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African Continent a Milking Cow for Google and Facebook

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‘Sandwich’ helps tech giants avoid tax in Africa via the Netherlands and Ireland.

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Algorithmic Colonisation of Africa
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Google’s office at the airport residential area in Accra, Ghana, sits inside a plain white and blue two-storey building that could do with a coat of paint. Google, which made more than US$ 160 billion in global revenue in 2019, of which an estimated US$ eighteen billion in ‘Africa and the Middle East’, pays no tax in Ghana, nor does it do so in most of the countries on the African continent.

Google Street View of the building registered as Google's office in Accra

Google Street View of the building registered as Google’s office in Accra

It is able to escape tax duties because of an old regulation that says that an individual or entity must have a ‘physical presence’ in the country in order to owe tax.  And Google’s Accra office clearly defines itself as ‘not a physical presence.’ When asked, a front desk employee at the building says it is perfectly alright for Google not to display its logo on the door outside. ‘It is our right to choose if we do that or not’. A visitor to the building, who said she was there for a different company, said she had no idea Google was based inside.

Facebook is even less visible. Even though practically all 250 million smartphone owners in Africa use Facebook, it only has an office in South Africa, making that country the only one on the continent where it pays tax.

Brick and mortar

The physical presence rule in African tax laws is ‘remnant of a situation before the digital economy, where a company could only act in a country if it had a “brick and mortar” building’, says an official of the Nigerian Federal Inland Revenue Service (FIRS), who wants to remain anonymous. ‘Many countries did not foresee the digital economy and its ability to generate income without a physical presence. This is why tax laws didn’t cover them’.

Tax administrations globally have initiated changes to allow for the taxing of digital entities since at least 2017. African countries still lag behind, which is why the continent continues to provide lucrative gains for the tech giants. A 2018 PriceWaterhouseCoopers report noted that Nigeria, Africa’s largest economy, has seen an average of a thirty percent year-on-year growth in internet advertising in the last five years, and that the same sector in that country is projected, in 2020, to amount to US$ 125 million in the entertainment and media industry alone.

‘Their revenue comes from me’.

William Ansah, Ghana-based CEO of leading West African advertising company Origin 8, pays a significant amount of his budget to online services. He says he is aware that tax on his payments to Facebook and Google escapes his country through what is commonly referred to as ‘transfer pricing’ and feels bad about it. ‘These companies should pay tax here, in Ghana, because their revenue comes from me’, he says, showing us a receipt from Google Ireland for his payments. During this investigation we were also shown an advert receipt from a Nigerian Facebook ad that listed ‘Ireland’ as the destination of the payment.

Like Google, Facebook does not provide country-by-country reports of its revenue from Africa or even from the African continent as a whole, but the tech giant reported general revenue of US$ sixty billion as a whole from ‘Rest of the world’, which is the world minus the USA, Canada, Europe and Asia.

Facebook revenue by user geography

Facebook revenue by user geography

Irish Double

The specific transfer pricing construction Google and other tech giants such as Facebook use to channel income away from tax obligations is called an ‘Irish Double’ or ‘Dutch Sandwich’, since both countries are used in the scheme. In the construction, the income is declared in Ireland, then routed to the Netherlands, then transferred to Bermuda, where Google Ireland is officially located. Bermuda is a country with no corporation tax. According to documents filed at the Dutch Chamber of Commerce in December 2018, Google moved US$ 22,7 billion through a Dutch shell company to Bermuda in 2017.

Moustapha Cisse, Africa team lead at Google AI

Moustapha Cisse, Africa team lead at Google AI

An ongoing court case in Ghana — albeit on a different issue — recently highlighted attempts by Google to justify its tax-avoiding practices in that country. The case against Google Ghana and Google Inc, now called Google LLC in the USA, was started by lawyer George Agyemang Sarpong, who held that both entities were responsible for defamatory material against him that had been posted on the Ghana platform. Responding to the charge, Google Ghana contended in court documents that it was not the ‘owner of the search engine www.google.com.gh’; that it did not ‘operate or control the search engine’ and that ‘its business (was) different from Google Inc’.

Google Ghana is an ‘artificial intelligence research facility’.

Google Ghana describes itself in company papers as an ‘Artificial Intelligence research facility’. It says that its business is to ‘provide sales and operational support for services provided by other legal entities’, a construction whereby these other legal entities — in this case Google Inc — are responsible for any material on the platform. Google Ghana emphasised during the court case that Ghana’s advertising money was also correctly paid to Google Ireland Ltd, because this company is formally a part of Google Inc.

Rowland Kissi, law lecturer at the University of Professional Studies in Accra describes Google’s defence in the Sarpong court case as a ‘clever attempt’ by the business to shirk all ‘future liability of the platform’. Kissi is cautiously optimistic about the outcome, though: while the case is ongoing, the court has already asserted that ‘the distinction regarding who is responsible for material appearing on www.google.com.gh, is not so clear as to absolve the first defendant (Google Ghana) from blame before trial’. According to leading tax lawyer and expert Abdallah Ali-Nakyea, if the ‘government can establish that Google Ghana is an agent of Google Inc, the state could compel it to pay all relevant taxes including income taxes and withholding taxes’.

