Companies

Bribery scandal locks Oxford out of World Bank contracts

oup books

Oxford publications. The company has been blacklisted from participating in World Bank funded programmes over a bribery scandal. The mother firm in the UK has also been slapped with a Sh292 million fine. Photo/File

Kenya’s largest publisher, Oxford East Africa, has been locked out of multi-billion shilling World Bank-funded contracts for three years in the wake of a bribery scandal involving senior government officials.

UK authorities and the World Bank have fined Oxford East Africa’s parent company — Oxford University Press (OUP) — Sh292 million as part of the settlement which also leaves the publisher’s Tanzanian subsidiary blacklisted for similar offences.

“This debarment is testimony to the bank’s continued commitment to protecting the integrity of its projects,” said Leonard McCarthy, the World Bank Integrity vice-president.

The action means that the two Oxford subsidiaries cannot participate in any projects funded by other agencies such as the African Development Bank which have an agreement with the World Bank to enforce corporate integrity.

The World Bank said in a statement that it had acted on the Kenyan and Tanzanian subsidiaries for making irregular payments to government officials for two contracts to supply text books under programmes funded by the Bretton Woods institution.

Oxford’s top rivals Kenya Literature Bureau (KLB), Longhorn Kenya, and the Jomo Kenyatta Foundation (JKF) are expected to be the major beneficiaries of the three-year ban.

They have now been left to share the multi-million shillings textbook publishing contracts.

Under a settlement agreement reached in London, Oxford University Press is to pay the World Bank $500,000 (Sh42 million) for flouting agreed procurement rules and additional £1.9 million (Sh250 million) to the UK’s Serious Fraud Office (SFO) for the same offences.

Investigations into the scandal that culminated in the penalties and sanctions started in May last year and closed early this year after establishing that the subsidiaries bribed government officials directly and through agents to win tenders and publishing contracts for textbooks.

Investigators found that Oxford East Africa was involved in widespread bribery that spanned five countries including Burundi, Malawi, Rwanda, Sudan and Uganda.

“The SFO remit was broader in its scope than the World Bank investigation in that it required investigation of all public tender contracts whether or not funded by the World Bank,” SFO said in a statement.

The UK agency added that its investigations covered several tenders in the years between 2007 and 2010.

Oxford University Press voluntarily reported the bribery scandal to the World Bank and SFO on suspicion of the underhand dealings at its regional subsidiaries.

“We do not tolerate such behaviour,” said Nigel Portwood, Oxford’s chief executive adding that the company was committed to maintaining the highest ethical standards.

Oxford’s debarment comes one year after donors pulled out of the $80 million (Sh6.7 billion) Kenya Education Sector Support Programme (KESSP) citing rampant fraud involving senior officials at the Ministry of Education.

The money was in support of the popular Free Primary Education (FPE) and the subsidised secondary education that the Kibaki’s administration introduced in 2003.

A large part of the money – which was committed in November 2006 – had been disbursed by the time the donors exited.

About 30 per cent of the money was earmarked for the purchase of exercise and textbooks – the key revenue stream for local publishers, who are yet to break into alternative markets like novels and self-help titles.

An initial audit of the free school programme conducted in October 2009 found that Sh234 million was lost from a small sample of expenditure in a single month, highlighting the depth of the cash haemorrhage.

Another forensic audit concluded in May last year found unaccounted for expenditure worth Sh4.8 billion for fiscal years 2007/08 and 2008/09.

The World Bank’s review of KESSP termed the utility of the funds as “unsatisfactory”, blaming the poor score on “significant efficiency losses resulting from fraud, corruption and weak management oversight.”

The World Bank is a major financier of Kenya’s education sector, having advanced $46.5 million for purchase of textbooks and other materials in the initial phase of KESSP between 2003 and 2007.

Oxford’s debarment follows a similar one on its rival Macmillan.

In July last year, Macmillan paid a Sh1.5 billion penalty to SFO after investigations revealed that it had bribed government officials in pursuit of public and World Bank-funded contracts in Africa.

The publisher remains banned from bidding for World Bank–funded contracts up to mid-2014.

Macmillan, which has since sold its Kenyan and Ugandan subsidiaries to veteran publisher David Muita for Sh300 million, was found to irregularly won tenders for the supply of text books to public schools in Rwanda, Uganda and Zambia between 2002 and 2009.

READ: Macmillan buyout opens new chapter in local publishing

The exit of Macmillan from the Kenyan market and now Oxford’s ban is set to further tilt the scales in favour of local publishers.

Thomas Nelson, Heinemann, and Longman are other foreign publishers that have exited Kenya since the 1970s through management buyouts.

Kenya has about 100 registered publishers from a low of six at independence, though the market is dominated by about 15 publishers, including State owned Jomo Kenyatta Foundation and Kenya Literature Bureau (KLB).

The industry sells books worth about Sh5 billion per year, mainly textbooks. Publishers say net profit margins in the sector oscillate between seven and 15 per cent.

In Kenya, the government’s introduction of FPE and subsidy of secondary education has made it the single biggest buyer of text books.

Annually, the State spends Sh1,056 and Sh3,600 per student in primary and secondary schools for purchase of learning materials, amounting to several hundred million shillings.

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