Treasury stalls Posta’s Sh543m land deal with Bharti Airtel

Indian telecom giant Bharti Airtel’s plans to build its African headquarters in Nairobi have run into strong bureaucratic headwinds that are also likely to determine the challenges other foreign investors face trying to set up operations in Kenya.

Work on the project stalled after two key government agencies questioned Airtel’s acquisition of prime public land in Nairobi that President Kibaki had offered the company to build its offices.

The Treasury has joined the Ethics and Anti- Corruption Commission (formerly the Kenya Anti-Corruption Commission) in opposing the proposed sale to Airtel of the land belonging to the Postal Corporation of Kenya (PCK) in breach of the rules set out in the Public Procurement and Disposal Act, 2005.

Opposition to the sale has arisen despite Airtel having sought and won the backing of the two principals in the coalition government – President Kibaki and Prime Minister Raila Odinga. The sale of the 2.36 hectares plot to the Indian firm effectively stalled in August after the Treasury tabled before the Postal Corporation board a rival bid to buy the same piece of land at nearly double Airtel’s offer.

Mr Kibaki had in July last year ordered the Finance, Lands and Information ministries to find suitable land for Airtel to set up its African headquarters that is to come with a regional call centre employing 1,000 people as part of a Sh12 billion

investment. Mr Odinga buttressed the position when he promised the Indian firm State co-operation during the official launch of the Airtel brand in Kenya.

Sources said Airtel officials have been piling pressure on their counterparts at the Postal Corporation to conclude the sale of the land on Nairobi’s Argwings Kodhek-Tigoni roads junction.

But a recent storm over the planned sale of UK security printer De La Rue Kenya shares to the government has sent PCK officials balking at the deal fearing possible consequences.

Documents seen by the Business Daily show that Bharti Airtel’s bid to acquire the land met opposition months after the launch of its operations in Kenya.

Former director of the Kenya Anti-Corruption Authority, Patrick Lumumba, first questioned the deal in a letter to the Postal Corporation dated May 9.

“(We) have received information from the (Information) ministry over the proposed sale of government land in Nairobi charged to PCK directly to Bharti Airtel,” said Prof Lumumba in his letter.

“It should be noted that the correct and legal procedures demand that the board of the corporation adopts and passes a formal resolution that approves the disposal…followed by an advertisement in the daily newspapers.”

The letter is copied to Postal Corporation chairman Cyrus Maina, Information permanent secretary Bitange Ndemo, Information minister Samuel Poghisio and Treasury permanent secretary Joseph Kinyua.

Prof Lumumba wrote another letter to PCK in August after the corporation failed to reply to the earlier one, reminding them of his position.
“We reiterate that any sale of public property in contravention of the law may constitute an offence under the Anti-Corruption and Economic Crimes Act,” the letter said.

Yesterday, Dr Ndemo dismissed the anti-corruption commission’s concerns as based on wrong premises.

“The Procurement Act 2005 does not have a provision for the disposal of public property such as land,” the PS said in response to questions on the ministry’s position. “Disposal of such property is taken care of by the State Corporation Act, which is detailed and elaborate.”
The Treasury and EACC, however, appear united in demanding that sale of the Sh543 million property be done in line with the Public Procurement and Disposal Act, 2005.

In his letter to the Postal Corporation management, Prof Lumumba had pointed out that the Act does not provide for disposal of public property to “pre-determined individuals or entities” and advised the corporation to liaise with the Public Procurement Oversight Authority (PPOA) on the matter.

The Treasury and Airtel officials had not responded to our questions as we went to press.

If Prof Lumumba’s position is confirmed, foreign investors will find it harder to secure land in Kenya until the land bank proposal under the Land Bill, 2011, is actualised.

Officials familiar with the matter said the corporation, led by post-master-general Hussein Ali, has engaged lawyers to guide its actions, possibly with the backing of the Cabinet.

The Act said a procuring entity may use restricted tendering or direct procurement as an alternative procurement procedure only if, before using that procedure, “the procuring entity — obtains the written approval of its tender committee and the reasons for using the alternative procurement procedure.”

Senior Postal Corporation officials said financial secretary Mutua Kilaka had made matters even more difficult with the tabling of a letter from a rival company that has offered to buy the same piece of land at $10 million (Sh930 million) – nearly double Airtel’s offer.

Minutes of the PCK board meeting show that Mr Kilaka, who is an alternate of Treasury PS Kinyua in the corporation’s board, did not want the letter to be put on record, insisting that he had only tabled it for information purposes. However, other board members read Mr Kilaka’s action as a word of caution against the transaction and have been unwilling to proceed without external backing.

The unsolicited rival bid from King Realtors has thrown the earlier sale plan in disarray, especially in its claim that theirs was the fair market value for the land.

“We propose the following offer ($10 million),” said the Argwings Kodhek-based firm.

It would be hard for Postal Corporation to sell the land without Treasury’s agreement.

This is because the Ministry of Finance is the custodian of all public property whose approval every government agency requires to dispose of an asset.
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