Cash-strapped countries

Like most countries, especially in Africa, Nigeria and Ghana have become more cash-strapped than usual as a result of the COVID 19 pandemic. While lockdowns enforced by governments to stop the spread of the virus have caused sharp contractions of the economy worldwide, ‘much worse than during the 2008–09 financial crisis’, according to the International Monetary Fund, Africa has experienced unprecedented shrinking, with sectors such as aviation, tourism and hospitality hardest hit. (Ironically, in the same period, tech giants like Google and Facebook have emerged from the pandemic stronger, due to, among others, the new reality that people work from home.)

With much needed tax income still absent, many countries have become even more dependent on charitable handouts. Nigeria recently sent out a tweet to ask international tech personality and philanthropist, Elon Musk, for a donation of ventilators to help weather the COVID 19 pandemic: ‘Dear @elonmusk @Tesla, Federal Government of Nigeria needs support with 100-500 ventilators to assist with #Covid19 cases arising every day in Nigeria’, it said. After Nigerians on Twitter accused the government of historically not investing adequately in public health, pointing at neglect leading to a situation where a government ministry was now begging for help on social media, the tweet was deleted. A government spokesperson later commented that the tweet had been ‘unauthorised’.

Cost to public

The criticism that governments often mismanage their budgets and that much money is lost to corruption regularly features in public debates in many countries in Africa, including Nigeria. However, executive secretary Logan Wort of the African Tax Administration Forum ATAF has argued that this view should not be used to excuse tax avoidance. In a previous interview with ZAM Wort said that ‘African countries must develop their tax base. It is only in this way that we can become independent from handouts and resource exploitation. Then, if a government does not use the tax money in the way it should, it must be held accountable by the taxpayers. A tax paying people is a questioning people’.

‘A tax paying people is a questioning people’

Commenting on this investigation, Alex Ezenagu, Professor of Taxation and Commercial Law at Hamad Bin Khalifa University in Qatar, adds that in matters of tax avoidance by ‘popular multinationals such as Facebook and Google, it is important to understand the cost to the public. If (large) businesses don’t pay tax, the burden is shifted to either small businesses or low income earners because the revenue deficit would have to be met one way or another’. For example, a Nigerian revenue gap may cause the government to increase other taxes, Ezenagu says, such as value added tax, which increased from five to seven and a half percent in Nigeria in January. ‘When multinationals don’t pay tax, you are taxed more as a person’.

Nigeria has recently begun to tighten its tax laws, thereby following in the footsteps of Europe, that last year made it more difficult for the digital multinationals to use the ‘Irish Double’ to escape tax in their countries. South Africa, too, in 2019 tailored changes to its tax laws in order to close remaining legal loopholes used by the tech giants. These ‘could raise (tax income) up to US$ 290 million a year’ more from companies like Google and Facebook, a South African finance source said. With US$ 290 million, Ghana’s could fund its flagship free senior high school education; Nigeria could fully fund the annual budget (2016/2017 figures) of Oyo, a state in the south west of the country.

Interior view of the Facebook office in Johannesburg, South Africa

Interior view of the Facebook office in Johannesburg, South Africa

Waiting for the Finance Minister

Nigeria’s new Finance Act, signed into law in January 2020, has expanded provisions to shift the country’s focus from physical presence to ‘significant economic presence’. The new law leaves the question whether a prospective taxpayer has a ‘significant economic presence’ in Nigeria to the determination of the Finance Minister, whose action with regard to the tech giants is awaited.

In Ghana, digital taxation discussions are slowly gaining momentum among policy makers. The Deputy Commissioner of that country’s Large Taxpayer Office, Edward Gyamerah, said in a June 2019 presentation that current rules ‘must be revised to cover the digital economy and deal with companies that don’t have traditional brick-and-mortar office presences’. However, a top government official at Ghana’s Ministry of Finance who was not authorised to speak publicly stated that, ‘from the taxation policy point of view, the government has not paid a lot attention to digital taxation’.

He blamed the ‘complexity of developing robust infrastructure to assess e-commerce activity in the country’ as a major reason for the government’s inaction on this, but hoped that a broad digital tax policy would still be announced in 2020.” Until the authorities get around to this, he said he believed that, ‘Google and Facebook will (continue to) pay close to nothing in Ghana’.

Comment

Google Nigeria did not respond to several requests for interviews; Google Ghana did not respond to a request for comment on this investigation. Neither entities responded to a list of questions, which included queries as to what of their activities in the two countries might be liable for tax, and whether they could publish country by country revenues generated in Africa. When reached by phone, Google Nigeria’s Head of Communications, Taiwo Kola Ogunlade, said that he couldn’t speak on the company’s taxation status. Facebook spokesperson Kezia Anim-Addo said in an email: ‘Facebook pays all taxes required by law in the countries in which we operate (where we have offices), and we will continue to comply with our obligations’.

Note: The figure of eighteen billion US$ as revenue for Google in ‘Africa and the Middle East’ over 2019 was arrived at as follows. Google’s EMEA figures for 2019 indicate US$ 40 billion revenue for ‘Africa, Europe and the Middle East’ all together. According to this German publication, Google’s revenue in Europe was 22 billion in 2019This leaves US$ eighteen billion for Africa and the Middle East.

This article was first published by our partner ZAM Magazine.

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Olivia Ndubuisi is a Nigerian broadcast journalist who loves investigations.

