Sometimes, corruption is fought. Â Then, viciously, it fights back. This is a conversation on energy cartels and a presidency too wordy, with little to show.
At the centre of energy woes in Kenya is what blogger Robert Alai hashtagged ‘Kenya Energy Cartels’. Behind this cartel are powerful state functionaries – a mix of wheelerdealers and anti-corruption quacks. In the downside is a Kenyan population suffering immensely due to high energy costs; and a country’s economic prospects held at ransom by a powerful cartel which seems untouchable, even by the President.
Here is the anatomy of the scam.
A talking President
In October last year, President Uhuru Kenyatta opened what local media referred to the ‘world largest geothermal power plant’ – The Olkaria IV. He was accompanied by his deputy, William Samoei Ruto.
The rhetoric during the highly publicized state function was not different from other Uhuru regime high sounding pledges and promises. And, as usual, none came to pass.
â€œYou cannot fight poverty if you cannot create an environment where you can create jobs. All that cannot happen if you donâ€™t have the essentials which is energy. These investments that we are making will go a long way towards empowering our people and combat social ills that have inflicted this country over the years,â€ President Kenyatta said.
President Uhuru appreciated the stakes involved in cheap power delivery by the wonder of geothermal energy, which, in Kenya’s vision 2030, is expected to bring to the national grid between 7000-10,000 megawatts of electricity.
He warned of cartels, and called them by their names. He singled out brokers, and fingered parliament.
â€œIf there is a procurement problem, let us deal with the procurement problem, as a procurement problem. But letâ€™s not get courts involved because there are ten thousand different funny brokers cruising around there filing cases. Then we have the parliamentary committees stopping this program and that program, in the name of investigating.â€
DP Ruto would quip it is not story, but real things happening, as in, Kusema na Kutenda.
â€œThere are real things happening. You know, we are not talking of a story here, we are talking of reality. So we want to tell Kenyans that this is not showbiz,â€ said Ruto, amid wild applause, as is usual.Â Watch the Video.
A year later, February this year, alongside Rwanda’s Paul Kagame, he launched Olkaria 1, boldly proclaiming that the cost of living for Kenyans will come tumbling down. As usual, it did not happen.
â€œTake my word that the cost of goods will come down and this will lead to a lower cost of living for all Kenyans,â€ said President Kenyatta.
In the Presidency’s usual digital rant, he took to twitter, and boasted, “Kenya is now the seventh highest producer of geothermal power in the world as it unveiled the biggest geothermal plant in the world,”.
Kagame, the optimist-realist Rwandese, dug in even more, saying a number of goods should also have their prices lowered. He mentioned cement.
â€œWe need more good news in the form of constant lowering of cement prices too,” said President Kagame. President Uhuru agreed, retorting, “You cannot fight poverty when you do not have power to run an economy with industries to create jobs and create wealth.â€
A report on the energy situation in Kenya reads:
Energy is a critical input in the manufacturing process. Kenya has for the longest time endured high cost of power making the cost of living and doing business in Kenya non-competitive. It is for this reason that many investors have relocated their manufacturing bases to countries such as South Africa and Egypt in order to reduce the cost of doing business. The commercial cost of power is Egypt is 4 US Cents while in South Africa it is 13 US cents. Kenyaâ€™s cost of power has for a long time been much higher than these comparative figures.
Suddenly, the words stopped. Public speeches extolling the wonders of geothermal energy came to a halt. Misery took over.
Cement prices have remained high up, and basic commodity prices have sky-rocketed. Unga is at all time high. Processed milk is a luxury. Industries, like Unilever and Eveready, have moved from Kenya. Jobs, promised to youths and women, remained elusive and scarce.
Silas Simiyu: A conundrum
A critical resource in Kenya’s economic outlook, geothermal power is today the most endangered of all the electricity sources for the country. Where in October last year the President warned of Â ‘ten thousand different funny brokers cruising around there filing cases’, today, these strategy has changed.
The brokers realized the court process was a waste of time and money and chose the safest route – to remove the single biggest stumbling block Â – GDC boss Silas Simiyu.
Dr. Simiyu, with hisÂ PhD in Applied Geophysics from the University of Texas, and an MSc and BSc in Physics and Geology from the University of Nairobi, became a pawn in the energy games. Head hunted to develop Geothermal development sector for Kenya, Simiyu collated together a team of 50 engineers which, under his guardianship, formulated the strategic plan for 5000Megawatts of electricity before 2030.
His big mistake, in my view, would be to believe that Kenya respects UT and Uon credentials. His Diploma in Geothermal Geophysics from the United Nations University in Iceland, or experience as a post-doctoral fellowÂ in Seismology at Duke University, or the fact that he saved the country some 59 billion annually since 2009, were highly inadequate to cushion him.
Simiyu’s fate had three disastrous elements in a dangerous chemistry. First he was thorough in his work. Second, he had no godfathers. Third, he avoided playing politics.
He would attempt the third – play politics – too late, when he boldly accused the real forces behind his -and GDC – woes.
â€œAll this must be understood in the context of a hunger by powerful people to take control of the huge resources (Sh64.2 billion) that the management has secured,â€ he said in a statement, soon after being suspended, in the infamous President Uhuru’s list of shame.
â€œThat so much money is available has created a lot of interest in people who think they should manage this mega dollar industry,â€ he claimed.
In the Presidential list of shame, Dr. Simiyu’s name, allegedly, had been ‘inserted’ between EACC and State house. Culprits: Diesel barons.
Expensive Diesel, booming business
GDC would, in the intervening years, surpass any other source of energy in Kenya by adding more to the national grid, for less. The worst that GDC would do; and which it already started doing, was to sound a death knell to Independent Power Producers, a multi-billion scandalous diesel world.
This is how the report summarized the diesel fiasco in the energy sector:
The cause of persistent high cost of power in Kenya was caused by over reliance on diesel-generated power and hydropower. The productivity of hydroelectricity has dwindled over time due to poor hydrology occasioned by climate change. To meet the growing demand for power in line with the projected power needs under the Vision 2030, the government was forced to not only use the expensive diesel generated power, but to also deploy emergency power which is four times more expensive (KES 35/kwh) than the average bulk power price at KES 10/kwh ( June 2014) .
Initially the plan was to use Medium Speed Diesel Plants for peak load at an average a price of KES 20/kwh. However due to high demand and low hydropower productivity, these medium speed diesel power plants have operated 30% of the time instead of the normal 13%. Still, high transmission and distribution losses coupled with an aged grid system has led to breakdowns and heavy losses amounting up to 22% and leading to very high electricity costs.
Revealing this state of events, Kahawa Tungu recently observed:
Over the last 10 years, the cartel behind the Independent Power Producers â€“ IPPs gang of a mercenary has ensured that they are paid 76% of electricity cost every for producing just 30% of energy through diesel. A case example is the 2013/2014 financial year when the government paid KSh 57 billion of its electricity budget to the IPPs.
The remaining 24% of the government electricity spending goes to state backed production which accounts forÂ 70% of Kenyaâ€™s electricity generation. Is the mathematics just not wrong?
While most analysts believe the Uhuru administration is serious in seeking to reverse this 30%-70% (generation) Versus 76%-24% (Cost) ratio, there is doubt whether Jubilee can implement its energy manifesto fast enough and antagonise the masters of diesel power generation who are losing money since increasingly they will have to generate less electricity.
This is part one of a long story. Keep reading.