Inside Jirongo’s Debt Empire: A Man Who Owes Kenya KSh40 Billion
Imagine walking into a public bank today and taking out a loan of KSh796 billion – the equivalent of Kenya’s budget deficit for the financial year 2022-2023 – and using land as collateral for the loan.
When you default on the loan, the bank chooses to sell your land, possibly as the last debt collection mechanism available under the law.
However, the bank discovers that the land you used as collateral actually belongs to the government, and how you obtained the title deeds for the main property is a mystery that is not easy to solve.
Almost three decades later, the bank collapsed. But you walk free and even manage to run for president, with thousands of people voting for you.
What sounds like a rooster and bull story is actually one of the highlights of the life and times of former MP Lugari Cyrus Jirongo, who did just that in the 1990s.
The recent questioning of Jubilee Party Vice Chairman David Murathe and former Speaker of the National Assembly Kenneth Marende by the Ethics and Anti-Corruption Commission over millions of shillings received from Mr Jirongo has leads the Nation to the story of how the politician ended up with a debt of KSh40 billion (TSh800 billion) to the taxpayer,
Mr Jirongo almost single-handedly led to the collapse of Postbank Credit Ltd, a state-owned bank that collapsed in the 1990s.
When Kenya’s budget was 45 billion shillings for the financial year 1993/1994, the country was short 2.7 billion shillings and borrowed to make up the shortfall.
At the same time, Mr. Jirongo had borrowed a similar amount from Postbank Credit. Partly to honor an ambitious National Social Security Fund (NSSF) real estate project in Nairobi, which failed after Mr Jirongo doubled its asking price to over KShs 2 billion, and partly for his personal use.
But the land he used as collateral was technically public property that could not be auctioned off to collect the debt.
In 1993, Mr. Jirongo was one of the most untouchable people in the country. He chaired the campaign group Youth for Kanu 1992 (YK-92) which had successfully campaigned for the re-election of President Daniel Arap Moi a year earlier.
As was the norm in post-independence Kenya, Mr. Jirongo was rewarded with a special status that allowed him to do almost anything he wanted.
By then, Mr. Jirongo had formed several companies that were making dodgy deals with government institutions, some of which came back to bite the taxpayer hard.
One of his companies, Offshore Trading Company, borrowed 1.1 billion Kenyan shillings from Postbank Credit and used 1,000 acres of land in the Ruai area of Nairobi as collateral.
A year later, another of his companies, Sololo Outlets, applied for a loan of KShs. 1.65 billion from the same bank. To secure the loan, Mr Jirongo used another title deed for a 2.5 acre piece of land in Mukuru kwa Reuben, Nairobi County.
Debt of KSh 40 billion
Neither loan was ever repaid and the interest on them left Mr. Jirongo KSh40 billion in debt.
The first loan of 1.1 billion shillings soared to more than 20 billion shillings, according to court records filed by the Kenya Deposit Insurance Corporation.
At the time Mr Jirongo borrowed the money, Kenya had not enacted the “in duplum” rule which prohibits the growth of interest rates beyond the amount borrowed. And interest rates in the 1990s were not favourable.
Postbank Credit was among 17 banks that collapsed in the 1990s after politically connected individuals borrowed billions and failed to repay.
More than KSh 80 billion has been borrowed by individuals and remains unpaid.
Apart from the obvious effect of lenders collapsing, billions of shillings saved by hard-working Kenyans in these banks have gone up in smoke and triggered an economic crisis.
The Deposit Protection Fund (DPF) was appointed receiver manager, then liquidator, of Postbank Credit. Part of his mandate was to collect overdue loans. The DPF has since been replaced by the Kenya Deposit Insurance Corporation (KDIC), which liquidates Postbank Credit and holds title deeds to both properties.
While pursuing Mr. Jirongo’s debts, the KDIC ran into a brick wall.
It turned out that the Ruai land was in fact owned by the Nairobi Water and Sewerage Company (NWSC), but its title had somehow passed to Mr. Jirongo and his network of companies.
In 1986, the government owned 13,000 acres in Ruai, which was earmarked for the expansion of the Nairobi Water and Sewerage Company’s treatment plant. The land was intended to expand the company’s wastewater treatment plant and ensure a steady supply of water to the city whose population was exploding every year.
It was subdivided and registered with Nairobi Water in 1996 following a presidential directive.
Almost immediately most of the land was transferred from Nairobi Water to politically connected individuals. Nairobi Water ended up with barely 3,000 acres.