Politics

A Dictator’s Guide: How Museveni Wins Elections and Reproduces Power in Uganda

Caricatures aside, how do President Yoweri Museveni and the National Revolutionary Movement state reproduce power? It’s been 31 years.

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Recent weeks have seen increased global media attention to Uganda following the incidents surrounding the arrest of popular musician and legislator, Bobi Wine; emblematic events that have marked the shrinking democratic space in Uganda and the growing popular struggles for political change in the country.

The spotlight is also informed by wider trends across the continent over the past few years—particularly the unanticipated fall of veteran autocrats Muammar Gaddafi in Libya, Hosni Mubarak in Egypt, Yaya Jammeh in Gambia, and most recently Robert Mugabe in Zimbabwe—which led to speculation about whether Yoweri Museveni, in power in Uganda since 1986, might be the next to exit this shrinking club of Africa’s strongmen.

Yet the Museveni state, and the immense presidential power that is its defining characteristic, has received far less attention, thus obscuring some of the issues at hand. Comprehending its dynamics requires paying attention to at-least three turning points in the National Resistance Movement’s history, which resulted in a gradual weeding-out of Museveni’s contemporaries and potential opponents from the NRM, then the mobilisation of military conflict to shore up regime legitimacy, and the policing of urban spaces to contain the increasingly frequent signals of potential revolution. Together, these dynamics crystallised presidential power in Uganda, run down key state institutions, and set the stage for the recent tensions and likely many more to come.

The purge

From the late 1990s, there has been a gradual weeding out the old guard in the NRM, which through an informal “succession queue,” had posed an internal challenge to the continuity of Museveni’s rule. It all started amidst the heated debates in the late 1990s over the reform of the then decaying Movement system; debates that pitted a younger club of reformists against an older group. The resultant split led to the exit of many critical voices from the NRM’s ranks, and began to bolster Museveni’s grip on power in a manner that was unprecedented. It also opened the lid on official corruption and the abuse of public offices.

Over the years, the purge also got rid of many political and military elites—the so-called “historicals”—many of whom shared Museveni’s sense of entitlement to political office rooted in their contribution to the 1980-1985 liberation war, and some of whom probably had an eye on his seat.

By 2005 the purge was at its peak; that year the constitutional amendment that removed presidential term limits—passed after a bribe to every legislator—saw almost all insiders that were opposed to it, summarily dismissed. As many of them joined the ranks of the opposition, Museveni’s inner circle was left with mainly sycophants whose loyalty was more hinged on patronage than anything else. Questioning the president or harboring presidential ambitions within the NRM had become tantamount to a crime.

By 2011 the process was almost complete, with the dismissal of Vice President Gilbert Bukenya, whose growing popularity among rural farmers was interpreted as a nascent presidential bid, resulting in his firing.

One man remained standing, Museveni’s long-time friend Amama Mbabazi. His friendship with Museveni had long fueled rumors that he would succeed “the big man” at some point. In 2015, however, his attempt to run against Museveni in the ruling party primaries also earned him an expulsion from both the secretary general position of the ruling party as well as the prime ministerial office.

The departure of Mbabazi marked the end of any pretensions to a succession plan within the NRM. He was unpopular, with a record tainted by corruption scandals and complicity in Museveni’s authoritarianism, but his status as a “president-in-waiting” had given the NRM at least the semblance of an institution that could survive beyond Museveni’s tenure, which his firing effectively ended.

What is left now is perhaps only the “Muhoozi project,” a supposed plan by Museveni to have his son Muhoozi Kainerugaba succeed him. Lately it has been given credence by the son’s rapid rise to commanding positions in elite sections of the Ugandan military. But with an increasingly insecure Museveni heavily reliant on familial relationships and patronage networks, even the Muhoozi project appears very unlikely. What is clear, though, is that the over time, the presidency has essentially become Museveni’s property.

Exporting peace?

Fundamental to Museveni’s personalisation of power also has been the role of military conflict, both local and regional. First was the rebellion by Joseph Kony’s Lord’s Resistance Army in northern Uganda, which over its two-decade span enabled a continuation of the military ethos of the NRM. The war’s dynamics were indeed complex, and rooted in a longer history that predated even the NRM government, but undoubtedly it provided a ready excuse for the various shades of authoritarianism that came to define Museveni’s rule.

With war ongoing in the north, any challenge to Museveni’s rule was easily constructed as a threat to the peace already secured in the rest of the country, providing an absurd logic for clamping down on political opposition. More importantly, the emergency state born of it, frequently provided a justification for the president to side-step democratic institutions and processes, while at the same time rationalising the government’s disproportionate expenditure on the military. It also fed into Museveni’s self-perception as a “freedom fighter,” buttressed the personality cult around him, and empowered him to further undermine any checks on his power.

By the late 2000s the LRA war was coming to an end—but another war had taken over its function just in time. From the early 2000s, Uganda’s participation in a regional security project in the context of the War on Terror, particularly in the Somalian conflict, rehabilitated the regime’s international image and provided cover for the narrowing political space at home, as well as facilitating a further entrenchment of Museveni’s rule.

As post-9/11 Western foreign policy began to prioritise stability over political reform, Museveni increasingly postured as the regional peacemaker, endearing himself to donors while further sweeping the calls for democratic change at home under the carpet—and earning big from it.

It is easy to overlook the impact of these military engagements, but the point is that together they accentuated the role of the military in Ugandan politics and further entrenched Museveni’s power to degrees that perhaps even the NRM’s own roots in a guerrilla movement could never have reached.

