Controversial Sh6b Telkom acquisition didn’t get board’s nod

The board of Telkom was side-lined as the government through National Treasury negotiated a full acquisition of the said company from the Mauritius-based Jamhuri Holdings Limited (JHL) at a cost of Sh6.142 billion, it has emerged.

In a letter to the then National Treasury Cabinet Secretary Ukur Yatani dated August 20, Telkom’s board chair Eddy Njoroge, complained that the board lacked a quorum to facilitate the completion of a transaction they were not privy to.

The board present at that time was short of two members as Dorcas Kombo and Jinaro Kibet had both retired. By the date of that letter, the Sh6.142 billion funds had already been wired from the Treasury, on August 5 2022, to cater for the buyout of Helios Investment, the parent company of JHL.

Technically insolvent

“As board members, we have not been involved at all in the transaction and in view of the fact that we could be held personally responsible for our actions, we could also seek this comfort from the Attorney General,” Njoroge said in the letter.

He further noted that the acquisition would pose more challenges to the continued operation of Telkom since the company was already technically insolvent.  His letter went unanswered despite transaction completion, leaving the firm in limbo over the status of employment contracts and bills owed to suppliers.

The full acquisition meant that Telkom was therefore expected to operate as a government parastatal as per the Public Finance Management Act, which requires state-owned firms to publicly declare their financial positions.

Also, being that Telkom was in negative equity, and had already failed to implement certain government projects, the Treasury would have been forced to constantly bailout it out, just as it has been the case with Kenya Airways.

The Telkom transaction was among the eight withdrawals totalling Sh22.43 billion that were hurriedly completed as supplementary funding between August 4 and 5 by the Treasury without the approval of the Controller of Budget Margaret Nyakang’o.

Surprisingly, the Finance and National Planning committee led by Molo MP Kuria Kimani has, however, established that the shares did not actually exchange hands, meaning JHL is still a shareholder at the telco.

Instead, the Sh6.14 billion was allegedly used to pay off a 2016 loan that was advanced by Helios for an undisclosed purpose.

“The amount was not actually for the shareholding of Telkom because the shares of Telkom were sold at $1 for the entire ordinary shares. The net balance of Telkom after this transaction is zero because what is happening is just change of shareholdings which has not yet happened,” said Kimani.

As it stands, JHL still has 40 per cent shares at Telkom, with the remaining 60 per cent held by the government of Kenya. “Therefore the biggest question is what was the need to retire this big loan,” adds Kimani.

Despite Telkom’s deficit position, the government also entered an indemnity agreement to take over a $239 million (Sh30.8 billion) loan that JHL absorbed from Orange East Africa.