Business Daily (Nairobi)
Albert Muriuki And Morris Aron
22 April 2008
analysis
On Nairobi's Loita Street, the Libyan flag flies high atop the five-storey Embassy building, perhaps a sign of the country's passion to get a foothold in Kenya's oil and business sector. The stakes are high.
Across the street is the Grand Regency Hotel, a landmark institution that symbolises greed, theft and corruption - the hallmark of the Kanu regime.
The Libyans want the hotel as part of their bid to entrench themselves into Kenya's business sector and so do the Indians.
Diplomatically, the Libyans have an upper hand - or so they believe.
Last month, when the country was in the thick of a political stalemate, President Kibaki flew to Kampala meet Libya's President Muammar Gaddafi who was commissioning a new mosque.
In diplomacy circles, that was a signal that the Libyans have got to the heart of Kenya's presidency.
Libyan oil merchants are in town looking for contracts and seeking to elbow out other investors in a pull-and-push game that has seen Indians - who were after the lucrative oil refinery in Mombasa - cry foul.
Eight years after they re-opened an embassy in Nairobi - which was shut in 1987 after the Moi regime accused the embassy officials of espionage - the Libyan oil merchants want to have a footprint in the region and are keen to edge out competitors.
Like the emerging story of the Grand Regency Hotel, the entry of Libyans - and the fight for lucrative tenders and business space - is opening new battle grounds.
Indian, Chinese and Libyan companies are taking advantage of a political stand-off between the Kibaki regime and British companies which were previously the main beneficiaries of such high level transactions.
At the Grand Regency, a group comprising Libyan investors trading as Libyan Arab African Investment Company is pitted against another one of Indians who recently bought a vacant plot next to the hotel.
The Indian group boasts of the fifth richest man in the world, Mr Mukesh Ambani, who early last month partnered with an Arabian real estate firm, Arrow Webtex, to form Delta Resources Limited and bought a number of plots close to the hotel.
One of the deals included the purchase of a parking lot next to Grand Regency at a cost of Sh1.4 billion from the National Social Security Fund (NSSF) in the country's biggest property deal so far this year.
Arrow Webtex has also reportedly bought another parking lot between Barclays Plaza and Nyati House, where it plans to build a number of top-end hotel and shopping malls, creating a "city within a city" around the hotel complete with modern shopping centres, casinos and other entertainment services.
The investors also recently bought into Gapco oil and have other interests in the country.
Once a virgin green zone, the land between Uhuru Highway and Loita Street has been the bastion of speculators who got the land in the mid years of the Moi Government and it is there that the Indians and the Libyans will start their fights.
And a cabal of local interests have joined the fray, questioning the authenticity of documents regarding the hotel sale.
A document supposedly written by businessman Kamlesh Pattni's lawyers but which do not have his signature, states that one of the pre-conditions for the hand-over of the hotel to CBK is the sale of the property to a pre-determined investor.
President Kibaki on a recent trip to Libya.
According to the document, the hotel was to be sold jointly by the Central Bank and Mr Pattni to a buyer free of any encumbrances at market value and determined by two reputable valuers.
Wetangula, Adan, Makhoha and Company, Mr Pattni's advocates, through Mr Ahmed Adan told the Business Daily that the reports were fraudulent and that the advocate firm had not issued such a document.
"I can confirm to you that we have not written any such a declaration," said Mr Adan.
The law firm accused politicians who are against the repossession of the hotel and "people who are interested in the deal," as being behind the document.
"The people behind this are shameless corrupt people with up to 20 cases in court," said Mr Adan as he showed the Business Daily what he said was the declaration signed by Mr Pattni before the handover of the hotel to Central Bank.
The Attorney General (AG) yesterday distanced himself from the hotel's recovery by the Kenya Anti-Corruption Commission (KACC).
So, if the documents were forged, who did it?
At the port of Mombasa, the transaction to buy 50 per cent of shares held by Shell, Chevron and BP in the Kenya Petroleum Refinery Limited (KPRL), has not only annoyed the Indians, but has brought to the fore just how Libya has muscled all its diplomatic, political and economic clout to get the lucrative deal even after the Indians, through their company, Essar Energy Overseas Ltd, won the tender in December last year.
The battle lines are slowly getting drawn.
Essar Energy Overseas Limited concluded a transaction of the purchase of 50 per cent shares by Shell, Chevron and BP in KPRL, Mombasa in December 2007. As per the Shareholders Agreement between the Government and the Industry shareholders, the Government has the Right of Pre-emption if the industry shareholders decide to sell their shares.
Accordingly, when the transaction was signed, the Government was approached by the three oil companies to waive its first right of purchase. This request has been extended three times, raising concern mainly amongst cadres of the Energy ministry, Foreign Affairs and Essar.
The last deadline passed on March 19.
The refinery in Changamwe, Mombasa, has a capacity of around 72,000 barrels per day and is an attractive investment. The intended modernization programme is to increase current production of liquefied petroleum gas, from the current 30,000 tonnes to 120,000 tonnes per year.
At the centre of the diplomatic row is the Finance ministry which has apparently been using delaying tactics probably as a way to force Essar to give up its bid and give Oilibya an easy way in.
The Libyans are slowly mastering their way into Kenya, having entered the downstream market with a rebranding of the former Mobil petrol stations.
However, during his recent trip to Uganda during the official opening ceremony of the Gadaffi National Mosque on March 19 in Kampala, Colonel Muammar Gadaffi held talks with President Kibaki. Whether this involved the pending business is not clear. The Presidential Press Service did not answer queries about the issue even after numerous calls and emails.
But the Indians are not taking it lying down, correspondence obtained by the Business Daily, shows that in a meeting held on March 12 this year, India raised concerns about the KPLR issue and urged his Kenyan counterpart to raise the issue with the Finance and Energy ministries.
The Kenyan Ministry of Foreign Affairs, in a letter signed by Ms Mercy Odongo on behalf of the Permanent Secretary, conveyed the Indians concerns to the ministries in a letter that clearly emphasised the fears and concerns of Essar.
"The matter is still being discussed in government. These consultations could take some while. In that regard and the fact that a number of ministries and stakeholders are involved, Foreign Affairs may not be in a position to provide further information at the moment," Mr Eliphas Barine of the Foreign Affairs ministry said.
The Indians are said to have pledged to use over $400 million (about Sh22 billion) in both equity and loans to upgrade the refinery, a process that would eventually dilute the 50 per cent share holding by the Government.
But the hurdle at the KPLR goes beyond the foreign relations and even deeper into matters of bi-lateral lending between Kenya and its erstwhile Indian partner.
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