Policing protest

The expulsion of powerful elites from the ruling circles and the politicisation of military conflict had just started to cement Musevenism, when a new threat emerged on the horizon. It involved not the usual antagonists—gun-toting rebels or ruling party elites—but ordinary protesters. And they were challenging the NRM on an unfamiliar battleground—not in the jungles, but on the streets: the 2011 “Walk-to-Work” protests, rejecting the rising fuel and food prices, were unprecedented.

But there is another reason the protests constituted a new threat. For long the NRM had mastered the art of winning elections. The majority constituencies were rural, and allegedly strongholds of the regime. The electoral commission itself was largely answerable to Museveni. With rural constituencies in one hand and the electoral body in the other, the NRM could safely ignore the minority opposition-dominated urban constituencies. Electoral defeat thus never constituted a threat to the NRM, at least at parliamentary and presidential levels.

But now the protesters had turned the tables, and were challenging the regime immediately after one of its landslide victories. The streets could not be rigged. In a moment, they had shifted the locus of Ugandan politics from the rural to the urban, and from institutional to informal spaces. And they were picking lessons from a strange source: North Africa. There, where Museveni’s old friend Gaddafi, among others, was facing a sudden exit under pressure from similar struggles. Things could quickly get out of hand. A strategic response was urgent.

The regime went into overdrive. The 2011 protests were snuffed out, and from then, the policing of urban spaces became central to the logic and working of the Museveni state. Draconian laws on public assembly and free speech came into effect, enacted by a rubber-stamp parliament that was already firmly in Museveni’s hands. Police partnered with criminal gangs, notably the Boda Boda 2010, to curb what was called “public disorder”—really the official name for peaceful protest. As police’s mandate expanded to include the pursuit of regime critics, its budget ballooned, and its chief, General Kale Kayihura, became the most powerful person after Museveni—before his recent dismissal.

For a while, the regime seemed triumphant. Organising and protest became virtually impossible, as urban areas came under 24/7 surveillance. Moreover, key state institutions—the parliament, electoral commission, judiciary, military and now the police—were all in the service of the NRM, and all voices of dissent had been effectively silenced. In time, the constitution would be amended again, by the NRM-dominated house, this time to remove the presidential age limit—the last obstacle to Museveni’s life presidency—followed by a new tax on social media, to curb “gossip.” Museveni was now truly invincible. Or so it seemed.

But the dreams of “walk-to-work”—the nightmare for the Museveni state—had never really disappeared, and behind the tightly-patrolled streets always lay the simmering quest for change. That is how we arrived at the present moment, with a popstar representing the widespread aspiration for better government, and a seemingly all-powerful president suddenly struggling for legitimacy. Whatever direction the current popular struggles ultimately take, what is certain is that they are learning well from history, and are a harbinger of many more to come.

This post is from a new partnership between Africa Is a Country and The Elephant. We will be publishing a series of posts from their site once a week.

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The Enduring Blind Spots of America’s Africa Policy

America should move way from making the military the face of its engagement with Africa and instead invest in deepening democracy as a principled approach rather than a convenient choice.

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The Enduring Blind Spots of America's Africa Policy
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While Donald Trump’s administration completely neglected America-Africa relations, the blind spots bedeviling America’s Africa policy preceded his 2016 election. Correcting the systemic flaws of the past 30 years will require a complete rethink after the controversial President’s departure.

To remedy America’s Africa policy, President Joseph Biden’s administration should pivot away from counterterrorism to supporting democratic governance as a principal rather than as mere convenience, and cooperate with China on climate change, peace, and security on the continent.

America’s Africa policy 

America’s post-Cold War Africa policy has had three distinct and discernible phases. The first phase was an expansionist outlook undergirded by humanitarian intervention. The second was nonintervention, a stance triggered by the experience of the first phase. The third is the use of “smart” military interventions using military allies.  

The turning point for the first phase was in 1989 when a victorious America pursued an expansive foreign policy approach predicated on humanitarian intervention. Somalia became the first African test case of this policy when, in 1992, America sent almost 30,000 troops to support Operation Restore Hope’s humanitarian mission which took place against the background of the collapse of the Somalia government in 1991.

On 3-4 October 1993, during the Battle of Mogadishu, 18 US servicemen were killed in a fight with warlords who controlled Mogadishu then, and the bodies of the marines dragged through the streets of Mogadishu. The media coverage increased pressure on the politicians and six months later America withdrew from Somalia — a case of the New World Order meeting the harsh reality of civil conflict.

The chastening experience resulted in America scaling back its involvement in internal conflicts in far-flung places. The result was the emergence of the second phase — non-engagement when Rwanda’s Genocide erupted in 1994 and almost a million people died in 100 days revealed the limitations of over-correcting the Somalia experience. This “non-interference” phase lasted until the twin Nairobi and Dar es Salaam US embassy bombings by Al Qaeda in 1998.

This gave way to the third phase with the realisation that the new threat to America was no longer primarily from state actors, but from transnational non-state actors using failing states as safe havens. The 2002 National Security Strategy states: “the events of September 11, 2001, taught us that weak states . . . can pose as a great danger to our national interests as strong states.”

