Michael Mundia Kamau

P.O. Box 58972 00200

 City Square Nairobi 26th June 2003

The Editor East African Standard Limited P.O. Box 30080 Nairobi Dear Sir My attention is drawn to the East African Standard editorial of 26th June 2003 titled “MPs’ rage over fund is justified”, and while in agreement with your view that the reduction of the Constituency Development fund comes as a drawback, take exception with the rather unkind reference to National Bank of Kenya in the last paragraph.

After an extensive analysis of how the reduction of the Constituency Development fund from KShs. 20,000,000 to a paltry KShs. 2,000,000 , will be more strenuous than beneficial, your editorial concludes thus :

“While other developments are being suspended, billions have been committed to rehabilitating dying institutions like the National Bank of Kenya. Yet the NBK is owed billions of shillings by known borrowers. It would have been wiser to have these people pay up and the cash spent on development.”

The use of NBK to drive home your point is harsh, unjustified and misplaced. For one, NBK is by no means a “dying” bank and has begun to re-emerge strongly after a long and punishing lull. The Management and Staff of NBK fully take credit for this, and it is unfortunate for your editorial not to recognize this.

This has been made possible by extraneous measures such as the increase of the authorized share capital from KShs. 3,000,000,000, to Kshs. 12,000,000,000, by the creation of 1.2 billion non-cumulative preference shares. That the books of NBK were in mess, cannot be in dispute, but neither can the efforts being made to revive it.

National Bank of Kenya finds itself in the difficult situation it is today largely because of gross mismanagement. Plainly put, NBK was crudely looted by a clique of powerful well connected individuals in the system then, with the connivance of helpless staff who had little or no means to fight the onslaught. The public could have stepped in to fight this evil, but it didn’t, because we partook in the plunder from the fringes. One system plundered, a different one attempts to re-build.

 Secondly, your editorial is wrong in referring to the government’s injection of funds as “rehabilitation”, as the government is paying back money borrowed from NBK in the first place. The government is making good it’s debt to NBK in the same way that it recently did to teachers.

The term “rehabilitation” is better used when looked at in the context of Finance Minister David Mwiraria’s budget day swipe at the banking sector, and the announcement of measures aimed at curbing excesses in the industry. These are measures that certainly pass as “rehabilitative” In another measure to “rehabilitate” the banking sector, the Finance Minister announced a reduction of the cash ratio from 8% to 6%, and significantly reduced the paid up share capitals for financial and non-financial institutions. This particular aspect will further help tidy up the books of NBK. The government is also clearly moving way from treasury bills as an expensive financial instrument of public borrowing, and instituted protective measures for depositers by the proposed pegging of interest rates to market parameters.

 These are measures geared at creating cheap and accessible credit for the general public as a tool of economic revival and prosperity. We may just be gearing up for an era of fierce competition and entrepreneurship never before seen in this country. Free market policies by far look like what will carry the day in this country.

 In such an environment, no one can be dismissed, least of all and in this case, National Bank of Kenya Limited, which has extensive banking experience in this country. Mainstream financial institutions such as Barclays Bank of Kenya Limited, Standard Chartered Bank Kenya Limited, Kenya Commercial Bank Limited and National Bank of Kenya Limited, have in a big way already experienced a major exodus by a marginalized and ostracized public. Little effort has been made in recent years to induce and build a retail customer base and this has seen to the growth of several Savings, Credit and Co-operative Organisations (SACCOs), across the country. Where one of the big four should have had a branch, now stand two, three, or even four SACCOs.

This country is evolving without us even realizing it. Thirdly, finally and in direct contradiction of remarks carried in your contentious paragraph, known borrowers appear to have started paying back : this very week your sister media house Kenya Television Network (KTN), carried a segment of how corporate mogul Ketan Somaia had entered into an agreement with NBK over the repayment of a sum of KShs. 14 million he had guaranteed for a borrowing by Block Hotels. Ketan Somaia has agreed to pay the sum owed in monthly installments over a period of time.

It must also be said that the MPs have no moral ground crying foul over the reduction of the Constituency Development fund allocation. It is they that moved with surprising speed to increase their emoluments immediately after the ninth parliament was convened ! It is they who also arm twisted Finance Minister David Mwiraria to prepare supplementary budgetary estimates earlier in the year, to cater for the purchase of Motor Vehicles worth KShs. 3.3 million for each of the 210 members of parliament. This is obscene. Members of Parliament ought to have set the right tone in the direction this country should now take by moving rapidly to institute the implementation of the Constituency Development fund at the initial recommended amount of KShs. 20,000,000, instead of starting by increasing their salaries. Then we would have taken them seriously.

The headline of the East African Standard which carries the said editorial reads “Ministers in Sugar Scam, say 93 MPs”, a backdrop to an industry on the brink of disaster and staring more than six million people, indeed an entire Nation, in the face. I would be more than gratified to hear that the funds destined for National Bank of Kenya have been redirected to salvage the sugar industry, the civil service, or small scale enterprise, but certainly not the fabled Animal Farm, that is fast manifesting itself in the MPs demands, cries of wolf from the tourism sector, and protection of lions over and above the Maasai community. Michael Mundia Kamau