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"id": 253953,
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"speaker_name": "Mr. Okemo",
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"legal_name": "Chrysanthus Barnabas Okemo",
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"content": "Thank you very much, Mr. Speaker, Sir. I would like to support the Report of the Public Accounts Committee. In doing so, I would like to commend the good work that was done by the Committee. I would also like to take this opportunity to appreciate the contribution by the Responder on behalf of the Government. Having served as a former Minister for Finance, I probably have the benefit of knowing a little bit more about some of the transactions than what the other hon. Members might know. First 446 PARLIAMENTARY DEBATES April 6, 2006 of all, it is important for the hon. Members to know what is the role of the Minister for Finance, the role of the originating Minister and the role of the Attorney-General. These are all procurements. Most of them are termed as security procurements. When you are talking about security procurements, you must know that the definition or classification comes from the originating Ministry. In this particular case, we are talking about the Office of the President. However, the passports issue is only in the Office of the Vice-President and Ministry of Home Affairs - the Immigration Department - because that department changed. Originally, it was in the Office of the President and it was transferred to the Office of the Vice-President and Ministry of Home Affairs. Mr. Speaker, Sir, if you look at each of these projects on its own merit and if you do not have foresight or hindsight of culpability or criminal activity, they are very good projects in their own merits. Therefore, we should start from that point. I can particularly speak about the passports issue and the Forensic Science Laboratories because I was privileged to have more information on them. The justification for these projects came from the originating Ministries and they were completely acceptable and could have stood on their own feet. I think the problem comes in when you look at the procurement procedures that were involved. In the case of the Forensic Science Laboratories, the vehicles, passports and several others, there is one common trait. They are all defined as security. Once they are defined as so, as Minister for Finance, I could not have gone too far to ask why are they security, or why can they not be subjected to normal procurement. If you were directed that they are security, they are so and the matter ends there. Mr. Speaker, Sir, our role as the Ministry of Finance was to ensure that procurement procedures are followed. However, in the case of security, procurement procedures had to be waived. The reasons were because they were in the interest of national security. You are serving as the Minister for Finance and there is also a serving Minister in the originating Ministry and you have the overall boss of the national security. You are, therefore, acting within this set-up. Once you have been told that it is national security, all you have to do as a matter of course and procedure, you approve. The next question is: After approving it for waiving the procurement procedures, what is the next thing that happens? The parent Ministry is supposed to go back and use whatever methods they want, whether it is single-sourcing or restrictive procurement. That is up to the originating Ministry after they have got the waiver from the Ministry of Finance. I think it is important for hon. Members to understand that this is how all these projects proceeded from the time they were conceived, approved, to the time the contracts were entered into. Mr. Speaker, Sir, if you look at lease financing or suppliers' credit, I think I heard some of the speakers say that this was fleecing the country. However, from a purely technical financial point of view, that is not true. That is technically incorrect! It means you do not understand what lease financing means. What it means is that you are not getting a loan because if it is a loan, then you have to make a provision in the Budget for a lump sum amount of money. If it is a lease, you make provision in the Budget for only the payments that are entered into for the period of the lease. Every successive year, you have to make provision in the Budget. That was the difference. The reason why that line of credit financing was approved was because of budgetary constraints at that time. It was not done because somebody wanted to make money! That is, at least, in my mind. Maybe, somebody else wanted to make some money. The Government at that time had been denied donor financing. We were under a lot of stress. There was a lot of insecurity. There was pressure to make sure that we have a forensic laboratory. We wanted to stem the immigration of illegal people. So, there were a number of reasons. Mr. Speaker, Sir, for some of us who happened to occupy those positions, we did that in good faith. There was nothing binding in the Exchequer and Audit Act and Procurement Rules and April 6, 2006 PARLIAMENTARY DEBATES 447 Regulations. There was no reason for us to go to the Cabinet for approval. We felt that it was in the interest of the nation and the whole Government be involved. So, it was, basically, to bring everybody on board. It was not a legal requirement to go to the Cabinet and ask for permission to enter into those contracts or go the lease financing route. There is nothing in the Exchequer and Audit Act or the Procurement Rules and Regulations which demands that the Minister for Finance must go to the Cabinet to seek approval. However, myself, and other colleagues who were involved, thought that it was better to bring the whole Government on board. That was the reasoning behind taking the matter to the Cabinet. Mr. Speaker, Sir, the question is: After the Ministry of Finance had given the authority for waiving, and the originating Ministry went ahead to do the job, how far does the Ministry of Finance get involved? The Ministry of Finance does not get involved from there on, until the contracts come to its office. Those contracts are as a result of negotiations between the parent Ministry and the contracting party. The Ministry of Finance only satisfies itself with the document availed to it, whether it makes financial sense or the terms look reasonable or not! You do not go into the other details like: \"Who are the contracting parties?