Counterterrorism training and equipping of African militaries is the central plank of this new security policy. As a result, counterterrorism funding has skyrocketed as has America’s military footprint in Africa. As a result, Africa has become the theatre in which the Global forever War on Terror is fought.

The counterterrorism traps 

The reflexive reaction to the events of September 11 2001 spawned an interlocking web of covert and overt military and non-military operations. These efforts, initially deemed necessary and temporary, have since morphed into a self-sustaining system complete with agencies, institutions and a specialised lingo that pervades every realm of America’s engagement with Africa.

The United States Africa Command (Africom) is the vehicle of America’s engagement with the continent. Counterterrorism blurred the line between security, development, and humanitarian assistance with a host of implications including unrelenting militarisation which America’s policy establishment embraced uncritically as the sine qua non of America’s diplomacy, their obvious flaws notwithstanding. The securitisation of problems became self-fulfilling and self-sustaining.

The embrace of counterterrorism could not have come at a worse time for Africa’s efforts at democratization. In many African countries, political and military elites have now developed a predictable rule-based compact governing accession to power via elections rather than the coups of the past.

“Smart” African leaders exploited the securitised approach in two main ways: closing the political space and criminalising dissent as “terrorism” and as a source of free money. In Ethiopia, Yonatan Tesfaye, a former spokesman of the Semayawi (Blue) Party, was detained in December 2015 on charges under Article 4 of Ethiopia’s Anti-Terrorism Proclamation ((EATP), arguably one of the the country’s most severe pieces of legislation. But Ethiopia has received millions of dollars from the United States.

The Department of Defense hardly says anything in public but gives out plenty of money without asking questions about human rights and good governance. Being a counterterrorism hub has become insurance policy against any form of criticism regardless of state malfeasance.

Egypt is one such hub. According to the Congressional Research Service, for the 2021 financial year, the Trump Administration has requested a total of US$1.4 billion in bilateral assistance for Egypt, which Congress approved in 2018 and 2019. Nearly all US funding for Egypt comes from the Foreign Military Finance (FMF) account and is in turn used to purchase military equipment of US origin, spare parts, training, and maintenance from US firms.

Another country that is a counterterrorism hub in the Horn of Africa is Ethiopia. For the few months they were in charge, the Union of Islamic Courts (ICU) brought order and stability to the country.  Although they were linked to only a few of Mogadishu’s local courts, on 24 December 2006, Ethiopia’s military intervened in Somalia to contain the rise of Al Shabaab’s political and military influence.

The ouster of the ICU by Ethiopia aggravated the deep historical enmity between Somalia and Ethiopia, something Al Shabaab — initially the youth wing of the ICU — subsequently exploited through a mix of Somali nationalism, Islamist ideology, and Western anti-imperialism. Al Shabaab presented themselves as the vanguard against Ethiopia and other external aggressors, providing the group with an opportunity to translate their rhetoric into action.

Ethiopia’s intervention in Somalia could not have taken place without America’s blessing. The intervention took place three weeks after General John Abizaid, the commander of US forces from the Middle East to Afghanistan, met with the then Ethiopian Prime Minister Meles Zenawi.  The intervention generated a vicious self-sustaining loop. Ethiopians are in Somalia because of Al Shabaab, and Al Shabaab says they will continue fighting as long as foreign troops are inside Somalia.

America has rewarded Ethiopia handsomely for its role as the Horn of Africa’s policeman. In both Ethiopia’s and Egypt’s case, on the score of human rights and good governance, the net losers are the citizens.

Drone attacks 

In keeping with the War on Terror being for forever, and despite departing Somalia in 1993, America outsourced a massive chunk of the fight against Al Shabaab to Ethiopia primarily, and later, to AMISOM. America is still engaged in Somalia where it has approximately 800 troops, including special forces that help train Somalia’s army to fight against Al Shabaab.

America carried out its first drone strike in Somalia in 2011 during President Barack Obama’s tenure. Under the Trump administration, however, the US has dramatically increased the frequency of drone attacks and loosened the oversight required to approve strike targets in Somalia. In March 2017, President Trump secretly designated parts of Somalia “areas of active hostilities”, meaning that the high-level inter-agency vetting of proposed strikes and the need to demonstrate with near certainty that civilians would not be injured or killed no longer applied. Last year, the US acknowledged conducting 63 airstrikes in the country, and in late August last year, the US admitted that it had carried out 46 strikes in 2020.

A lack of transparency regarding civilian casualties and the absence of empirical evidence that the strikes lead to a reduction in terrorism in Somalia suggest that expanding to Kenya would be ill-advised. The US has only acknowledged having caused civilian casualties in Somalia three times. Between 2016 and 2019, AFRICOM failed to conduct a single interview with civilian witnesses of its airstrikes in Somalia.

Despite this level of engagement, defeating Al Shabaab remains a remote possibility.

Containing the Chinese takeover 

The Trump Administration did not have an Africa policy. The closest approximation of a policy during Trump’s tenure was stated in a speech delivered by John Bolton at a Conservative think tank decrying  China’s nefarious activities in Africa.  Even with a policy, where the counterterrorism framework views Africa as a problem to be solved by military means, the containing China policy views African countries as lacking the agency to act in their own interests. The problem with this argument is that it is patronising; Africans cannot decide what is right for them.

Over the last decades, while America was busy creating the interlocking counterterrorism infrastructure in Africa, China was building large-scale infrastructure across the continent. Where America sees Africa as a problem to be solved, China sees Africa as an opportunity to be seized.

