By Citizens Against Corruption Business Editor, Nairobi – June 1, 2019
Central Bank of Kenya (CBK) dropped a bombshell on Madaraka Day that will deal a major blow to Corruption merchants in and beyond Kenyan borders with repercussions that could see the hitherto booming Real Estate tumble downwards. CBK Governor Patrick Njoroge announced withdrawal of Kenya’s prime mover Ksh 1,000 currency note within three months.
The bombshell came as the CBK unveiled new generation banknotes as part measures to curb fraud and money laundering. The new notes were unveiled by CBK Governor Njoroge during the Madaraka Day celebrations held at Narok stadium officiated by President Uhuru Kenyatta. The new currency notes will be in Ksh50, Ksh100, Ksh200, Ksh500 and Ksh1000 denominations.
Samples of the new generation currency notes unveiled by the Central Bank of Kenya on Madaraka Day
Kenyans have until October 31 to change the current one thousand shilling notes following the launch of the new generation bank notes by President Uhuru Kenyatta during the 56th Madaraka Day celebrations. Billions of Ksh 1,000 bank notes are stashed for corruption and tax avoidance by unscrupulous corrupt favour buyers, real estate developers and black marketeers. The Ksh50, Sh100, Ksh200 and Ksh500 notes will be phased out gradually.
The Central Bank Governors disclosed rampant abuse of the note by counterfeit fraudsters some of whom have been found manufacturing billions of local and foreign fake currencies. The note is also popular in neighbouring countries of Tanzania, Uganda, Sudan and Somalia where mushrooms of street bureau exchanges thrive.
“The emergence of counterfeits has become a great concern. All the Ksh1000 notes were withdrawn by a gazette notice on Friday. Those in possession of the bank notes have until October 31, 2019 to release them,” Prof Njoroge said and urged Kenyans to have the notes changed.
The Ksh 1000 note is widely used during political campaigns and has been the easiest note to dish out. The huge sums stashed under mattresses for 2022 elections will be adversely affected. A leading 2022 contender Deputy President William Ruto’s aide was recently found with Ksh 700 million in 1,000 shillings notes in his house. Ruto himself has fortunes in underground strongrooms with 24/7 cctv surveillance.
It is believed those turning up with huge sums of money will have to explain its sources and ascertain taxes paid. Most of the money is believed to be part of cash fueling the so-called Tangatanga premature 2022 campaigns politicians. Ruto’s lead campaigner Kipchumba Murkomen last April bragged that they have enough money to campaign daily until 2022. They now will have to open their war chest to the banking system when they go to change the 1,000 notes.
Religious organisations also keep huge amounts of money within their shrines, churches and mosques that does not circulated in the banking system. The Hindu, Moslem and commercial sects are biggest culprits in that field where their faithfuls deposit and give and get money in large numbers.
The immediate phase out of the Ksh1000 note, according to Dr Njoroge, will help in dealing with cases of counterfeits, which has impacted the economy negatively. Bad elements in the society have often used fake money in Ksh1000 notes to hoodwink unsuspecting Kenyans. Some pose as innocent citizens seeking change in exchange of the fake notes.
In 2013 General Election millions of generic Ksh 1,000 notes were produced with identical features of genuine notes. The then Central Bank Governor Njuguna declined to respond to inquiries by Kenya Confidential whose staff had documented the criminal process.
The launch of new notes followed two policy directions by President Kenyatta on government payments and the clearance of all imported goods both of which attract huge bribes demanded by corrupt civil servants and business brokers. Both Central and County Governments suppliers, whose payments have been delayed to yield bribes by crooked civil servants, will have to be paid by June 30th.
“All accounting officers in the national government should ensure that all pending bills that do not have audit queries are paid promptly and on priority basis before the end of this financial year. The county governments should also fallow suit,” President Kenyatta directed.
The President also directed the Kenya Revenue Authority, Kenya Ports Authority and the Kenya Bureau of Standards not to inspect goods that have been cleared by their respective agents in their points of origin. Goods inspection procedure has been a cash cow for corrupt KRA, KPA and KEBS officials. Dozens of staff in all three agencies are before various courts.
The government decision will also go a long way in curbing wanton embezzlement of public funds as well as money laundering. It will further enhance liquidity in the financial sector by encouraging those who had embraced pillow banking due to political uncertainty and in the banking sector due to banks banks, to return their money in circulation.
The new notes were issued on Friday May 30th through a gazette notice after the completion of the process that saw Kenyans present their views to CBK on how the new bank notes should look like. All the notes bear the iconic image of Kenyatta International Convention Centre on their faces and embody the country’s wildlife diversity- the buffalo, the lion, elephant, rhino and the giraffe.
They also embody green energy, tourism and governance, what the CBK boss termed as the drivers of new Kenya. The launch of the new notes underscores the fact that the history of CBK is intertwined with the history of Kenya.
The new bank notes, a samples album of which with identical serial numbers A00001 were handed to the President have more than two security features- the seal plus paper differentiation. It’s also friendly to those with vision impairment as they have specific lines on the sides for easy identification. Ruto was also given an album that may haunt him as a bad omen for years.
