Ghost investors own Sh. 100 billion wealth on NSE

NSE Biggest gainers: The following feature was written BY GITAHI NGUNYI. Faceless investors control more than Sh. 100 billion in listed companies at the Nairobi Securities Exchange. A survey by The People newspaper on 32 listed blue chip companies found that secretive investors had their shares registered through 85 nominee accounts and shell companies.

Exploiting the loopholes in financial investment laws that allow them to mask their wealth in public listed companies, the faceless investors have been earning handsome annual dividends from the businesses they have interests in.

The most curious of the shell companies is a firm registered as The Government of Kenya Ltd. The company which is listed among the top ten shareholders in companies associated with the trinity of former President Daniel arap Moi, former Attorney General Charles Njonjo, and former head of civil service Jeremiah Kiereini.

The company gives the illusion that the government of Kenya is a shareholder in the two companies. However, the practice in Kenya is that the shareholding in listed or non-listed firms is held either by a parastatal or the permanent secretary of a ministry.

The two companies where The Government of Kenya Ltd is listed as a top shareholder are CFC Stanbic Holdings and Liberty Kenya Holdings. In CFC Stanbic Holdings, the company holds 4.3 million shares with a market valued of Sh464.65 million while in Liberty Kenya Holdings Sh69.04 million.

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CFCStanbic Holding is the successor of the businesses that were owned by CFC Bank whose board was for a long time chaired by Njonjo before majority shares were acquired by South African financial services giant Standard Bank Group.

Its subsidiaries include stock brokerage firm CFC Stanbic Financial Services and fund management firm Stanlib. The two are a result of a split of what was formerly CFC Financial Services which was the stock brokerage and fund management arm of CFC Bank.

Liberty Kenya Holdings on the other hand is the holding company for CFC Life and Heritage Insurance. Both insurers have operations in Kenya and Tanzania.

Although the company continues to hold shares in the two companies, its existence is a legal mystery. Questions are still raised as to how the registrar of companies could register it given that its name is in direct contravention of law.

According to the registration act of 1951, the registrar of companies is barred from registering companies with names that which suggests that it has the patronage of the president, government or local authority.

Among the names that the registrar is expressly barred from registering are those that which include, Presidential, Government, or Municipal.

The shell company was a subject of investigation in 2003 when the retired president Mwai Kibaki commissioned international corruption and money laundering firm, Kroll to investigate trace wealth stolen from Kenyan public.

In the course of their investigation, Kroll came across the company whose official address was Harambee House. The Kroll Report named former president Moi, former vice president George Saitoti, former trade minister Nicholas Biwott, Former Aldai MP Dr. Sally Kosgey, Former finance minister Chris Okemo and Mark Bor as the directors.

But late Biwott fought off the claims that he is a director in the company saying he does not know the company nor does he have shares in it.

Besides, The Government of Kenya ltd, another curious shell company is Africa Liaison and Consultants Services (ALCS) which also holds substantial wealth in the two companies associated with the trinity.

ALCS has 43 million shares in CFCStanbic which are valued at Sh4.6 billion while in Liberty Kenya Holdings its 156 million shares are valued at Sh2.48 billion.

ALCS has a curious history in corporate Kenya. The company started operations immediately after independence to hold business interests of senior officials in founding president Jomo Kenyatta’s government and their business friends.

Its initial directors were Busia Senator Amos Wako, then an advocate working at Kaplan and Stratton, and Francis Addley. Both Wako and Addley were in the board courtesy of Kaplan and Stratton which had been contracted as nominees to register and run the company.

ALCS as it was to emerge when the principals decided to be open, has many other layers of nominee shareholders.

In 1977, when the actual owners came dropped their mask, the directors read like who was who in the government. Still, the directors were just representatives of other nominee companies.

The principals included former Commissioner of Police, the late Ben Gethi, head of intelligence the late James Kanyotu, Minister for Agricultre the late Bruce McKenzie, Attorney General Charles Njonjo, former Kenya Power managing director Julius Gecau, former head of civil service Jeremiah Kiereini.

Until his death last year, Kiereini was the ALCS chairman. But the company went underground again during former President Moi’s regime. It’s not clear who are the other shareholders in the company since most of the other shareholders are long dead and other senior government officers have joined up as shareholders.

In our survey, we found that most of the secret investors have hidden their wealth through nominee accounts held in trust by Standard Chartered Bank.

In the 32 companies we looked at, there are 43 nominee accounts operated by the bank. With 13 nominee accounts, CFCStanbic Bank is the second most preferred bank for investors wishing to hide their wealth followed by Equity Bank which had seven accounts. KCB and Cooperative Bank had four accounts each while NIC bank operates two accounts.

Other preferred ways of hiding wealth in listed companies includes using investment banks and lawyers. A trail of the investments shows that they have concentrated their values in select companies in the biggest money minting sectors such as banking, insurance, manufacturing and telecoms.

For example, in banking and insurance, the wealth of mysterious investors is valued at Sh44.25 billion.

But the biggest wealth is hidden in East Africa Breweries where the faceless investors own shares valued at Sh22.7 billion.

Safaricom is the second company where investors hiding in nominee accounts have a major stake. With 1.2 billion shares their investments are valued at Sh15.3 billion while their shares in CFCStanbic, KCB, and Equity Bank, their wealth is values at Sh13 billion, Sh11 billion, and Sh10 billion respectively.

In Kenya Power, they are worth Sh7 billion while in Britam and Liberty Kenya Holdings, their shares are valued at Sh2.2 billion and Sh2.9 billion. NSE Biggest gainers.