Almost two years into the Trump administration, there were no US ambassadors deployed in 20 of Africa’s 54 countries even while America was maintaining a network of 29 military bases.  By comparison China, has 50 embassies spread across Africa.

For three consecutive years America’s administration has proposed deep and disproportionate cuts to diplomacy and development while China has doubled its foreign affairs budget since 2011. In 2018, China increased its funding for diplomacy by nearly 16 per cent and its funding for foreign aid by almost 7 per cent.

As a show of how engagement with Africa is low on the list of US priorities, Trump appointed a luxury handbag designer as America’s ambassador to South Africa on 14 November 2018. Kenya’s ambassador is a political appointee who, when he is not sparring with Kenyans on Twitter, is supporting a discredited coal mining project.

The US anti-China arguments emphasize that China does not believe in human rights and good governance, and that China’s funding of large infrastructure projects is essentially debt-trap diplomacy. The anti-China rhetoric coming from American officials is not driven by altruism but by the realisation that they have fallen behind China in Africa.

By the middle of this century Africa’s population is expected to double to roughly two billion. Nigeria will become the second most populous country globally by 2100, behind only India. The 24-country African Continental Free Trade Agreement (AfCFTA) entered into force on 30 May 2019. AfCFTA will ultimately bring together all 55 member states of the African Union covering a market of more than 1.2 billion people — including a growing middle class — and a combined gross domestic product (GDP) of more than US$3.4 trillion.

While Chinese infrastructure projects grab the headlines, China has moved into diversifying its engagement with Africa. The country has increased its investments in Africa by more than 520 per cent over the last 15 years, surpassing the US as the largest trading partner for Africa in 2009 and becoming the top exporter to 19 out of 48 countries in sub-Saharan Africa.

Some of the legacy Chinese investments have come at a steep environmental price and with an unsustainable debt. Kenya’s Standard Gauge Railway is bleeding money and is economically unviable.

A fresh start

Supporting democratic governance and learning to cooperate with China are two areas that will make America part of Africa’s future rather than its past.

America should pivot way from making the military the most visible face of its engagement with Africa and instead invest in deepening democracy as a principled approach rather than a convenient choice.

Despite the elegy about its retreat in Africa, democracy enjoys tremendous support. According to an Afro barometer poll, almost 70 per cent of Africans say democracy is their preferred form of government. Large majorities also reject alternative authoritarian regimes such as presidential dictatorships, military rule, and one-party governments. Democracy, while still fledgling, remains a positive trend; since 2015, there have been 34 peaceful transfers of power.

However, such positive metrics go hand in hand with a worrying inclination by presidents to change constitutions to extend their terms in office. Since 2015, leaders of 13 countries have evaded or overseen the weakening of term limit restrictions that had been in place. Democracy might be less sexy, but ignoring it is perilous. There are no apps or switches to flip to arrest this slide. It requires hard work that America is well equipped to support but has chosen not to in a range of countries in recent years There is a difference between interfering in the internal affairs of a country and complete abdication or (in some cases) supporting leaders who engage in activities that are inimical to deepening democracy.

The damage wrought by the Trump presidency and neo-liberal counterterrorism policies will take time to undo, but symbolic efforts can go a long way to bridging the gap.

America must also contend with China being an indispensable player in Africa and learn to cooperate rather than compete in order to achieve optimal outcomes.

China has 2,458 military and police personnel serving in eight missions around the globe, far more than the combined contribution of personnel by the other four permanent members of the UN Security Council, Russia, the US, France and Britain. China had more than 2,400 Chinese troops take part in seven UN peacekeeping missions across the continent — most notably in Mali and South Sudan. Of the 14 current UN peacekeeping missions, seven are in Africa, consuming two-thirds of the budget.

Climate change and conflict resolution provide opportunities for cooperation. Disproportionate reliance on rain-fed agriculture and low adaptation to the adverse impact of climate change make Africa vulnerable to the damaging effects of climate change, the consequences of which will transcend Africa. Through a combination of research, development, technological transfer and multilateral investment, America and China could stave off the impact of climate change in Africa.

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Hijacking Kenya’s Health Spending: Companies Linked to Powerful MP Received Suspicious Procurement Contracts

Two obscure companies linked to Kitui South MP Rachael Kaki Nyamai were paid at least KSh24.2 million to deliver medical supplies under single-source agreements at the time the MP was chair of the National Assembly’s Health Committee.

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Hijacking Kenya’s Health Spending: Companies Linked to Powerful MP Received Suspicious Procurement Contracts
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Two obscure companies linked to Kitui South MP Rachael Kaki Nyamai were paid at least KSh24.2 million to deliver medical supplies under single-source agreements at the time the MP was chair of the National Assembly’s Health Committee, an investigation by Africa Uncensored and The Elephant has uncovered.

One of the companies was also awarded a mysterious Ksh 4.3 billion agreement to supply 8 million bottles of hand sanitizer, according to the government’s procurement system.

The contracts were awarded in 2015 as authorities moved to contain the threat from the Ebola outbreak that was ravaging West Africa and threatening to spread across the continent as well as from flooding related to the El-Nino weather phenomenon.

