Billionaire businessman Peter Munga orchestrated a secretive purchase of 452.5 million shares of Britam Holdings from the government of Mauritius in a deal that left the island nation with a Sh3.9 billion loss, according to an inquiry report.
The Port Louis commission of inquiry, which investigated the transactions, established that the then Mauritius’ Minister of Financial Services, Good Governance and Institutional Reforms Roshi Bhadain helped the Kenyan businessman buy the shares for Sh7.1 billion in 2016.
This was despite the fact that there were rival higher bids of Sh11 billion each from South Africa’s insurance firm MMI Holdings and Barclays Bank (now Absa Group), which Mr Munga had earlier promised to match.
The Britam shares were seized by Mauritius in 2015 from its citizen Dawood Rawat, whose Sh71 billion ponzi scheme was exposed, putting pressure on the government to sell his assets in Kenya and other jurisdictions to compensate investors and policyholders.
After buying the shares, Mr Munga would later sell them in two tranches at undisclosed prices that are expected to have earned him billions of shillings in capital gains.
He first sold 104 million shares in 2017 in the open market and followed it up with the disposal of 348.5 million shares to Zurich-based multinational Swiss Re in 2018.
Mr Munga called the roundabout transactions a “Manowari Project”, according to the inquiry.
Manowari is a Swahili name for submarine and the authors of the report say it is a fitting description of the secretive nature of the transactions.
The sale of the shares to Mr Munga’s investment vehicle Plum LLP would not have been made public in Mauritius had it not been for a question asked by the Leader of the Opposition.
On May 3, 2016, Mr Bhadain casually told Parliament that the shares had been sold to Mr Munga.
The response prompted the formation of the inquiry after it emerged that the Kenyan businessman had bought the stocks at a cheaper price and the laid-down procedure for handling Mr Rawat’s assets was ignored.
There were several meetings between Britam directors and Mauritian officials in Nairobi and Port Louis but the most consequential was a secret one between Mr Munga and Bhadain on Saturday, November 14, 2015.
They were joined by officials of BDO, the accounting firm that had been appointed as special administrators of the Rawat assets.
“This was the meeting that changed the course of history of this sale which would ultimately end with the big fall from R4.3bn (Sh11 billion) to R2.4bn [Sh7.1 billion at the agreed exchange rates],” the report says.
Mr Munga told the participants that the Kenyan government would not welcome a foreign investor.
He was repeating a message that had been communicated by former Treasury Cabinet Secretary Henry Rotich, who wrote to Mauritius’ Ministry of Finance and Economic Development (MOFED) asking the shares to be sold to Kenyan investors.
MOFED initiated the sale of the Britam shares but the process was later “hijacked” by Mr Bhadain, whose associates irregularly introduced amendments to the Insurance Act to deal with insolvency issues.
Mr Munga is among the businessmen with powerful connections in the Jubilee administration.
On March 8, 2016, Mr Munga landed in Mauritius with his small team and dealt with BDO. On March 12, 2016, the independence day of Mauritius, he signed an MoU which the report says was more in the nature of a formal contract, with all the terms laid down in black and white for R2.4bn.
The report found that sale of the shares to Mr Munga was concluded without Cabinet approval, valuation, or the appointment of an independent transaction adviser.
The shares were to be transferred to the National Property Fund Limited (NPFL), which was to sell it at a later date.
The government had borrowed R3.5 billion (8.9 billion) from Bank of Mauritius (the central bank) to compensate Mr Rawat’s victims, easing the pressure to sell the Britam shares immediately.
But the stocks were sold to Mr Munga and only the proceeds were transferred to NPFL, with Mr Bhadain and his team of regulators and conservators (accounting firm BDO) saying it was necessary to sell the shares because their prices were falling on the Nairobi Securities Exchange.
The shares were transferred to NPFL on June 10, 2016 and on the same day they were sold to Mr Munga, with the fund receiving a string of payments starting from April 29, 2016 to June 3, 2016.
Plum LLP, Munga’s investment vehicle, also came into existence on that same day.
Unusual for an international transaction of this nature, the deal was denominated in Kenya shillings and Mr Munga chose the paying bank besides negotiating the currency conversion rates.
Equity Bank, which was founded by Mr Munga, made the payments in a process that the inquiry report says makes it difficult to establish whether kickbacks were also remitted to other parties.
The shillings were converted into US dollars and wired to Mauritius.
The report says that Mauritius can seek the co-operation of United States, which tracks dollar transactions, but noted that any deals involving the shillings will remain a mystery.
“If the transaction had occurred in US dollars and a Mauritian bank was involved, that avenue could have been pursued through the co-operation of the US,” the report says.
“But the transaction had been done in Kenyan shillings and, what is more, when the money was transferred in US dollars, the bank involved was a Kenyan bank, that of Peter Munga.”
The commission wanted to investigate an anonymous note it received and which alleged that the difference between what Mr Munga paid and the highest bids can be traced to a bank in the United Arab Emirates.
Afsar Ebrahim, who was then deputy managing partner of BDO Mauritius and whom the report says was the main intermediary between Mr Munga and the ex-minister Bhadain, travelled to Kenya after the deal was concluded and met the Kenyan billionaire on the morning of May 9, 2016.
Mr Ebrahim told the commission that he travelled to Kenya to ascertain ownership details of Britam shares and that he had no other business in the country.
The commission, however, obtained a letter written by Mr Munga to the BDO executive referencing the meeting.
“Does that make sense? A 4-day visit in May when all has been settled in March 2016? What for? When BDO has an office in Kenya to do that simple exercise which could well have been done online,” the authors of the report posed.
Mr Munga would also travel to Mauritius on a business visa on February 5, 2017, two weeks after Mr Bhadain had resigned from the government.
The report says his itinerary and the people he met remain a mystery. The intrigues did not escape Mr Rawat, who co-invested with Mr Munga in Britam for decades.
“The Kenyans either duped the Mauritians or made a covert deal which is rather intriguing,” he is quoted as saying in the report.
The island nation sought the co-operation of the Kenyan government through the Attorney-General’s office but was reportedly snubbed.
Those who were to be interviewed for their roles include Sandeep Raghunath Khapre (Managing Partner of BDO Kenya), Mr Munga, Agnes Odhiambo (former Britam director), Benson Wairegi (former Britam CEO) and Gladys Karuri (former Britam CFO).
Others are Mr Rotich and Wanyambura Mwambia, the deputy director of economic affairs in charge of tax administration and private sector issues at the Treasury.
Most of the individuals only submitted brief written statements which the commission variously described as misleading, coached or ridiculous.
“What we can say is that the Kenyans had things to hide for them to stop co-operation when the matter came to a crux. They had no reason not to co-operate with the inquiry, if things had been done with the openness and transparency required,” says the report.