In the world of dealing making, the sky is the limit, so to speak, to how much a shrewd investor can squeeze from a transaction. But when someone makes Ksh400 million in one deal in a struggling economy like Kenya, the country stops to watch and listen.
Mr John Ngumi is not your typical celebrity entrepreneur or financial expert. He is often a laidback corporate number-cruncher who was shoved into the limelight through political appointments during the President Uhuru Kenyatta regime, during which he served as chairman at Kenya Pipeline Company and Safaricom Plc. Before this his big gigs were during the season of initial public offerings (IPOs).
But that’s just part of John Ngumi’s riveting story. A career banker, Mr Ngumi has turned heads over the past few months after it emerged that he was paid a king’s ransom to midwife the government buyback of 60% of Telkom Kenya shares from Helios Investment Partners. According to disclosures from a parliamentary investigation, it was revealed that Mr Ngumi’s company, Eagle Africa Capital, was paid a cool $3.07 million (about Ksh400 million) from a transaction valued at Ks6.2 billion.
France’s Orange bought a majority share in Telkom Kenya when it was privatized in 2007 but then disposed of it to London-based Helios Investment in 2015. After afew missteps, Helios needed to exit. As transaction adviser, Mr Ngumi led the money aspect of a deal that has been as controversial as it was lucrative.
The Helios transaction was paid off a few days to the 9th August general elections in 2022, raising questions of whether the government real got value for its investment.
Speaking to MPs probing the issue, the investment banker struggled to justify his advisory fees for the Telkom Kenya, only arguing that Jamhuri Holdings, Helios subsidiary that held the Telkom stake, needed high-level advice to divest. “I was paid the money because I was the best in the business. They valued the advice I gave them and it was a willing buyer willing seller (transaction),” he said.
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For John Ngumi, it appears it mattered less that the transaction was value for government’s money. “The transaction had to happen because the investor had reached the end of their patience with certain things that had happened,” he says in an interview with KTN. “Promises that had not been kept and a feeling that nothing would change.”
He was referring to, among others, the government’s decision to chisel away property valued at Ksh10 billion from Telkom Kenya’s balance sheet without Helios consent and its refusal to support the merger with Airtel.
Indeed, to prove that the Ksh400 million pay was not just hot air, Mr Ngumi on 18th April paid a tax of Ksh111.9 million to Kenya Revenue Authority (KRA) from his handsome fees, just days after facing the parliamentary probe. Mr Ngumi received his payment over a period of six months to September last year, putting his monthly pay during the period at Ksh66 million. He is the single highest beneficiary in the transaction, with Anjarwalla and Company Advocates, the legal advisers, getting Ksh54 million.
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This is what he told Business Daily said after paying taxes: “I made a commitment to Parliament that I would pay within one week and that is what I have done. As a consultant, I am required to pay 5% withholding tax but out of good faith, I have decided to pay 30% as though it is a Pay As You Earn consideration.”
Mr Ngumi’s deal, however, still pales compared to the 2003 corporate power play by the later Naushad Meralli when he made a profit of Ksh200 million in one day. He simply bought the Vivendi stake in KenCell at $230 million (he owned 40% of Kencell and had pre-emptive rights) and sold it to a new partner, Celtel International, the very same day for $250 million — earning a sumptuous profit of $20 million.
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