Man behind Chinese firm in Sh3.4tr Mui coal mines

George Kariithi (right) chairman of the Great Lakes Corporation with Zhou vice chairman of Baosteel, a steel manufacturer, in Shanghai, China. Photo/Courtesy

When George Kariithi, a millionaire businessman, first got wind that the government had intentions of leasing out the multi-billion-shilling Mui Coal fields two years ago, he instantly sensed a lucrative business opportunity.

It struck him that he could use his close connections with two Chinese friends and mining executives to bag the lucrative contract and he quickly arranged for a flight to China to meet Li Yuxin and Yang Wusheng.

As an experienced hand in natural resources exploration, Mr Kariithi knew that his Chinese friends had at their disposal the technical expertise and financial muscle needed to win the lucrative tender.

Using his company, Great Lakes Corporation, which he co-owns with a New Zealand national, Ian See, Mr Kariithi formed a consortium with Mr Yuxin and Mr Yusheng, the Fenxi Mining Industry Group.

On August 24 last year, Mr Kariithi and his Chinese partners received communication from the Permanent Secretary in the Ministry of Energy, Patrick Nyoike, informing them that their consortium had won the concession to mine coal in the Mui basin’s blocks C and D.

The two blocks are thought to have more than 400 million tonnes of coal reserves valued at Sh3.4 trillion ($40 billion), according to the Ministry of Energy estimates.

Mr Kariithi, 58, a trained pharmacist and one of the lesser known Kenyan business magnates, had won one of the most hotly contested and lucrative Kenya government tenders ever, but controversy was soon to follow award of the contract.

When the Business Daily caught up with him, he was preparing to leave for China to meet his business partners.

He was concerned that negative publicity on the tendering process was “distracting people from the bigger picture,” and feared that the controversy would delay the start of the mining process and hold back economic benefits the local community and the country would derive from it.

“We won the tender in an open process, and I’m willing to answer, as I should, all the questions that are arising, we have nothing to hide,” said Mr Kariithi.   

As a businessman with interests in such volatile countries as South Sudan, DR Congo, Senegal and Zimbabwe, Mr Kariithi is used to confronting challenges that are, in most cases, potential deal breakers.  

On the Mui basin deal, he has had to contend with Mutitu Member of Parliament Kiema Kilonzo’s offensive on the award that has now dragged on for nearly a year.

Mr Kilonzo claims that during a fact-finding visit to China, a delegation consisting of Kitui community leaders established that Fenxi did not have the financial or technical capacity to deliver on the Mui basin coal project.

“The entourage did not see any projects being handled by the Fenxi Industry Mining Group. They also did not receive any profiles showing the Group’s activities in China or abroad,” says a report published by Mr Kilonzo’s team upon return from the visit.

The MP has also raised questions on Mr Kariithi’s partnership with the Chinese, arguing that the local shareholding aspect of the tendering should have been reserved for the local community.

The impending displacement of thousands of Mui basin residents to make room for the coal mining project has become a hot issue and there are also fears of environmental degradation to be addressed.

“The failure to involve the Akamba community and Kitui County in particular where the coal is found in equity participation is an issue that cannot be negotiated,” said the Kilonzo report seen by the Business Daily.

The attacks gained momentum last month when the chairman of the Law Society of Kenya, Eric Mutua – himself a resident of the Kitui county – backed Mr Kilonzo’s demands. 

In a letter dated July 9 addressed to Energy PS, Mr Mutua asked Mr Nyoike to respond to the queries raised by the Kilonzo delegation regarding Fenxi group’s financial and technical abilities.

Mr Mutua, who is also chairman of the liaison committee of Mui Basin Block C and D, has promised to go to court to block the process in the absence of a credible response, adding that he was “under a lot of pressure from the community to explain the issues.”

Mr Kariithi terms the issue of local shareholding as a “misunderstanding”, arguing that the government holds shares in the mining venture.

He declined to disclose his shareholding in Fenxi Group, but denied Mr Kilonzo’s claim that Great Lakes Corporation owns 30 per cent of Fenxi.

Mr Kariithi has hardly ever featured in Kenya’s media, fuelling speculation that there are powerful people behind Great Lakes. The Mutito MP has, for instance, claimed that a “Dr Mwangi” is also a shareholder in the venture.

“This is actually a joint venture between Fenxi and the government, the government could decide to allocate its portion of shares to the local community or hold them at the central government level or both,” said Mr Kariithi.

Documents provided by the Energy PS show that Fenxi will hold 89 per cent of the mining venture, while the government will control 11 per cent of the shares.

In addition, the government will be entitled to a 23.6 per cent share of gross revenue generated from block C and 22.1 per cent share from block D revenues.

“Eleven per cent is significant ownership. We are talking about hundreds of millions of dollars here,” said Mr Kariithi.

Mr Nyoike maintains that due diligence was done to determine Fenxi’s financial and technical capacity to undertake the project.

As part of the conditions for the concession, Fenxi is required to pay a total of Sh294 million ($3.5 million) concession fee for the two blocks.

The Chinese firm is also expected to pay a special exploration license fee of Sh336 ($4) per square kilometre, environmental impact license fees of Sh1.9 million, special mining lease fees of Sh3.5 million and a training charge of Sh13.7 million per annum.

“Negotiations are to be finalised within three months and the concession documents initialed for further government action,” said Mr Nyoike, while disputing claims that the local community has been kept in the dark regarding details of award of the coal mining contract.

Ownership of the Great Lakes Corporation, and the terms under which Mr Kariithi partnered with the Chinese however remains a vexing issue.

Mr Kariithi says he is the majority owner of Great Lakes Corporation, whose shareholders are listed as Consolidated Securities Limited, Fatima Holdings Limited and Kei Kei Limited.

Mr Kariithi’s co-shareholder in Great Lakes, whom he describes as Anglo-Chinese, is also a co-director in the firm.

Insisting that there are no mystery shareholders behind Great Lakes Corporation, Mr Kariithi says his partner, Mr See, owns only a small portion of the firm and his main contribution has been his knowledge of the Chinese language and culture.

The businessman says he has been involved in big ticket mining deals through his other company, African Resources Corporation, which is currently prospecting for natural resources in Southern Sudan, DRC, Zimbabwe and Malawi.

He has also operated two telecommunication businesses in South Sudan which he founded before the signing of the peace agreement with the North.

The Kenyan businessman started his career as a marketing executive for Wellcome Kenya Limited in 1978, rising to the position of regional manager in charge of the greater Eastern and Central Africa region. 

He started his own business of supplying healthcare products in 1985, which expanded to deliveries in the Sudan People Liberation Army (SPLA) controlled areas of South Sudan.

It was while at it that Mr Kariithi became close to the late SPLA leader, John Garang’ – a friendship that in 2003 help him win a license to operate South Sudan’s first mobile telephone network, Network of the World (NoW).

In 2007 he founded the Voda Network Systems (VNS) an internet service provider that serves government departments and private businesses.

Despite concerns of possible delays in the mining project due to the ongoing controversy, Mr Kariithi says the coal mines have the greatest potential to transform the economy of Kitui county and of the entire country.

“We have to wait for exploration to be conducted in the other blocks to ascertain the estimated reserves in quantity, quality and gross value,” he said during the interview.

“However, of more importance to the people of Kitui and Kenya as well is the number of spinoff industries that will arise from the coal mining venture. This project will definitely make Kitui the wealthiest county in Kenya...much more than the counties with oil.”

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.