Conflict of interest issues face Uhuru appointees to top jobs

Three of President Uhuru Kenyatta’s recent appointees to the boards of State corporations and regulatory agencies are facing a huge conflict of interest burden that market watchers said could complicate their performance in the new positions.

NIC Bank chairman James Ndegwa, who was appointed the chair of capital markets regulator CMA, tops the list of those in the conflict of interest dilemma, having been named to head an agency that regulates a market in which he has significant interest.

Mr Ndegwa’s family is a major shareholder in NIC Bank, a public listed lender that is under Capital Markets Authority (CMA) regulation. The bank has two subsidiaries, NIC Capital and NIC Securities, which are also licensed and regulated by the CMA.

The CMA board chairman is a powerful position with the authority to gazette new market regulations and take administrative action against issuers and market intermediaries in breach of the rules.

Mr Ndegwa’s appointment, which stockbrokers have welcomed, means that he will potentially have to arbitrate as part of the CMA board on matters touching on firms under his stewardship or in which he has significant interest.

Former CMA chairman Kung’u Gatabaki said the potential for conflict of interest remains high in the case of Mr Ndegwa and the CMA position.

“Based on good corporate governance, one must resign as a director of publicly traded companies upon becoming a regulator. In my case, I resigned from Mumias, TPS Eastern Africa and Uchumi where I held directorships when I became the chairman of CMA,” Mr Gatabaki told the Business Daily.

Mr Gatabaki reckoned that while the law does not prohibit the CMA chairman from being a director of a public listed company, separation of the two should be observed in practice.

“What happens when the company in which you are a director becomes the subject of investigations or regulatory enforcement by CMA?” posed Mr Gatabaki.

The list of those facing conflict of interest in their new positions also includes investment banker John Ngumi, who was appointed the Kenya Pipeline Corporation (KPC) board chairman, and TransCentury CEO Gachao Kiuna, who will sit in the board of the Kenya Investment Authority (KIA).

Mr Ngumi is an experienced investment banker who has extensive knowledge of the East African investment and deal making environment and is currently Standard Bank’s director for investment banking coverage in East Africa.

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He established Standard Bank’s East Africa investment bank unit in 2004, though he ceased holding operational control of the unit in 2009 to focus on deal origination. 

Standard Bank has been playing a bigger role in the financing of Kenya’s mega energy sector projects, and last year was selected as one of the lead arrangers for the Sh70 billion 310 megawatt Lake Turkana Wind Power project.

Mr Ngumi’s experience in closing deals and raising project finance for companies was seen as one of the main drivers in his appointment as chair of the Konza Technopolis Development Authority (KoTDA) in 2012.

The discovery of oil in northern Kenya also means that the country is likely to build a new oil pipeline to evacuate the oil meant for the export market, raising questions as to whether Standard Bank would still want to participate in such a deal with Mr Ngumi as the KPC chairman.

Mr Ngumi told the Business Daily that there will be no conflict of interest arising from his roles at KPC and CFC Stanbic, since he will be guided by government and CFC Stanbic compliance rules that spell out strict measures to be followed when dealing with any matter that has potential conflict of interest.  

“I have been a chairman of KOTDA for the past two-and-a-half years and such a question (of conflict of interest) has never arisen. The CFC Stanbic compliance department has very clear and strict rules on this. Personally I would remove myself from any matter that has a potential conflict of interest with my bank,” Mr Ngumi said.

Dr Kiuna will be sitting in the board of the body tasked with attracting investments into Kenya. In his other capacity as the chief executive of TransCentury, he presides over a company that having started as an investment club in the late 1990s, has grown to be one of the foremost investment firms in Kenya complete with an NSE listing.

TransCentury has been concentrating its business activity in three areas of power infrastructure, infrastructure projects and engineering.

The firm is eyeing the power generation business as well as provision of support services to the extractive oil sector. Dr Kiuna had not responded to our queries by the time we went to press.