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Economy

CS Mucheru sells stake in bitcoin company

ICT Cabinet Secretary Joe Mucheru. PHOTO | FILE
ICT Cabinet Secretary Joe Mucheru. PHOTO | FILE 

ICT secretary Joe Mucheru has quit the board of bitcoin dealer BitPesa and begun offloading his shares in the digital currency platform to avoid a possible conflict of interest.

Mr Mucheru, who was sworn into office on December 18 last year, has also put his shares at BitPesa on sale, saying he does not want to preside over an industry where he has financial interests that may prejudice his decisions.

“I’ve formally resigned from the board of BitPesa and I’ve put my shares on sale. The process is ongoing,” said Mr Mucheru in an interview with the Business Daily.

The 48-year-old minister further said he was divesting from Wananchi Group, a company he co-founded in 1999, which trades under the Zuku brand.

“I own Wananchi through an investment vehicle and I have already received waivers to offer the shares to both existing and new shareholders,” he said.

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Wananchi Nominees Ltd is the holding company for Wananchi Online co-founders, including Mr Mucheru and Njeri Rionge, who was the founding CEO of the Internet service provider.

Mr Mucheru said the decision to make good his earlier promise to exit the board of the bitcoin platform and sell his shares in firms that are under the ICT ministry is in line with global best practices for public officials.

Mr Mucheru, a long-serving executive at search giant Google, stands out as a loner at a time when a dozen Kenyan public officials are holding onto or have been forced to quit the boards of private and Nairobi bourse-listed companies.

Controller of Budget Agnes Odhiambo has refused to relinquish her position as director at Britam. Nduva Muli, who was sacked in November as Transport principal secretary, also retained his directorship at Britam even as he served as a top bureaucrat.

Export Promotion Council general manager Lucy Waithaka chairs the board of battery maker Eveready East Africa and sits on the board of agricultural firm Sasini.

Public Service Commission boss Margaret Kobia was is August 2013 forced to quit the board of tyre maker Sameer Africa barely three weeks in office, following intense public debate on the legality and integrity of the appointment.

Other public officials forced to quit company boards are the Judiciary Chief Registrar, Anne Amadi, who in June 2014 left Crown Paints Kenya after serving as director for nine months, Salaries and Remuneration Commission chairperson Sarah Serem (Mumias Sugar), Public Service secretary Sicily Kariuki (Commercial Bank of Africa), and Treasury financial secretary Mutua Kilaka (Bamburi Cement).

The Constitution bars State officers from taking up any other gainful employment as board directorships.

Chapter Six of the Constitution requires public officials to ensure ‘objectivity and impartiality in decision making.’

Mr Mucheru is a serial entrepreneur and was an early stage investor in local IT firm Weza Tele – which was in May last year acquired by Mauritian financial services firm AFB for $1.7 million.

Mr Mucheru’s exit from the board of BitPesa pre-empts a bruising clash between the Cabinet secretary and the Central Bank of Kenya (CBK) and Safaricom – two players who have waded into the digital currency debate.

Bitcoin is a virtual currency whose use and value has grown exponentially since its inception in 2009 by a techie going by the pseudonym Satoshi Nakamoto.

Unlike traditional fiat currencies, which partly derive their value from the faith that users put in the issuing governments, bitcoin is not created, regulated or backed by any central bank.

Safaricom is currently locked in an acrimonious court battle with BitPesa after the telecoms operator terminated mobile money payments to the platform’s payment gateway, Lipisha Consortium Ltd.

Kipochi, another bitcoin trading platform linked to M-Pesa, last year closed operations after Safaricom cut their mobile money connection on fears that the volatile virtual currency is not regulated by the CBK.

Mr Mucheru, an angel investor at BitPesa, has described his shareholding in the bitcoin exchange platform as a “significant minority stake”.

The ensuing legal clash between Safaricom and BitPesa has sucked in the banking sector regulator who was forced to issue a warning to the public about use of cryptocurrencies such as bitcoin.

“CBK reiterates that Bitcoin and similar products are not legal tender nor are they regulated in Kenya. The public should therefore desist from transacting in bitcoin and similar products,” said CBK governor Patrick Njoroge in a notice dated December 15, 2015.

Mr Mucheru hit back, asking the CBK and lawmakers to develop regulations to govern the use of cryptocurrencies likening it to the advent of pioneer mobile money platform M-Pesa which was viewed with suspicion at its birth in March 2007.

“We need to change regulations to take into account innovations such as virtual currency as this is currently outside CBK’s mandate,” retorted Mr Mucheru.

“It will be a sad day if we fail to embrace this because we are afraid. Kenya cannot be the tech hub of Africa if our own regulations stifle innovation,” he said in an earlier interview before he assumed office.

In a quick rejoinder, BitPesa has now partnered with M-Pesa rival Airtel Money to offer bitcoin payments, trade, as well as make and receive remittance services in Kenya.

BitPesa has operations in Uganda, Tanzania and Nigeria; where it has interlinked the bitcoin platform to bank accounts and mobile money providers, including Airtel, MTN Uganda and M-Pesa.

The remaining directors at BitPesa include Dan Morehead of Pantera Capital, Musoni Kenya chairman Duncan Goldie-Scot, venture capitalist Jalak Jobanputra of Future/Perfect Ventures and Elizabeth Rossiello, the chief executive.

BitPesa in February raised $1.1 million in fresh funding from American investors, including San Francisco-based investment firm Pantera Capital, Bitcoin Opportunity Corp, Crypto Currency Partners, Future/Perfect Ventures and Stephens Investment Management.

This brought the total capital raised by the Kenyan bitcoin startup founded in November 2013 to $1.7 million.

By cutting links with Wananchi Group, Mr Mucheru has once again avoided a possible conflict of interest with London-based private equity firm Helios, which has multiple interests in the IT industry.

Helios is also a shareholder at Wananchi Group and is currently finalising plans to acquire a 70 per cent stake in Telkom Kenya from France Telecom, which trades as Orange, for an undisclosed value.

Part of the deal involves Helios giving back to the Treasury a 10 per cent stake for a mere $1, a transaction which involves Mr Mucheru’s ministry alongside Treasury secretary Henry Rotich.

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