Audit syndicated loans on debt register

The criminal prosecutions related to the Kimwarer and Arror dams have taken off at last. We must wait and see how the prosecutions play out and whether it shall bear convictions.

For the foreign banks that lent us Sh 60 billion to build the dams, the criminal case will not stop them from demanding their pound of flesh. The pity is that the taxpayer will still have to pay.

When you borrow money from a bank, it does not matter to them that you were mugged as you left the banking hall and the money was robbed from you. We don’t have the dams, but the money may have to be repaid.

Money borrowed from European banks will always come back to haunt you. When you go through the latest external debt register today, what you will find listed on the first page are loans we owe to European banks due to Anglo Leasing contracts that happened nearly 20 years ago.

For many years, we — like the proverbial ostrich — ignored loans borrowed in the 1970s for the infamous and non-existent KenRen fertiliser plant we wanted to build in Changamwe. The loans to the European banks remained on the external debt register for nearly 40 years.

Eventually, the taxpayer had to repay the billions. We don’t have a fertiliser plant. When you go through our external debt register today, the first thing you will notice is the sheer number and preponderance of second-tier European banks that are listed among our creditors — the types you might describe as belonging to the periphery of the global capital markets.

Clearly, we have borrowed too much money from these types of banks. The second trend you notice is the rate at which these peripheral and fringe banks are supplanting the traditional multilateral institutions that used to give us concessionary credit from the external debt register.

Make no mistake, I am not suggesting that all these commercial banks that appear on our external debt register are engaged in wrongdoing. The point is that the experience in Africa with these banks has taught us that these global European brands are no paragons of virtue. Syndicated loans open major loopholes for rent-seeking government officials.

International bankers and transaction advisers are making a killing by taking advantage of mismanaged economies and conspiring with political elites on the continent to saddle citizens and future generations with opaquely placed and expensive syndicated loans.

These global brands we see around Africa today are but vultures who have rushed to the continent to suck blood and cash in on the chaos in domestic money and capital markets. A case that occurred in neighbouring Tanzania several years ago immediately comes to mind.

The Tanzanian government had gone to the international market to raise money, saying that it needed the funds to finance key infrastructure projects in energy, transport, water and sanitation.

Standard Bank Plc of the United Kingdom — a reputable and highly regulated international bank — and its subsidiary in Tanzania, Stanbic Ltd, were contracted to raise some $600 million through a facility known as a sovereign note private placement.

At the beginning of negotiations, the arrangement was that Standard Bank plc and Stanbic Ltd would be paid an arrangement fee of 1.4 percent of the money raised from the loan.

It was to turn out that Standard Bank Plc and Stanbic Ltd had surreptitiously increased the fee to 1.6 percent to accommodate and factor in kickbacks and backhanders to well-connected and corrupt top government officials through a local company by the name Enterprise Growth Markets Advisers Ltd that belonged to government officials.

The irony is that when the scandal broke out, Standard Bank Plc, now known as ICBC Standard Bank Plc, and touted as a bank operating on high standards of integrity and transparency, quickly dashed to the Serious Fraud Office in London where they not only snitched on their Tanzanian partners in crime, but also hurriedly negotiated a deferred prosecution deal, insulating them from court charges.

We must thoroughly scrutinise and audit all syndicated loans on our external debt register.