Spencon Kenya
ECP ran into negative headlines recently for the way it allegedly stripped Spencon of its assets and fled the country, leaving scores of employees without pay. [ Photo / BBC.com ]

The announcement that the UK Department for International Development (DfID) will be folded into the Foreign and Commonwealth Office (FCO) is as surprising as it is alarming. Surprising because DfID is known as a more efficient and effective operator on the ground than the bureaucratic FCO, but alarming because of the leeway it could give to UK private capital to operate in Kenya without the necessary oversight.

Earlier this year, the UK signed some agreements with Kenya for increased cooperation especially trade and investment. One of the key issues that stood out from the UK side, was the decision to mobilize and increase private capital from Britain to be invested in development projects in Kenya. Much of this is expected to go into public-private partnership (PPP) deals such as the proposed Railway City and other housing projects. The capital is also expected to be invested directly into companies.

On paper this is a good thing as it could mean more Foreign Direct Investments; in practice has proven to be problematic especially because of the weak regulations we have in Kenya for foreign investments. One of the things that DfID has been doing over the years is channeling UK taxpayers’ money for investment in Africa through its development fund, CDC Group.CDC’s biggest investments in Africa are in Nigeria (Sh35billion) and Kenya (Sh28billion) in various sectors.

According to its website, CDC says, “Our mission is to support the building of businesses throughout Africa and South Asia, to create jobs, and to make a lasting difference to people’s lives in some of the world’s poorest places.”

This, however, has not been the case. CDC has been particularly criticized because of the opaque manner in which these funds are invested and, more importantly, the lack of accountability for the manner in which companies it invests in conduct themselves. One of the most common vehicles CDC has used for investment in Kenya and Africa as a whole is a private equity company called Emerging Capital Partners (ECP).

Investigated by the UK Serious F***d Office in 2012 for alleged c********n in Nigeria and i*****l surveillance of a UK-based Nigerian w***********r, ECP, CDC and DfID all came in for criticism and the cabinet minister in charge of DfID launched an investigation.

Eventually, a former Nigerian governor James Ibori was extradited from Dubai after fleeing from justice in Nigeria and charged in the UK. It turns out companies in which he had laundered money stolen from taxpayers had received UK taxpayers’ money through CDC and ECP. That would have been treated as a one-off event until the same ECP ran into negative headlines recently for the way it allegedly s******d Spencon of its assets and fled the country, leaving scores of employees without pay even as its own executives paid themselves handsomely.

This despite both DfID and CDC touting how they invest in developing countries to create jobs and employment. “We focus on investing in countries where the private sector is weak, jobs are scarce, and the investment climate is difficult, but particularly in sectors where growth leads to jobs,” CDC says on its website.

In Spencon’s case, jobs were lost not just in Kenya but in Uganda, Tanzania and Zambia among others. ECP later refused to pay these workers their dues and claimed that the fund it had invested in had reached maturity and been w***d up. According to a BBC investigative program in April, audit firm PWC described the ECP executives’ behavior at Spencon as c********n and worthy of investigation under the UK Bribery Act. This is despite DfID being quoted in the matter as saying it has zero-tolerance to c********n.

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Ironically, ECP CEO Vincent la Guennou, was recently quoted by CNBC calling for more development funds to bail out companies such as the ones ECP has stakes in. In an opinion piece, he asks for cash from international donors to be channeled directly to high potential companies through debt, quasi-equity and guarantee instruments so that they have breathing space to survive Covid-19. He adds that banks should be refinanced to roll over maturities of debts and to involve both central banks and fund managers like ECP and their shareholders.

“The battle for jobs and against poverty (in Africa) is therefore being fought on the corporate front,” la Guennou writes.

While in Uganda authorities have involved Interpol to investigate the ECP executives, nothing has been heard from Kenyan government agencies on the same.

Observers now worry that with DfID being merged into the Foreign and Commonwealth Office, its operations and investments through CDC are likely to become more opaque and unregulated.

One of the British ECP executives who is accused of this corporate a***e of office in the Spencon case, Andrew Brown, surprisingly, has recently been appointed a Managing Director in CDC Group. This is deflating for former Spencon workers who have been hoping for intervention from UK authorities to have their wage arrears settled.

While in Uganda authorities have involved Interpol to investigate the ECP executives, nothing has been heard from Kenyan government agencies on the same.

Kenya and UK treaties

For Kenya, which is gearing up to do a bilateral trade deal with the United States, it is high time it also relooked at other bilateral agreements it has in place with countries like the UK.

The last UK-Kenya bilateral treaty was signed in 1973 and is very outdated. With DfID funding now likely to come through private equity companies, it is time for Kenya to work out a new agreement with the UK on how such investments will be regulated in Kenya. In particular, executives of such entities should be liable under Kenyan law for corporate malfeasance and fly-by-night tactics that belong in the colonial era.

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