Kenya’s Prosecutor Orders Arrest of Treasury Secretary Rotich
Kenya’s Prosecutor Orders Arrest of Treasury Secretary Rotich
(Bloomberg) -- Kenyan authorities arrested Treasury Secretary Henry Rotich after an investigation by the state prosecutor into alleged irregular payments for the construction of dams.
Rotich, 50, is the most senior official to be targeted so far in an intensifying battle against corruption in Kenya. His detention may result in his replacement, ending six years at the Treasury in which the Harvard-trained economist presided over an average economic growth rate of 5.7%, faster than the 4.9% achieved in the preceding six-year period.
The Office of the Director of Public Prosecution ordered the arrest of Rotich, Treasury Principal Secretary Kamau Thugge and 24 others as part of an investigation into possible irregularities involving two planned dam projects that may have cost the government billions of shillings.
“The evidence established malpractices that impacted on our public debt,” Director of Public Prosecutions Noordin Haji said Monday in a televised speech.
Calls to Rotich and Thugge seeking comment went unanswered. The Kenyan presidency declined to comment on whether a cabinet reshuffle is planned.
The investigation not only threatens to hamper President Uhuru Kenyatta’s $25 billion plan to expand infrastructure and boost the East African nation’s economy, at a time when East Africa’s biggest economy is struggling to contain borrowing in line with recommendations from the International Monetary Fund.
“A long anticipated reshuffle maybe on its way,” said Vinita Kotedia, a macro-strategy analyst at EFG Hermes Kenya Ltd. “The president is taking a strong stand on the anti-corruption campaign, which could be positive for markets. The economic impact will otherwise be neutral.”
The yield on Kenyan bonds due in 2024 was little changed at 5.144%, while those maturing in 2032 and 2048 were down 0.4% and 0.5% respectively. The shilling shed 0.4% against the dollar to 103.63, its weakest in 20 months.
The prosecutor found that the Treasury negotiated a 63 billion-shilling ($609 million) commercial loan for two dams that was inflated by 17 billion shillings, Haji said on Monday. The projects investigated by his office -- the planned Kimwarer and Arror dams in the western Rift Valley region -- were estimated to cost about 65 billion shillings, Haji said March 8.
Officials awarded the contract to CMC di Ravenna of Italy while aware that the company was at the time “straining and getting into voluntary liquidation,” Haji said. The same firm had been awarded three other mega-dam projects whose construction was incomplete or yet to commence, he said.
The contracts were awarded “in flagrant disregard to the laid down public-procurement laws, regulations and rules, resulting in massive loss of public resources,” Haji said.
CMC said in an emailed statement it had yet to receive any communication from the Kenyan authorities and that there was no wrongdoing by its representatives.
--With assistance from Bella Genga and Adelaide Changole.
To contact the reporters on this story: David Herbling in Nairobi at dherbling@bloomberg.net;Eric Ombok in Nairobi at eombok@bloomberg.net
To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Helen Nyambura, Paul Richardson
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