Evidently looters of public coffers have created safes in their houses where they hide the monies they steal and therefore curtailing circulation in the money market. This means that that the government has to use a lot of resources to print new money. Many of the looters invest in real where they use cash to buy land, building materials and all other needs without reference to banks.
That has been the practice by all government owned-banks Chairmen and Managing Directors over the years. Their houses and private officers serve as their banks when it comes to cash at their disposal. Former chairman of the Co-operative Bank Kiplagat converted a colonial garden store at his Karen home into a strongroom of millions of shillings in local and foreign currencies. he would proudly show his trusted friends his looted fortune.
More than two decades after Mzee Jomo Kenyatta died and Dictator Daniel Moi took over with his new currency notes, former Managing Director of National Bank Stanley Githunguri used to pay his staff with crisp new Ksh 100 Kenyatta notes. A raid on his offices and homes was a welcome relief to the Central Bank with recovery of millions in Kenyatta’s Ksh 100 currency notes.
Million were also recovered from former Chairman of Kenya Commercial Bank (KCB) and later Finance Minister George Saitoti residence on his death in a police plane air crash. Saitoti was in the early stages of mounting his bid for 2013 presidential race. He crashed on his way to a Church fund raising meeting in Nyanza.
Githunguri was initially recruited as a management trainee by the National Bank which later sent him to Britain for a nine-month course in banking. It was upon his return that he was sent to Nakuru as the branch manager. It was here that he met Mzee Kenyatta and, with time, they became firm friends. It is believed he was among the last people Mzee Kenyatta spoke to on the phone on August 22, 1978, the day he died.
“In the course of interactions with Mzee, I came to know most of the people who were close to the President. Some of them were senior civil servants such as Isaiah Mathenge (then Rift Valley PC) and Central Bank Governor Duncan Ndegwa,” Githunguri says.
He also met the fiery politician Kihika Kimani who was the chairman of Ngwataniro Mutukanio, a land-buying company. The giant company had an account with the Standard Bank but Githunguri convinced the Kihika to transfer it to National Bank Nakuru branch. The branch was built on a plot that Githunguri registered in Kenyatta’s name and caused the bank to pay rent for several years to the president in advance.
Kihika could not understand bank transfers and preferred dealing with hard cash. He went with a group of women to the Standard Bank and withdrew all the cash. The women then ferried the cash in ciondos (baskets) to National Bank branch from Standard Bank branch. It was quite a spectacle on Nakuru streets with police escorts.
Transporting money in ciondos did not start with National Youth Service scandal suspect Ms Kabura. During raids in residents of NYS1 several hundred millions in one thousand notes were recovered under mattresses, in mattresses and in safes.
Kihika himself at his home hosting Kanu big wigs as one time Chairman of Kanu chairmen proudly opened his huge safe to show his colleagues heaps of cash he had stashed inside. Most of the money were contributions from Kikuyus buying land in the Rift Valley. Kihika had built himself over Ksh 250 million house famous for its multiple chimneys.
As Githunguri rose through the ranks he was involved in numerous business ventures that included farming, real estate and hospitality. Even when he was transferred to Mombasa, Mzee Kenyatta continued consulting him for his banking needs.
He confesses that when he got into problems with various organs of government, he could count on Mzee Kenyatta to come to his rescue. One such occasion was when he invest his loot into a plot (real estate) where Nairobi’s iconic Lilian Towers stands in Nairobi. It turned out that there was a 1954 council by-law that prohibited the construction of more than six floors in the vicinity of the Central Police Station.
“I came to know about this by-law when I took the drawing of my 16-floor hotel project to City Council offices. I was denied approval on the basis of the 1954 by-law. I tried to talk to everybody, including the Mayor who was then late Andrew Ngumba, to no avail. I finally went to see Mzee Kenyatta in Gatundu (his rural home).”
“I showed him my drawings and told him I could not proceed with the project because of a by-law passed by a white man before independence. He was not amused. He, in my presence, telephoned the Mayor,” Githunguri would later explain with joy.
This is how Mr Githunguri recalls the Kenyatta conversation in Kikuyu:
“Ngumba, if I wanted to build a house all the way to heaven, would you have a problem with it?”
“No, Mzee. I would have no problem with it.’’
“If that is so, why do you deny Githunguri approval to build his 16 storeys because of a 1954 by-law?”
Pushed to a corner, Ngumba replied that he, similarly, would not have any problem with Githunguri’s project.
“Do you have his drawings there at City Hall?”
“Yes, Mzee. They are here.”
“Do you have a rubber stamp that says ‘approved’? Kenyatta asked.
“Yes, Mzee, I have it.’’
“I’m heading to State House. I want to find you there with the drawings duly approved,” the President said and hung up.
“When we got to State House, Ngumba was already there waiting with the drawings stamped ‘approved.’” He was then asked to review outdated laws.
He recalls that the “approved” stamp was a source of great mirth for Mzee Kenyatta. As they chatted over tea, the President remarked: “Ngumba, that small stamp of yours will one day land you in trouble.”