Thursday, 31 May 2018

Kenya and Uganda salivating over Petrodollars


Lokichar field in Kenya. The sweet smell of petrodollars
 Kenya and Uganda are salivating over petrol dollars. And there is a stampede for the sweet aroma. Kenya will haul its first crude barrels out of Lokichar fields this Sunday. But Uganda is not far behind. 
And both appear set to hit the market come December 2018 in a Pilot programme called the Early Oil export.
Kenya is first off the blocks to ship 80,000 barrels from Lokichar to Mombasa for storage until, 400,000 barrels, enough to fill a tanker. Uganda is planning to evacuate 48,000 barrels stored in Hoima Basin fields and is in the process of awarding the contract for the transportation of the crude to Mombasa by road.  It could be shipping its first consignment by the end of June or early July, Uganda watchers say.
 The Crude will also be stored in Mombasa at the tanks of the defunct Kenya Petroleum Oil refineries. This means that both countries will have to up their pumping activity in the coming months to meet shipment capacity. At a rate of 2000 barrels a day, that would mean another six to eight months of hard work.
 It is worth the effort, for they could generate an estimated US$30 million apiece going by the current market prices. The market price for top brand, the UK Brent, stands at nearly $75 a barrel. The Kenya crude is said to stand at par with the Brent in terms of quality.
Initially, the early oil exports were said to be viable at $56 a barrel. Now, at $74, the programme is more than viable, as there is a potential $19 windfall per barrel. A Kenyan official has tried to stem high expectations by saying they do not expect to make a profit, as the exports are meant to test the waters.
These Monsters will become a common sight on our roads 
“Early oil is not a commercial project. This is an experiment… it is a geological project. We want to find out what is in the ground. As for break even, how much money is going to be made or when the communities are going to get the money, it is not a relevant question. The communities understand that it is part of the extended oil well testing programme,” said Andrew Kamau, The Permanent Secretary, Ministry of energy.

However, profit or not, the potential earnings are sorely needed to plug holes in their foreign trade deficits and also help rally the local currencies.  Thirty million dollars I half a year is, therefore, a welcome addition to the forex earnings pot
, it is no pocket change.  That explains the stampede to get the early oil programme going. Its impact on their economies is significant.
Both countries had to wait in expectation for that event for it will mark their entry into the exclusive club and, assuming prudent management of the cash, lives will improve.

Uganda was the first to strike oil in 2006 but its entry into the club was frustrated by disputes over sharing of revenue, taxes and the decline in world market prices for crude. She has verified reserves of 7.5 billion barrels while Kenya, where oil was discovered six years later, faced disputes with local communities which demand a larger pie of the cake. Kenya has confirmed 750 million barrels but is still counting. Exploration, which had eased due to low world market price for crude, has picked up tempo as prices recover.

Tuesday, 29 May 2018

Graft in Kenya: Are the 40 days of a thief over?

Noor Haji:The DPP stamping his authority
The fight against graft in Kenya has picked momentum. It has beaten all other previous attempts in terms of speed, breadth, and potential impact. This round of investigations appears designed to be a precedent setter- a deterrent.  Seems like the 40 days of the thief are over.
In addition to prosecution, the suspects could also lose the property acquired with proceeds from sleaze.  This will be followed, if the example of the KPLC contractors is anything to by, by blacklisting the same firms so that they cannot do any business with the government in future.

