Kenya's finance minister denies corruption charges

NAIROBI (Reuters) – Kenya’s Finance Minister Henry Rotich pleaded not guilty on Tuesday to corruption charges over the award of two dam tenders, a day after his detention in an unprecedented move against a sitting minister in a country notorious for graft.

Rotich, who spent the night in a police cell, is accused alongside other senior officials of conspiring to defraud the public, among other charges.

Dressed in a gray pinstripe suit and yellow tie, Rotich denied the charges before a packed court in Nairobi. Not all the 28 accused were in court, but all the others present also pleaded not guilty.

The case stems from an investigation into the misuse of funds in two dam projects planned in western Kenya, overseen by Italian construction company CMC Di Ravenna.

Kenya also charged a director of the company, Paolo Porcelli, in absentia with conspiracy to defraud the country. Kenya will seek his extradition from Italy, director of public prosecutions Noordin Haji said on Tuesday.

“We will also issue an international arrest warrant,” Haji told Reuters, adding that company had not complied with a request to give statements to Kenyan authorities, he said.

CMC di Ravenna denied wrongdoing on Monday. “CMC is certain of the correctness of the work of the company and its representatives,” it said in a statement, adding it had not been informed of any official communication from Kenyan authorities.

Officials of the company were not available for comment on Tuesday.

The two dams were budgeted to cost 46 billion shillings ($446 million) but the treasury borrowed 63 billion instead, Haji said on Monday, needlessly ratcheting up Kenya’s ballooning public debt, which stands at around 55% of GDP.

ETHNIC DIVISIONS

The shilling has lost 0.5 percent against the dollar since Rotich was charged. It traded at 103.65 on Tuesday, reflecting market unease about the apparent vacuum at the top of the finance ministry.

Rotich has not been fired on formally resigned, and no replacement has been announced.

“(This) has created a power vacuum in Treasury, albeit temporarily,” a senior currency trader told Reuters.

Hasnain Malik, managing director of frontier markets equity strategy at London-based firm Tellimer, said Rotich’s arrest laid bare splits within the ruling Jubilee coalition.

The coalition was “openly divided” between Kikuyu supporters of President Uhuru Kenyatta and Kalenjin supporters of Vice President William Ruto, he said. Rotich is a Kalenjin.

Those divisions could curtail economic growth, with a cap on interest rates having already substantially shrunk credit to the private sector, he said.

“Kenyan growth is more reliant on effective public project spending because of the lending rate cap. A divided government is a problem,” he said. “Investors should worry that this arrest is a reflection of those divisions.”

Ruto has made clear he expects the coalition’s nomination for the presidency in the 2022 elections, when Kenyatta will have to step down due to term limits.

Haji also cited pressure stemming from politicians speaking to the media, but emphasized there had been no interference in his work.

“In terms of (interfering) phone calls, there was none, that I have to be very clear (about),” he told Reuters.

But “people (were) making a lot of noise that we were targeting a certain community. You know that area has been very volatile when it comes to clashes. So we were concerned.”

Some 1,200 people were killed in violence following the disputed 2007 national election. Kalenjin lands were a major flashpoint.

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