh17 billion respectively in the provision of this service. Tetra had earlier won a tender to provide the same service. The market is replete with companies who can in short order provide the service. Where was the rationale for this single sourcing?  It could only be a way of justifying the appropriation of the Sh30 billion that has now been siphoned off from the Kenyan taxpayer.

PPOA was the first gatekeeper that could have stopped this scandal in its tracks. However, PPOA chose to pander to a political and commercial corrupt narrative.

Who investigates and interrogates the actions of PPOA? The Auditor-General and EACC are duty bound to review the actions taken by PPOA and to recommend prosecution of all officers who authorised this Sh30 billion thievery.

In the end, and as Tetra has shown in its court papers, the Office of the President could have undertaken an accelerated open tender by inviting Siemens, Motorola, Sepura, etc. to give their quotations and financial structuring. Obviously this option was eschewed as it would not have been possible to provide for the Sh30 billion padding.

The only department that has effectively queried and distinguished itself in this scandal is the National Treasury. Government does not operate outside of its annual balance sheet. The liabilities and all revenues of a government must be known at any one time.

Government cannot book in a benefit and budget for it outside of its current balance sheet to be factored in the future. That is illegal.

Yet this illegality was critical for the fraud in this case to be effectuated. In the absence of this illegal device, the Safaricom justification would not have worked. Single sourcing was buttressed on this premise. The sweetener by Safaricom to the government was that the government would not have to pay; rather, it would simply barter the 800MHz frequency spectrum.

Screen Shot 2016-03-16 at 2.40.57 PM

When Safaricom attempted to reap the fruits of its devious scheme by demanding that the Communications Authority allocate it the 800 MHZ spectrum under the Safarigate contract, Tetra, Airtel and Orange protested this arrangement, stating clearly that this was a consideration for the consummation of an illegal contract. Treasury quickly disowned the scheme. Treasury has insisted that any money derived from frequency spectrum sale must first be remitted to the consolidated fund from which normal budgetary process would apply.  This means that the cost of the Safarigate deal must be booked into government books now and not in the future. Since Treasury has now disowned a critical element of the Safarigate contract, it means that the deal between Safaricom/Huawei and the government is illegal ab initio, and is a nullity.

Screen Shot 2016-03-16 at 2.38.54 PM CCK deep in scheme

Quite apart from facilitating the Safarigate scandal, CCK was in complete violation of its mandate under the Act of Parliament creating it and under the Constitution. The regulator knowingly perpetrated this scandal. It provided a false narrative and justification. It allowed spectrum to be used to provide a commercial benefit to private entities.

CCK allowed frequency payments due to CCK for onward transmission to the Treasury to be offset against a contract which was not under the supervision or control of CCK. Huawei and Safaricom had a clear incentive to inflate its cost to government so that it could offset this inflated rollout cost against the future yet-to-be-determined frequency fees. In actual fact, our investigations indicate that CCK officers demanded to interrogate the bill of costs of Safaricom/Huawei, but a telephone call from Office of the President directed that no one should question the Safaricom/Huawei costings.

But it must have been clear to officers at CCK that this was going to be where the scandal had been cooked and that they would in future be called to explain their roles when the government payments to Safaricom become due and audit queries arise. CCK officers are ready to testify on this aspect of this fraud and this evidence needs to be captured right away when everyone’s memory is fresh and records intact. This is the crux of this scandal.

Who determines what the cost of a security camera is? No wonder CCK officers refer to the Safaricom/Huawei contract as the “$10,000 camera contract”!  It is the only way to explain the Sh45 billion Safarigate contract: each camera would have to cost US$10,000 (Sh1 million) to get to that price when it is know that a security camera costs less than $500 (Sh50,000).

As Tetra’s Court documents show, the only way to objectively determine the true cost of the hardware and software in the Safarigate contract is to open the contract to an objective evaluation and competitive supply of all elements in the network.

The mandarins behind Safarigate will not allow this to happen unless compelled. It will shortly become obvious when the scandal is uncovered.

The subject and self-serving assertion that a contract which had been quoted at Sh17 billion for a countrywide rollout had now been awarded for a Sh15 Billion rollout for only two towns (Nairobi and Mombasa) and a Sh45 Billion for a countrywide rollout cannot be explained on the basis that this system is superior to that which Huawei had quoted less than six months earlier. It is the same Huawei who are rolling out the Safarigate network.

How is it that a more expensive version of the system had conveniently become available less than six months later, and for the joint benefit of Safaricom and Huawei?

Your typical Kenyan will be excused to think that carting away Sh30 billion would be more than enough to last one a lifetime of opulence and security. However, the same players are already at work seeking to replicate this scandal many times over.

A surreptitious news item appeared recently indicating that Kenya Railways had applied to CA for allocation of frequencies to rollout a security network to manage the Standard Gauge Railway. The whole process is about to be repeated. And other government agencies will also apply the same formula to design a similar network.

The multiplier effect

Yet the original CCK tender was meant to provide a national security and emergency network which would serve all persons in the security and emergency environment. In fact, CCK was categorical when its officers appeared in Parliament that the law does not allow Safarigate/Huawei to provide services to any other person other than the police because a licence would be required. The Tetra contract with the government, which had been approved by the Attorney-General and OP, had the following organisations on this unified network: Kenya Army, Kenya Navy, Kenya Air Force, Kenya Police, Kenya Railways, GSU, CID, AP, NYS, all Government Ministries and departments, KWS, KPA, KAA, Telkom Kenya, KRA and Central Bank of Kenya. And this unified system would have cost  Sh9 billion for a countrywide rollout.

We now have a Sh15 billion network for one service (Police) for only Nairobi and Mombasa.
In the end the Kenya Police has been saddled with an imposed solution. Court documents show that the Police were happy with the Tetra solution as it was the first time in the history of the Police where the Police were consulted and independently asked to review and choose a security system, unlike in the past when orders from above determined the system and cost of the system the Police were directed to accept.

That old system is back. The Police have been ordered to accept a Safaricom/Huawei solution which has been crafted by Huawei/Safaricom for their benefit.

The dealings between Safaricom/Huawei and the government leave many questions unanswered.  First, as already shown and as originally conceived in 2002, there was to be an integrated network for all the emergency service providers, and not just to the police.

The most problematic outcome of this contract is the suggestion that the police can have an upgraded system which is not accessible to other emergency service providers. It would mean that in the event of an emergency the police will not be able to communicate with the army or hospitals or with the fire departments.

The President personally opposed Anglo Leasing type contracts and recently regretted that his government was manoeuvred into paying a contract of this nature which he previously opposed. The only difference between the contract to Safaricom and the Anglo Leasing contracts is the name. How can his government then be creating its own Anglo Leasing type contracts?

The record of Safaricom comes into question. Safaricom was set up by Vodafone and a little-known company, Mobitelea, the identities of whose owners remains a mystery. The best endeavours to get answers as to who was behind this company failed and the public simply accepted and moved on.

In the end, the dealings between Safaricom/Huawei and the government is typical of what happens in Kenya with big-ticket items. Notwithstanding the unresolved questions, this contract is likely to go ahead because the players have sufficient political power to ensure the questions do not have to be addressed.

2 COMMENTS

  1. We are gutting the soul, strength, blessing of this country. Rather than ‘we’, some parasites, vultures, demons and occultists are stealing the life and breathe of this great land. Blood sucking vampires who are leaving their children with a legacy of darkness. In our helplessness as a people we cry out to God the Creator, to have mercy on us, and to activate His revenge, for we are bemused by this evil.

LEAVE A REPLY

Please enter your comment!
Please enter your name here