Also, the banks through the funds were channeled are
staring at prosecution and heavy fines while the managers could find themselves jobless if they escape prosecution.
Some employees of the power distributor, Kenya Power and Lighting, have been sacked for their involvement in graft and 350 companies which they had approved to render services to the firm have had the contracts canceled and blacklisted. According to media reports, their names will be circulated so that they do not do any business with the government. This is the first time in Kenya where the ramifications of sleaze are so broad and far-reaching.
George Kinoti, CID Boss: Breaking Corruption Cartels
The penalties imposed on those caught with their hands in the till so far is a measure of the government’s determination to slay the ghost. A few weeks ago,  Five senior officers in the former Nairobi City council were jailed for a total of 15 years and fined a total of $86,000(KES86 Million), for their role in the purchase of a piece of rock for a cemetery. See also http://eaers.blogspot.co.ke/2018/05/graft-under-siege-in-kenya.html
This sets the precedent for 20 of 54 suspects in the plunder of US$90 million from the National Youth Service who have their day in Court today, just two weeks after the scandal hit the headlines. The 54, including 40 public servants and 14 traders, face huge fines and jail terms. It could go further for their property is also at stake. The lot is accused of stealing the Money from the National Youth Service department through fictitious supplies that were not even tendered for.
The speed of investigations and prosecution appears designed to ensure the cartels do not re-group and fight back as they have done in the past.
There are questions regarding the audacity of this gang, which involves lower cadre officers. They could be fronts for tenderprenuers who make huge money from the government for supplying nothing.  The NYS money paid during the 2015/2016 f and 2016/2017 financial years, may have been used to fund the 2017 political campaigns, say analysts.  If this be the case, politicians could be roped in in phase two of the investigations.
There is every justification for the ferocity with which the anti-graft campaign is being carried out. The audacity with which the corrupt steal public funds and the amounts involved is akin to sabotaging government projects.
 In the case of NYS, 54 people stole US$90 million from public coffers. At the National Cereals and Produce Board, an estimated 18 traders flooding the NCPB with grain denying farmers the only market for their produce.
 The National Youth Service, which is designed to equip the youth with marketable skills is now a cash cow for the corrupt. That means that the program is likely to be killed, denying the Youth an opportunity to learn a trade and thus condemning them to unemployment.
The country will also be denied critical skills in its development effort. That 54 people could conspire to enrich themselves at the expense of millions of poor Youth is unconscionable. Further, sabotaging agriculture, the backbone of the economy is, to say the least, treasonable.
At NCPB, 77 officials and traders in the NCPB saga should start bracing themselves for tough times ahead. Here the 77 colluded to flood the National Cereals and Produce Board with Maize of unknown origin locking out genuine farmers.  The 77 include 18 traders and 59 managers. The CEO resigned.
The Director of Public Prosecutions has called for more resources to be deployed on this matter in order to expedite investigations. So far, the Ethics and Anti-Corruption Authority is on the matter but the DPP wants more expertise including the Directorate of Criminal Investigation, Kenya Revenue Authority and the Assets Recovery Authority. This suggests that their property could also be targeted.
Given the current ferocity, a number of people are sitting on hot coals. These include officials at Kenya Pipeline and Kenya Power corporations. Even banks through which the money was channeled are under probe and risk a US$200,000 penalty for each offense committed if found culpable.
Pessimists wonder whether the war will succeed this time around, give previous failures. What is new, they ask.  The war on graft has shifted from the witch hunt, engineered by politicians to ending the vice by targeting the real culprits- the junior officers who escaped the dragnet in the past investigations which targeted the so-called “big fish.”
The government is releasing the reports of graft to the media. That way it has removed the wind from the sails of Politicians and NGOs that in the past played the role of “watchdogs.” With politicians completely deflated, the war is no longer witch hunt but a professional drive to rid the country of corruption cartels.  
The government says that the on-going investigations and prosecutions are the first phase of the war against sleaze. The second face is still on-going and could even catch the “big fish” if any. Let’s cross our fingers.

Tuesday, 22 May 2018

Kenya enters the oil export club,staring at windfall

The Monsters that will transport the crude
Kenya will begin its Pilot oil exports next month. All contentious issues have been cleared and the country is ready to export oil in a few weeks’ time.
Kenya’s crude is said to be among the best in the world, at par with the Brent Crude C1 which is now selling at $78.94 at the world market. This means Kenya will gain a windfall of roughly $24 a barrel.
 The government and Tullow oil last year said the pilot scheme was viable at the then market price of $56 a barrel.
The contentious issue with the Turkana community regarding revenue sharing was the last hurdle in the process. All other technical issues such as the acquisition of transporters have been cleared.
 As at February last year, Kenya had 70,000 barrels of crude stored in tanks at the Lokichar Basin where the Wells are with a daily production potential of 2,000barrels.
 The country is planning to export 2,000 barrels a day in a pilot project that will enable concrete understanding of the Wells.
 It is also a learning ground for the technical aspects of the oil evacuation since Kenya’s crude is waxy and can solidify en route. This is a major lesson that must be learnt before the design and construction of the Pipeline for it has to be understood the exact temperature at which the oil has to be transported.
Apart from understanding the temperatures, Kenyan officianado must also understand the oil business before signing the dotted lines. Kenya plans to produce some 2,000 barrels of crude a day for the pilot scheme.
 Tullow, oil the majority stakeholder in the operation has leased 100 ISO T11 standard insulated containers with a minimum fluid capacity of 25,000 litres to haul the fuel from the Lokichar fields to Eldoret by road. From there it will be hauled by rail to Mombasa where it will be stored on Kenya Pipeline facilities ready for export.
A barrel of crude carries 159 litres. This means that each truck, called trail tanks, will carry 157 barrels meaning that 13 trucks will be needed to haul 2000 barrels. To haul it to Mombasa Kenya Railways Corp will require 13 flat-bed wagons per trip.
In February last year, the Wells were said to be pumping 2000 barrels of crude per day or 60,000 barrels a month.  That means more than 700,000 barrels are in stock for export. We could not confirm the actual output per day. This means that the country could be looking at more than $55 million in oil revenue this year. China and India are reported to be eyeing Kenya’s crude. So the market may not be a big issue.
 The cost of transporting crude oil by road and rail over the 1,086-kilometre distance is estimated at $30-34 per barrel. 
The real purpose is to learn the ropes of the oil business and the technical and logistical requirements of hauling Crude oil to the Lamu port. Profit was a secondary motive here, learning not profit is the primary motive although the price must meet all costs including the operators’ operating costs.
Tullow’s count of the Turkana Oil reserves stands at 750 million barrels. However, its partner in the project, Africa Oi,l estimates that the fields could contain as much as 1.63 billion barrels. This is supported by the fact that new finds are being announced regularly.
Kenya expects to start full oil production in 2020 when they expect to be producing 100,000 barrels per day. Consequently, she has begun the process of building its 850 Kilometre pipeline from the Lokichar fields to Lamu port. 

