Michael Joseph: Where Did Money To Buy His Laikipia Ranch Come From? Another Gem From KPMG Audit

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CAPTION: Mr. 10% Michael Joseph.

The leaked confidential KPMG dossier on the procurement weaknesses at Safaricom clearly illustrates the insider influence on virtually all the vendors and suppliers. Buffered by billions of shillings in operating profits and reserves, the company has become a self-consuming organism, everyone is on the take one way or the other.

The audit which Safaricom CEO appears to have called for unwittingly, barely scratches the surface on procurement that runs into tens of billions of shillings annually.

In the process, some employees acquired god-like status and became enslaved to the gravy-train.

The period under mercurial CEO Micheal Joseph was one of tremendous growth and dealing with a hapless competition. These other Telcos never really stood a chance.

In the process, Josephs word became law, he developed a frontier spirit, which allowed for flouting of some key procedures, in the name of the greater good of the company.

The KPMG audit only touched on the few of the key procurement heads that cumulatively add-up to billions of shillings and the picture here is not rosy. It begs the question, what of the smaller procurement bits for the running of day-to-day operations and which don’t raise red flags?

Over and over in the KPMG report, the words ‘selective tendering’ and ‘single sourcing’ hit out at you obscenely. Anything other than open tendering was clearly an avenue to play tricks and give undue advantage to a pre-determined lot of suppliers in return for some form of recompense.

The short-listing of multiple approved suppliers per category is another sordid tale, where the decision to award which job to whom depended purely on the discretion of certain individuals and who was in good books with them.

Safaricom has not had, in its 17 year history, an open system for measuring the performance of their suppliers especially those who provide services running into billions of shillings per year.

In order to keep the gravy train rolling, these suppliers have had to invest time and resources to continually court, be-friend and socialize with the decision makers, attend their occasions, drink single-malt whiskeys with them, all so that they would never forget to renew the running contracts.

Guy who supply Government tell horror stories of how easy it is to get onto the list of approved suppliers but sometimes the call to deliver or quote never comes through.

During the period under consideration, KPMG noted that one of the big cash items related to activations (customer interaction with the brand). 14 companies were invited to tender but only 7 got any work.

For the longest time it has been rumored that Mosound seems to get super preferential treatment in the award of work from Safaricom, never before have these claims been backed up by figures until this highly illuminating KPMG report.

More damning was the part of the report which concluded that the Kes. 1.2 Billion paid out during the period, Safaricom lumped together the actual activation with ‘other work’ given to these agencies.

Secondly, these ‘other jobs’ given to these agencies were never coded separately into the Oracle system thereby making the work of differentiation purely manual.

At the end of these 3-year contracts with activation agents, a new tendering process was commenced after March 2015. However, due to queries and change in strategy, this process was stopped. As a stop-gap measure, some of the contracts were extended for 5 months.

KPMG illustrates how different activation agencies were allied with different Directors or senior managers at Safaricom and who (at the exact same time) signed the renewal contracts.

The obviously most self-evident inference that we can make is that the biggest two agencies by volume of work for the period under review with well close to Kes.700 million got their renewal contracts signed off by Peter Arina (Former Safaricom No. 2 and now at EA Cables) and current Director of Risk Nicholas Mulila.

CAPTION: Shareholders of East African Cables should know that they’re in for a rude shock, with this white-collar thief Peter Arina as CEO of the company.

We will soon write a story of how Mulila handed in the report that had Peter Arina frog-marched from the Safaricom premises by security…

To revert to the earlier thread centred on the opaque procurement and vendor identification protocols at Safaricom, any current anomalies are usually a reflection of a past impunity that was taught or noted.

From KPMG report, the curious case of CELFOCUS stands out like a sore thumb, a debacle going back a decade to 2007 during the reign of his majesty Micheal Joseph. Doesn’t it make you shudder to know that he is now the Executive Chairman of Kenya Airways?

Anyhow, Safaricom required Customer relationship management third line support services in 2008. They therefore decided to identify the vendor through a closed sourcing process by inviting 4 firms. These were Satyam, ATOS origin, Celfocus and Microsoft.

After the first round of technical and other evaluations, Satyam and Microsoft were eliminated from the process for various reasons, many of which are currently irrelevant here.

The remaining two companies were evaluated based on their technical capacity and their costs with the following determination.

As would be expected, the tender committee recommended French firm ATOS Origin for the contract. The tender board upon receipt of this recommendation and report from the subordinate tender committee flatly and outrightly rejected it. They demanded that a due diligence be conducted on ATOS Origin and Satyam to determine their competence to participate in a tender of this magnitude. If you are wondering why a new due diligence on only these two firms and not the third, ditto, that makes two of us.

To further muddy the water, the tender board decided and directed that the evaluation committee should review the comprehensiveness of the Request for Proposal (RFP) and confirm that the evaluation process had not overlooked anything of importance or a critical area.

Unknown to the tender committee, CELFOCUS CEO had written privately to Safaricom CEO Michael Joseph raising serious issues and strong objections regarding the scope of the RFP and calling into question the entire tender process.

Due to the CELFOCUS complaint and the recommendation of the Tender Board, CELFOCUS and ATOS Origin were engaged in workshops and group discussions by Safaricom in March 2007 in a bid to establish gaps and deficiencies raised by CELFOCUS.

In a clear breach of protocol, Safaricom laid itself bare to these two bidders by giving them access to its (Safaricoms’) systems to enable them pin-point the or clarify what parts of the RFP were unclear.

As is normally the case in such situations, CELFOCUS were unable to pin-point any weaknesses and gaps within the scope of the RFP that they had complained about.

Subsequently, the evaluation committee received fresh proposals from these two bidders while finance did a re-evaluation based on the new proposals.

Would you believe, the new process still managed to rank ATOS Origin above CELFOCUS and the tender committee recommended them for engagement once more to the Tender Board.

The tender board stopped any pretext of objectivity and ordered the evaluation committee to conduct a specific technical evaluation, broken down into the modules that would be necessary to execute the contract on Satyam, ATOS Origin and CELFOCUS. The only reason for this new dimension can be inferred to be that in the worst case scenario, rather than lose the entire contract, some of the modules could be pawned off to one vendor and the rest to another vendor.

The tender committee had wised up by this time, so they re-issued the RFI with the new technical dimensions and corresponding cost basis in July 2007 to our 3 vendors who faithfully responded. To the tender committee, it was clear that the Tender board had someone in mind for the contract and their adherence to procedure could very well be career-limiting.

So with self-preservation on their mind, the tender committee found CELFOCUS to be best-suited for the contract because they had “a detailed program and strong technical resources…” (Yeah right).

ATOS Origin was eliminated because “their responses were not detailed”.. while Satyam lost out because “they had weaker references…” (The rest is just technical filler).

Our friends at the tender board received the report of the tender committee recommending CELFOCUS for the contract, immediately and rather gleefully concurred with the recommendation and signed the report in August 2007.

The tender board report was signed by Michael Joseph, John Barorot, Eddie Irungu and Daniel Ngobia, just to illustrate the heavy weights involved.

By 3rd October, the contract had been signed by Les Baillie (CFO) and Paul Tico from CELFOCUS.

However, in 2012 when the contract was due to expire, it was quietly renewed for another 5 years on the basis for the need for continuity. This was contained in a single sourcing justification report.

Ken Okwero, Head of Strategy at Safaricom SWORE that at the end of the 10 year monopoly by CELFOCUS, Safaricom would switch over to another more flexible system.

Then you wonder how Micheal Joseph became a ranch owner at Lewa within several years of arrival in Kenya!

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