In 2018, Mr. Jirongo signed a 15 billion Kenyan shillings deal with Sheikh Rakadh Group, a company associated with the UAE royal family, to build a city on Ruai land. The deal, however, fell through after Mr Jirongo demanded KSh1 billion from the Dubai Royal Family to pay off the Postbank Credit loan and recover the title deed.
Mukuru kwa Reuben land is also owned by Nairobi County and houses the AEF Reuben Primary School, a police station, a maternity ward and a vocational training centre. But the title deed is registered in the name of Kuza Farms and Allied Ltd of Mr. Jirongo.
The Catholic Church founded AEF Reuben Primary on the property in 1986.
While children with the potential to be Kenya’s future were learning at AEF Reuben Primary, military leader Augustine Cheruiyot was in the process of acquiring title to the land on which the school stands. In 1990, Mr. Cheruiyot sold the land to Mr. Jirongo’s Kuza Farms and Allied for an undisclosed sum.
Three years later, Kuza Farms handed over the title deed to Postbank Credit as collateral for a KSh1.65 billion loan that Mr Jirongo’s other company, Sololo Outlets, had requested.
Again, Mr. Jirongo’s companies failed to repay the loan.
In Mukuru kwa Reuben, all was quiet until 2014 when Mr Jirongo sued the school and the town hall, claiming ownership of the 2.5 acre piece of land.
Despite the fact that Mr. Jirongo did not have the title deed, in 2016 the town hall reached an amicable agreement with the politician which would allow him to obtain a one-time payment of KShs 250 million for the ground.
But the agreement came with conditions. Mr. Jirongo was to clear all charges on the ground, including loans. He then had to ensure that the title deed was formally transferred to the town hall.
In 2019, Mr Jirongo sued City Hall demanding that the 250 million shillings be released. But the Postbank Credit loan still remained unpaid, and the title deed was still with the KDIC and registered in the name of Kuza Farms and Allied.
High Court Judge Samson Okong’o dismissed the complaint and ordered Mr Jirongo to either transfer the title to the town hall or not receive any money.
Yet the Town Hall somehow released the entire KSh250 million to Kuza Farms and its owner, Mr. Jirongo, before the land was transferred to them.
The KDIC was not involved in the relations between Mr. Jirongo and the town hall. Normally, all money from land transactions would have gone to KDIC to repay the outstanding loan, which reached over 18 billion Kenyan shillings.
After receiving the payment from the town hall, Mr. Jirongo sent money to several influential people: the general secretary of the Cotu Francis Atwoli (60 million KShs), the deputy of the Pan-African Parliament representing South Sudan Albino Aboug ( 38 million KShs), Mr. Murathe (25 million KShs), former Senator Vihiga George Khaniri (5 million KShs) and Mr. Marende (3 million KShs).
And their windfall is now attracting the attention of the Ethics and Anti-Corruption Commission (EACC).
Mr. Atwoli, Mr. Murathe and Mr. Marende said that the money they received came from non-land related transactions or other dealings of Mr. Jirongo.
The boss of Cotu claimed to have received part of the payment of an amicable loan advanced to Mr. Jirongo and which is part of a court decision. He advanced Mr. Jirongo a loan of KShs. 100 million which the latter was unable to repay, prompting a lawsuit which Mr. Atwoli won.
The EACC summoned Mr Murathe to explain the purpose of the KSh25 million he received from Mr Jirongo on July 23, 2020.
Mr Murathe denied knowledge of the land deals that put Mr Jirongo in trouble and maintained that the funds he received were intended to settle a debt that the former Lugari MP owed him.
The 2020 payment, Mr Murathe explained, was part of a KSh60 million debt that Mr Jirongo owed him.
Mr Marende said the funds he received were for legal fees from a client he was representing.
Prior to the 1993 loan, Mr. Jirongo had obtained a KSh50 million loan from Postbank Credit in 1992.
At the time, the politician was buying land from another company, Soy Developers.
He had paid KSh 10 million, or half the price, as a deposit.
He presented the title deed to the land to Postbank Credit and borrowed KShs. 50 million.
Mr Jirongo defaulted and the receiver of Postbank Credit sold the land at auction to ASL Ltd.
The owners of Soy Developers – Sammy Boit Kogo and his wife Antoinette – have been in and out of court seeking damages from Mr. Jirongo.
Their attempt to file a criminal complaint was thwarted by the Supreme Court, which ruled that authorities had unnecessarily delayed bringing criminal action and that Mr. Jirongo would be at a disadvantage in his defense because several crucial documents have since been lost.