The construction is expected to start next year and end in 2021. It will be owned by the Joint Venture Partners, Tullow Oil, Africa oil and Total Oil and the Kenya government. The 865-kilometre pipeline, it is estimated, will cost US$2.9
billion.

Wednesday, 16 May 2018

Graft under siege in Kenya?

  Corruption is becoming a dangerous business in Kenya! In the last two days, five people convicted of graft have been fined a total of Ksh 100 million (US$1 million) and sentenced to jail for a total of 20 years! That sounds like a clear deterrent if there was any.
 And if that is not deterrent enough, the entry of spies into the investigation of graft is a warning shot that the days of graft are running short. The spies, of the National Intelligence Service, NIS, are in the thick of investigations in the latest scam to hit the National Youth Service, NYS.
The department is said to have paid a whopping Kshs 9 billion, (US$90 million) to ghost suppliers in the last two years. This so soon after the then Cabinet Secretary for Devolution, Anne Waiguru, was hounded out of office over graft scam in the same department.
Waiguru was hounded out over an alleged loss of Kshs 791 million (US$7.9million). That ten times more was stolen after her departure is disturbing. It suggests that the thieves in the department were left untouched. Some reports suggest, that she was hounded out by corrupt cartels salivating for the loot in the department, which fell under her docket.
Top to Bottom: Kihara Kariuki, Noordin Haji,
 and George Kinot: Uhuru's graft Killer Squad?

Apparently, they had a field day. And this lends weight to the claim that she stood against the cartels which then resolved to hound her out of office. The people of her home county did not buy the crap about her corrupt deals, they elected Governor of Kirinyaga.

 Back to the sentencing. A former permanent secretary, a former City Clerk, a legal secretary and another senior officer in the former Nairobi City Council were today sentenced for their role in the purchase of a piece of rock for a cemetery. The last two were fined Ksh 52 million and Ksh 32 million respectively. The former two were fined a million each ($10,000).

 Yesterday, a former District Accountant was fined Ksh16.5 million( US$165,000) for stealing Kshs 3.8 million ($38,000) and four years in jail.

Anne Waiguru: Hounded out of
office by graft cartels?
 That the big fish are being sentenced on conviction must worry 
the small fish. They must fear that they are the next in line. They have cause to worry. With the sleuths in the thick of things, many heads will roll. These guys out ghost criminals and terrorists, Desktop thieves must be easy prey for they can be monitored both electronically and physically.

That it was not business as usual, was signaled when the former A-G, Githu Muigai suddenly resigned and was replaced by the President of the Court of Appeal Paul Kihara Kariuki, the former head of sleuths, Ndegwa Muhoro, was relieved of his duties in January and replaced by his Deputy, George Maingi  Kinoti.  The former Director of Public Prosecutions, Keriako Tobiko, was appointed Cabinet Secretary and replaced by another spy, Noordin Haji.

Apparently, President Kenyatta is determined to slay the ghost of graft and he wants men he can trust in place to help him slay it. He has in the past complained that graft has the capacity to destroy this country and to derail his "Big Four Agenda".

