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Multi-Million NCBA Deal Returns to Haunt Uhuru

The NIC-CBA merger in 2018 created Kenya's third-largest bank by asset value, with the Kenyatta family holding a 13.2% stake

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The 2019 exemption of NIC and Commercial Bank of Africa (CBA) from share sale tax by the National Treasury following their merger has returned to haunt former President Uhuru Kenyatta and his family. The Kenyatta family controls a 13.2% stake in NCBA, the entity that resulted from the merger.

As President William Ruto on Monday, January 30 hit out at unnamed powerful individuals in previous administrations whom he accuses of evading taxes, a section of Kenya Kwanza leaders came out guns blazing against Ruto’s predecessor, Uhuru Kenyatta, and his family, reviving the state capture allegations that formed a key theme of Ruto’s Presidential campaign.

Speaking on Monday, Ruto had implied that the anti-government rallies against him being led by Azimio coalition Raila Odinga were being sponsored by powerful tax evaders, insisting that their time was up. Now, leaders in his camp are pointing their fingers at the former President and his family – accusing him of sponsoring the Azimio activities and citing the exemption of the NIC-CBA merger from stamp duty as evidence of the Kenyattas’ alleged failure to pay taxes.

Nyandarua Senator John Methu and Kenya Kwanza strategist Dennis Itumbi are among those who highlighted the NIC-CBA tax exemption as they hit out at Odinga, and the Kenyatta family for allegedly sponsoring the rallies in which Odinga has demanded Ruto’s resignation.

“We cannot continue to operate in a space where those in power exempt themselves from paying taxes. Their day is up. Every citizen must pay tax. Even if they sponsor demos so they don’t pay tax, they will pay,” Ruto stated on Monday.

At a separate forum, Nyeri Senator Wahome Wamatingi stated; “We are united in what we are saying and we are demanding the former president Uhuru that he misused his power in his regime and as Kenya Kwanza we are going after him, not his personal businesses but after the fact that he has been avoiding to pay taxes.”

The NIC-CBA merger in 2018 created Kenya’s third-largest bank by asset value. It was completed though a share swap, with NIC group shareholders owning 47 percent of the merged entity and CBA shareholders including the Kenyatta family owning 53 percent of the merged entity.

In June 2019,  former Treasury Cabinet Secretary Henry Rotich exempted the transfer of CBA shares to NIC Bank from paying stamp duty of one percent of the value of unquoted stocks being transferred. While tax waivers aren’t unheard of, the NCBA exemption raised eyebrows due to the proximity of shareholders to the Uhuru-led administration.

The merger deal did not quote the value of CBA shares, but analysts placed the value of the 53 per cent stake at Ksh35 billion based on the book value of Ksh65 billion at the time the deal was announced—putting the stamp duty charge north of Ksh350 million.

“The Cabinet Secretary for the National Treasury and Planning, on the recommendation of the Cabinet Secretary for Lands and Physical Planning, directs that the instruments executed in respect of the transactions relating to the merger of NIC Group PLC and Commercial Bank of Africa shall be exempt from the provisions of the Act,” Rotich said in a legal notice.

Busia Senator Okiya Omtatah, then an activist, moved to court to challenge the exemption, even as CBA fought off claims that the exemption was irregular.

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