The investigation found that between 2014 and 2016, the Ministry of Health handed out hundreds of questionable non-compete tenders related to impending disasters, with a total value of KSh176 billion including three no-bid contracts to two firms, Tira Southshore Holdings Limited and Ameken Minewest Company Limited, linked to Mrs Nyamai, whose committee oversaw the ministry’s funding – a clear conflict of interest.

Number of Suppliers Allocated BPAAlthough authorities have since scrutinized some of the suspicious contracts and misappropriated health funds, the investigation revealed a handful of contracts that were not made public, nor questioned by the health committee.

Mrs Nyamai declined to comment for the story.

Nyamai has been accused by fellow members of parliament of thwarting an investigation of a separate alleged fraud. In 2016, a leaked internal audit report accused the Ministry of Health — colloquially referred to for its location at Afya House — of misappropriating funds in excess of nearly $60 million during the 2015/2016 financial year. Media stories described unauthorized suppliers, fraudulent transactions, and duplicate payments, citing the leaked document.

Members of the National Assembly’s Health Committee threatened to investigate by bringing the suppliers in for questioning, and then accused Nyamai, the committee chairperson, of blocking their probe. Members of the committee signed a petition calling for the removal of Nyamai and her deputy, but the petition reportedly went missing. Nyamai now heads the National Assembly’s Committee on Lands.

Transactions for companies owned by Mrs Nyamai’s relatives were among 25,727 leaked procurement records reviewed by reporters from Africa Uncensored, Finance Uncovered, The Elephant, and OCCRP. The data includes transactions by eight government agencies between August 2014 and January 2018, and reveals both questionable contracts as well as problems that continue to plague the government’s accounting tool, IFMIS.

The Integrated Financial Management Information System was adopted to improve efficiency and accountability. Instead, it has been used to fast-track corruption.

Hand sanitizer was an important tool in fighting transmission of Ebola, according to a WHO health expert. In one transaction, the Ministry of Health paid Sh5.4 million for “the supply of Ebola reagents for hand sanitizer” to a company owned by a niece of the MP who chaired the parliamentary health committee. However, it’s unclear what Ebola reagents, which are meant for Ebola testing, have to do with hand sanitizer. Kenya’s Ministry of Health made 84 other transactions to various vendors during this period, earmarked specifically for Ebola-related spending. These included:

  • Public awareness campaigns and adverts paid to print, radio and tv media platforms, totalling at least KSh122 million.
  • Printed materials totalling at least KSh214 million for Ebola prevention and information posters, contact tracing forms, technical guideline and point-of-entry forms, brochures and decision charts, etc. Most of the payments were made to six obscure companies.
  • Ebola-related pharmaceutical and non-pharmaceutical supplies, including hand sanitizer
  • Ebola-related conferences, catering, and travel expenses
  • At least KSh15 millions paid to a single vendor for isolation beds

Hacking the System

Tira Southshore Holdings Limited and Ameken Minewest Company Limited, appear to have no history of dealing in hygiene or medical supplies. Yet they were awarded three blanket purchase agreements, which are usually reserved for trusted vendors who provide recurring supplies such as newspapers and tea, or services such as office cleaning.

“A blanket agreement is something which should be exceptional, in my view,” says former Auditor-General, Edward Ouko.

But the leaked data show more than 2,000 such agreements, marked as approved by the heads of procurement in various ministries. About KSh176 billion (about $1.7 billion) was committed under such contracts over 42 months.

“Any other method of procurement, there must be competition. And in this one there is no competition,” explained a procurement officer, who spoke generally about blanket purchase agreements on background. “You have avoided sourcing.”

The Ministry of Health did not respond to detailed questions, while Mrs Nyamai declined to comment on the contracts in question.

Procurement experts say blanket purchase agreements are used in Kenya to short-circuit the competitive process. A ministry’s head of procurement can request authority from the National Treasury to create blanket agreements for certain vendors. Those companies can then be asked by procurement employees to deliver supplies and services without competing for a tender.

Once in the system, these single-source contracts are prone to corruption, as orders and payments can simply be made without the detailed documentation required under standard procurements. With limited time and resources, government auditors say they struggle especially with reconciling purchases made under blanket agreements.

The agreements were almost always followed by standard purchase orders that indicated the same vendor and the same amount which is unusual and raises fears of duplication. Some of these transactions were generated days or weeks after the blanket agreements, many with missing or mismatched explanations. It’s unclear whether any of these actually constituted duplicate payments.

For example, the leaked data show two transactions for Ameken Minewest for Sh6.9 million each — a blanket purchase order for El Nino mitigation supplies and a standard order for the supply of chlorine tablets eight days later. Tira Southshore also had two transactions of Sh12 million each — a blanket purchase for the “supply of lab reagents for cholera,” and six days later a standard order for the supply of chlorine powder.

Auditors say both the amounts and the timing of such payments are suspicious because blanket agreements should be paid in installments.

“It could well be a duplicate, using the same information, to get through the process. Because you make a blanket [agreement], then the intention is to do duplicates, so that it can pass through the cash payee phase several times without delivering more,” said Ouko upon reviewing some of the transactions for Tira Southshore. This weakness makes the IFMIS system prone to abuse, he added.