The Big Four is the legacy he wants to bequeath on Kenya as the legacy of his Presidency. He is therefore likely to be merciless with thieves. The National intelligence is said to have briefed the President about the loss of Ksh9 billion at NYS. The president then allowed the story to leak to the press.

So
a number of people must be having sleepless nights for they are staring at jail and bankruptcy. If the tempo is maintained, a number of senior and junior officials in the government, especially, the Treasury building and the NYS headquarters on Thika Road must be pretty worried.


Also worried are businessmen who supply air to the National Youth Service and get paid for it. They could lose everything they worked for or stole. And it is not only these, everyone who has a case pending at the anti-corruption court has cause to worry. The precedent has been set and their turn is coming soon.
 If the NYS scam is anything to go by, then, targeting Cabinet Secretaries and Permanent Secretaries is not enough, The battle musty slide lower persuing accountants, auditors procurement officers, and Clerks.

Monday, 14 May 2018

Roads audits, Count the legs instead of the cows

 Politicians and journalists in East Africa have formed a habit of commenting on investment in the infrastructure sector without proper understanding. They thus mislead the public to believe they are short-changed.
It is easy to point at their failure as deliberate misreporting. However, given the spread of the practice in East Africa, it is clear that the commentators lack the capacity to write technical reports, which makes their work worthless.

 On reporting on roads construction and costing they focus on the distance, ignoring the number of roads on the distance. That is they count the cows instead of counting their legs which is the practice in road construction. This is because roads have either two lanes or more and each lane is counted as a tarmacked road.

 A good example was the sustained criticism of Kenya’s Standard Gauge Railway project from Mombasa to Nairobi.  While it was condemned as the den of corruption, investigations established that the criticism was funded by corruption cartels through their friends in the equally corrupt media
.
A recent report in a Kenyan daily over the actual length of paved roads in the country exposes the level of this vice.   The report quotes different numbers on paved road length wondering which is correct. As expected, the writer’s bent was the government has not built the alleged length of roads in the current Economic Survey which puts the length of paved roads built in the last five years at 6,000Km.  

Entebbe Expressway: 
Zooming over swamps
But a perusal of completed projects in Kenya by the three Roads Authorities, though woefully outdated, shows that roads measuring in length 2914 kilometers were completed by 2016. Another 1818 Kilometers were on-going.
Given that the reports are almost three years old, more roads must have been completed unless they tell us that no activity was going on since 2016. However, going by the figure 2914 Kilometers, assuming two-lane roads, we are talking about 5828 Kilometers of a road.
 Considering that most urban roads are more than four-lane, this list understates the size of paved roads completed in the country from 2015. This list does not include roads we know are complete and in use such as the 12.3 Kilometer –Phase1 of the Ndogo Kudu bypass in Mombasa.

The 12.3 Km section has 49.2 Kilometers of paved road, being a dual road. The 13-Kilometre Outer-ring road in Nairobi is an 8- lane -road meaning that the quantity of paved on that section is more than 100 kilometers, and is also complete.
This sort of misreporting has played a key role provoking disdain with which citizens here treat their governments.
Entebbe Expressway: 
difficult Terrain
 Last year, Uganda’s Parliamentary committee on statutory Enterprises, COSASE, kicked so much dust on the cost of constructing the Entebbe expressway branding it the most expensive roads in the world. They alleged that the road’s construction cost $9.3 million per kilometer and ordered a review of the costs.

Politicians and journalists could be forgiven for their ignorance but what about government audit units?

The Ugandan Controller and Auditor General also questioned the cost of the Entebbe Expressway saying it cost more than Ethiopia’s 88 KM Addis-Ababa –Adama -six-lane expressway.

The comparison was pedestrian, to say the least. It only looked at the products and their costs ignoring the land on which the product is built.  The land terrain is a major determinant of the cost of a road. Bridges load a larger cost on a road’s construction cost.
The Entebbe expressway crosses muddy swamps and therefore needed a lot of bridges. It boasts of 2.225 KM of bridges sitting on 240 pillars some as deep as 6-8 Metres.  These costs exclude under-passes and interchanges.

The moral here is, to audit any engineering project objectively, we must start with the detailed design of the project for that is where the devil is; where costing is done, contract components are defined and justified.

The detailed design also shows the physical features of the project area and what has to be constructed where. For example,

it shows intersections, bridges, overpasses, service roads, pedestrian paths, culverts, drains, climbing lanes, bus stops, etc. in case of roads.