\" That is supposed to have been taken care of by the originating Ministry. Therefore, as far as Anglo Leasing and other related projects are concerned, the contracting parties are completely the purview and privilege of the originating Ministry. Now, that having happened, if you look at the contracts that were signed between the Government and third parties--- I cannot say that I did not see the contract. I saw and read the contracts. I was satisfied because the interest rates that were charged on those contracts were commensurate with commercial rates of interests that were being charged by commercial banks overseas. You could have looked at other contracts and seen that the interest rates that were being charged were not out of the way. The other thing that is significant - and which the House must note - is that to charge a commitment fee is a very normal commercial practice. Even when you go to borrow money from a bank, and you are given a mortgage, there is a certain percentage of money that you pay as a one- time payment. That was provided for in those contracts. For example, in one of the cases, we had 3 per cent interest rate as a commitment fee. That was the amount of money that was paid at the time of the signing of the contract. By the way, all those contracts were being signed after we had already been advised by the Attorney-General. He advised us that the contracts were okay and we could go ahead and append our signatures there. The Minister for Finance does not append his signature, but he gives approval to the Permanent Secretary to append his signature. That is the law. We proceeded exactly according to the law. The 3 per cent commitment fee that was provided for in the contract was paid and signed for according to the contract. So, there was nothing illegal about that. Mr. Speaker, Sir, what became illegal in this case was when the payments began to be made without any goods or services having been received by the Government. I think that is where the illegality and corruption starts. You do not pay in one instalment but in two instalments for no goods and services. In the case of the forensic laboratories, the land was supposed to have been made available by the Government. Some of these funds were to go towards the construction of the buildings and the forensic equipment. That is why in the contract there was an 18- months period within which, with the Government land being there, was sufficient time to construct a building and procure equipment so that by the time you start the first instalment payments, you will be paying for something. So, why the payments were made and no services rendered and no land had been made available, is where the problem is, but everything else was done according to the rules, regulations and Exchequer and Audit Act. It was done absolutely to the letter. Now, if other parties were using this opportunity to make money, I think that should be the subject of investigation as the Government Responder mentioned. 448 PARLIAMENTARY DEBATES April 6, 2006 Mr. Speaker, Sir, the other thing that I would also like to correct is the impression that money was signed off through promissory notes in one day and given out. I think one needs to understand what a promissory note is and its role. A promissory note, as far as the Government was concerned, was only supposed to act as security. It was a negotiable instrument which acts as security for Government and must be given to whoever is advancing you the money, and it falls due at the end of the contract period. This means that even if it changes hands one hundred times, the Government obligation to repay will only be when it matures. The maturity of the promissory note coincided with the contract period. So, there is a lot of mystery and misunderstanding, I think, purely from the technical point of view because a promissory note is not about giving money. A promissory note is a negotiable instrument, which is an acceptable form of security that governments give all over the world to secure credit, loans or whatever payments, and they fall due at the end of the contract period because it is a promise to pay money at a future date which is defined in that document. That is how we secured this supplier's credit. So, I think it is important that things must be understood in their proper perspective and in the circumstances under which they were done. Mr. Speaker, Sir, now there may have been individuals, and it is not for me to judge, who may have taken advantage of the fact that it is single-sourcing and restrictive tendering that they wanted to make some extra money for themselves by inflating prices. Now, let me mention one thing: If this special audit report had not come out, I do not think we would be talking about Anglo Leasing today. Nobody would have known anything about it. The special audit report is what triggered it! There have never been audits of all these Anglo Leasing contracts and when they were audited, questions have been triggered. We must say that we are wiser today than we were then. If I were the Minister for Finance, sitting in hon. Kimunya's chair today, I think I would ask a lot of questions before I would sign a contract of this nature or even before I would give authority to waive the necessity for normal procurement. I would do it differently. Mr. Speaker, Sir, I believe if a government tells you that they are getting involved in a security contract, you just accept it. The Government then goes ahead and does the necessary. They even negotiate, but you do not know who they are negotiating with because that is not your business. They later come back and say: \"This is what we have agreed on in the form of a contract.\" They ask the Attorney-General: \"Is the contract good? Can it be signed?\" The Attorney-General gives the Government a written opinion and says: \"Yes, the contract is good, it can be entered into.\" All the Minister has to do is authorise his Permanent Secretary to go ahead and sign the contract because that is the way the law is. So, in terms of history, I am trying to put these things in perspective, because I saw there were a bit of insinuations from some hon. Members as to the wrong-doings of the previous Government. However, that is not really the issue here. It is not a question of the previous Government or the present Government. The issue here is: What will we do to close these loopholes? There is a lot of money that is involved, that has been lost and could be lost if we do not do something about it. Therefore, we, as leaders, have to be bi-partisan. That is why both sides of this House must approve the Public Accounts Committee (PAC) Report. I believe that anybody who has been adversely mentioned in that Report must be investigated and let the due process of law take its course. The law is there. Why do we want to take short-cuts? If, for example, Mr. Okemo or the Vice-President and Minister for Home Affairs or Mr. Kimunya are found guilty, they must face the music. That is what we would like to encourage. We would like to encourage a country where the rule of law is respected. Mr. Speaker, Sir, some of us believe that Kenya is bigger than any of us individually. We should be judged by history as people who cared about our country, and not those who cared about themselves, as individuals. It is in that spirit that I thought I should throw some light on the April 6, 2006 PARLIAMENTARY DEBATES 449 background to the Anglo Leasing issue. Mr. Speaker, Sir, I would like to go further and suggest that, let us not just investigate this matter from 1997 to date; let us go a little bit further. There are a lot of other security projects that were approved earlier than 1997. If we really have to solve this problem, we ought to go further and look at all the security projects. We should look at how they were approved and whether there was culpability. If there are people who were culpable, they should face the music. That is what we are all yearning for. That is what Kenyans will respect us for. Thank you, Mr. Speaker, Sir."
}