In addition, a KSh4 billion contract for hand sanitizer between the Health Ministry’s Preventive and Promotive Health Department and Tira Southshore was approved as a blanket purchase agreement in April 2015. The following month, a standard purchase order was generated for the same amount but without a description of services — this transaction is marked in the system as incomplete. A third transaction — this one for 0 shillings — was generated 10 days later by the same procurement employee, using the original order description: “please supply hand sanitizers 5oomls as per contract Moh/dpphs/dsru/008/14-15-MTC/17/14-15(min.no.6).

Reporters were unable to confirm whether KSh4 billion was paid by the ministry. The leaked data doesn’t include payment disbursement details, and the MOH has not responded to requests for information.

“I can assure you there’s no 4 billion, not even 1 billion. Not even 10 million that I have ever done, that has ever gone through Tira’s account, through that bank account,” said the co-owner of the company, Abigael Mukeli. She insisted that Tira Southshore never had a contract to deliver hand sanitizer, but declined to answer specific questions. It is unclear how a company without a contract would appear as a vendor in IFMIS, alongside contract details.

It is possible that payments could end up in bank accounts other than the ones associated with the supplier. That is because IFMIS also allowed for the creation of duplicate suppliers, according to a 2016 audit of the procurement system. That audit found almost 50 cases of duplication of the same vendor.

“Presence of active duplicate supplier master records increases the possibility of potential duplicate payments, misuse of bank account information, [and] reconciliation issues,” the auditors warned.

They also found such blatant security vulnerabilities as ghost and duplicate login IDs, deactivated requirements for password resets, and remote access for some procurement employees.

Credit: Edin Pasovic/OCCRP

Credit: Edin Pasovic/OCCRP

IFMIS was promoted as a solution for a faster procurement process and more transparent management of public funds. But the way the system was installed and used in Kenya compromised its extolled safeguards, according to auditors.

“There is a human element in the system,” said Ouko. “So if the human element is also not working as expected then the system cannot be perfect.”

The former head of the internal audit unit at the health ministry, Bernard Muchere, confirmed in an interview that IFMIS can be manipulated.

Masking the Setup

Ms Mukeli, the co-owner of Tira Southshore and Ameken Minewest, is the niece of Mrs Nyamai, according to local sources and social media investigation, although she denied the relationship to reporters. According to her LinkedIn profile, Ms Mukeli works at Kenya Medical Supplies Agency, a medical logistics agency under the Ministry of Health, now embroiled in a COVID procurement scandal.

Ms Mukeli’s mother, who is the MP’s elder sister, co-owns Icpher Consultants Company Ltd., which shares a post office box with Tira Southshore and Mematira Holdings Limited, which was opened in 2018, is co-owned by Mrs Nyamai’s husband and daughter, and is currently the majority shareholder of Ameken Minewest. Documents also show that a company called Icpher Consultants was originally registered to the MP, who was listed as the beneficial owner.

Co-owner of Tira Southshore Holdings Limited, Abigael Mukeli, described the company to reporters as a health consulting firm. However Tira Southshore also holds an active exploration license for the industrial mining in a 27-square-kilometer area in Kitui County, including in the restricted South Kitui National Reserve. According to government records, the application for mining limestone in Mutomo sub-county — Nyamai’s hometown — was initiated in 2015 and granted in 2018.

Mukeli is also a minority owner of Ameken Minewest Company Limited, which also holds an active mining license in Mutomo sub-county of Kitui, in an area covering 135.5 square kilometers. Government records show that the application for the mining of limestone, magnesite, and manganese was initiated in 2015 and granted in 2018. Two weeks after the license was granted, Mematira Holdings Limited was incorporated, with Nyamai’s husband and daughter as directors. Today, Mematira Holdings is the majority shareholder of Ameken Minewest, which is now in the process of obtaining another mining license in Kitui County.

According to public documents, Ameken also dabbles in road works and the transport of liquefied petroleum gas. And it’s been named by the Directorate of Criminal Investigations in a fuel fraud scheme.

Yet another company, Wet Blue Proprietors Logistics Ltd., shares a phone number with Tira Southshore and another post office box with Icpher Consultants Company Ltd., according to a Kenya National Highway Authority list of pre-qualified vendors.

Family LinksMrs Nyamai and her husband co-own Wet Blue. The consulting company was opened in 2010, the same year that the lawmaker completed her PhD work in HIV/AIDS education in Denmark.

Wet Blue was licenced in 2014 as a dam contractor and supplier of water, sewerage, irrigation and electromechanical works. It’s also listed by KENHA as a vetted consultant for HIV/AIDS mitigation services, together with Icpher Consultants.

It is unclear why these companies are qualified to deliver all these services simultaneously.

“Shell companies receiving contracts in the public sector in Kenya have enabled corruption, fraud and tax evasion in the country. They are literally special purpose vehicles to conduct ‘heists’ and with no track record to deliver the public goods, works or services procured,” said Sheila Masinde, executive director of Transparency International-Kenya.

Both MOH and Ms Mukeli refused to confirm whether the ordered supplies were delivered.

Mrs Nyamai also co-owns Ameken Petroleum Limited together with Alfred Agoi Masadia and Allan Sila Kithome.

Mr Agoi is an ANC Party MP for Sabatia Constituency in Vihiga County, and was on the same Health Committee as Mrs Nyamai, a Jubilee Party legislator. Mr Sila is a philanthropist who is campaigning for the Kitui County senate seat in the 2022 election.

Juliet Atellah at The Elephant and Finance Uncovered in the UK contributed reporting.

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