The World Bank estimates that $ 1 trillion in illicit money circulates around the world every year. [Courtesy]

The fact that we revel in an undernourished political regime seasoned with sordid expressions of partisanship and personality challenges has been demonstrated by the lack of moral outrage over the Pandora Papers leaks.

Those on President Kenyatta’s side have tried so hard to portray the team of journalists who rummaged through 12 million slices of documents like guns – perhaps through ex-deputy to President William Ruto. And not wanting to be left behind, the Ruto part cheerfully applauded. Finally, the hunter had become the hunted.

Did the president break a law? Maybe not unless it can be proven that the president – an officer of the state – opened an overseas account during his tenure or did not disclose it in his makeshift statement. So this was another case of an opportunistic firefight. But the Pandora Papers exhibit by the International Consortium of Investigative Journalists offers a little glimpse into the incestuous relationship between power and big money.

“Repatriate money hidden in foreign accounts” was a buzzword in the 1990s. For most of those who then rose up against President Moi’s Kanu, blame him and members of his government for embezzling public money drew loud cheers at the rallies. It went out of fashion shortly after Narc came to power under Mwai Kibaki. They may have fallen under the spell of the magic of offshore accounts as the administration engulfed itself in financial malfeasance.

Due to their comparative advantage (low to zero taxes) including secrecy, even hedge funds and private equity portfolios are held in tax havens.

In the past, the wealthy (mainly the ruling elite) in fragile democracies – fearing coups d’état – would put their wealth in shelters in case they were deposed. Hiding money abroad was a kind of insurance. And that’s why it’s important to know what perception those who hold such accounts project, especially if they are in leadership or influencing positions.

Do they know what others don’t know?

“A leader who hides money abroad knowingly undermines his country’s economic growth,” tweeted Narc-Kenya leader Martha Karua. “Having offshore accounts creates mistrust,” said Justin Muturi, the president.

Besides the moral issues, of great concern – this is what these flows end – almost always illicit rent-seeking, bribes of inflated state contracts; what it might do to the economy (such as currency distortion) and political architecture.

The World Bank estimates that $ 1 trillion in illicit money circulates around the world every year.

In Kenya, Sh2 billion is lost every day – translating into a third of the budget. Because the expatriation of the national capital stock – thus compromising economic development – abroad is only half the story. It could be that these tax havens facilitate the return of illicit money into the financial system and that they are therefore vectors of money laundering.

The case of Anglo Leasing offers great lessons; no goods were delivered, but the government was forced to pay (1.4 billion shillings per Jubilee) for these “goods and services” in order to access Eurobond funds, which again appeared to have been another case of “karata” with public money.

Kenya’s problem is the entrenchment of transactional politics characterized by deal-making and shadow boxing by those on opposite sides: a good breeding ground for corruption.

Corruption corrodes and weakens the democratic process in several ways: it distorts the political system because it offers the unfair advantage of money; they can buy votes and parties and hinder freedom of expression by buying media or simply playing with electoral boundaries; they can also tip the scales of justice.

And because of all this, they can perpetuate the capture of the state; the contracts come back to the same entities several times. Influencers don’t have to be in politics. Their surrogates do the bidding for them. Transplant leaves people worse off and left behind and is invariably a cause of social grievance and disaffection.

Put it another way; bad politics and corruption are the reason we are growing at half our potential. As the Asian tigers (Singapore and South Korea) – tied with Kenya at the time of independence – galloped, we were just happy to keep walking.

And that is why it is reckless to imagine that the political class has the right answers to our problems.

-Mr. Kipkemboi is Editor-in-Chief of Partnerships and Special Projects, Standard Group


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