Cyrus Jirongo almost single-handedly led to the collapse of Postbank Credit Ltd, a state-owned bank that collapsed in the 1990s, Nation Africa reported.
The former Lugari Member of Parliament is said to currently owe Kenya approximately Sh40 billion, which represents a huge financial loss for the Kenyan people. Jirongo’s irresponsible actions were the main contributing factor to the collapse of the bank, and his failure to repay his debt represents a further injustice to the Kenyan people. It is estimated that if Jirongo had repaid his debt, the Kenyan people would have been saved from losing billions of shillings.
In the 1993/1994 financial year, Kenya’s budget was Sh45 billion. This was not enough to cover the country’s expenses, and they had to borrow Sh2.7 billion to make up the difference. This trend continued in the following years, with Kenya borrowing more and more money to cover their expenses. As of 2019, the country’s debt is estimated to be over Sh9 trillion.
Imagine walking into a state-owned bank today and taking a loan worth the equivalent of Kenya’s entire budget deficit for the next financial year. Using land as security for the loan, you could borrow an amount equivalent to over three quarters of the country’s GDP. Such a move would be highly irresponsible and could destabilise the Kenyan economy.
In Kenya, if you default on your loan repayment, the bank has the option to sell your land. This is typically done as a last resort debt recovery method under the law. However, the bank discovers that the land you used as collateral is actually owned by the government. This can be a mystery to unravel, as it is not easy to determine how you obtained title deeds for the property.
In the early 1990s, Cyrus Jirongo was one of the most powerful men in Kenya. It is an incredible story, but it is true. Nearly three decades ago, Postbank Credit Ltd collapsed. But Cyrus Jirongo, the former lawmaker, was not only walking free, but he even managed to run for president in 2017, with thousands of people voting for him.
In the 2017 Kenyan general elections, Cyrus Jirongo vied for the presidency under the United Democratic Party. He garnered approximately 11,000 votes, which were 0.07% of the total votes in the elections. Jirongo’s performance in the election was lacklustre, to say the least, and he ultimately lost to the incumbent, Uhuru Kenyatta.
The United Democratic Party contested the 2022 elections as part of Azimio La Umoja, and were able to get two MPs elected. The party leader Cyrus Jirongo congratulated William Ruto on his victory, saying that it was a victory for democracy. He also said that he believed that his party would continue to be a force in Kenyan politics.
The recent questioning of Jubilee Party vice-chairman David Murathe and former National Assembly Speaker Kenneth Marende by the Ethics and Anti-Corruption Commission has thrown a spotlight on the financial dealings of politician Moses Jirongo. It is alleged that Mr Jirongo received millions of shillings from the Kenyan government, but has failed to repay the debt, leading to a Sh40 billion debt to the taxpayer.
The story of how Mr Jirongo has ended up in such a large debt is a complex one, but it appears to revolve around his involvement in a number of controversial deals.
The collapse of Postbank Credit Ltd
When Kenya was struggling to make ends meet in the early 1990s, Mr Jirongo took out a series of loans from Postbank Credit Ltd, a state-owned bank. These loans, totaling billions of shillings, were largely used to finance Mr Jirongo’s personal projects, including an ambitious but ultimately failed real estate venture.
The loans began to put strain on the bank, and when Kenya’s budget deficit grew to Sh2.7 billion in the 1993/1994 financial year, Postbank Credit was left with no choice but to collapse. This had devastating consequences for the Kenyan economy, and Mr Jirongo was largely blamed for the disastrous turn of events.
For a while, it seemed like Mr Jirongo was untouchable. He chaired the Youth for Kanu 1992 (YK-92) campaign group that had successfully campaigned for President Daniel Arap Moi’s re-election a year earlier. He seemed to have the ear of the president and was seemingly above the law. However, in 1993 his luck ran out when it was discovered that the land he had been using as collateral for loans was actually public property that could not be auctioned off to repay the debt. This revelation brought Mr Jirongo down from his perch and showed that even the most powerful people are not above the law.
In 2014, one of businessman Jackson Jirongo’s companies, Offshore Trading Company, borrowed Sh1.1 billion from Postbank Credit. To secure the loan, Jirongo used a 1,000-acre piece of land in Nairobi’s Ruai area as collateral.
The following year, another of Jirongo’s companies, Sololo Outlets, applied for a loan of Sh1.65 billion from the same bank. To secure this loan, Jirongo used a title deed for a 2.5-acre piece of land in Mukuru kwa Reuben, Nairobi County.
The Sh40 billion Jirongo debt
Neither of the two loans has ever been repaid, and their interest has left Mr Jirongo with a Sh40 billion debt.
The first loan of Sh1.1 billion was taken out in the 1990s, and according to court records filed by the Kenya Deposit Insurance Corporation, it has now ballooned to over Sh20 billion. This is because, at the time Mr Jirongo borrowed the money, Kenya had not yet enacted the ‘in duplum’ rule, which prohibits the growth of interest rates beyond the amount borrowed. Consequently, the interest rates on the loan have been steadily accumulating over the years, leaving Mr Jirongo with an increasingly heavy debt burden.
Since the early 1990s, a total of 17 banks in Kenya have collapsed due to non-repayment of loans by politically connected individuals. These individuals have borrowed a total of more than Sh 80 billion, which has left a significant financial burden on the Kenyan economy.
The collapse of these banks has not only had a negative impact on the financial sector, but has also resulted in the loss of billions of shillings saved by hard-working Kenyans. This has in turn triggered an economic crisis, with serious implications for the country as a whole.
The Deposit Protection Fund (DPF) was appointed receiver manager, and later liquidator, of Postbank Credit. Part of its mandate was to recover unpaid loans. The DPF has since been replaced by the Kenya Deposit Insurance Corporation (KDIC), which is liquidating Postbank Credit and holds title deeds for both properties.
The DPF’s efforts to recover unpaid loans from Postbank Credit have been ongoing since the bank’s collapse. However, the KDIC has now taken over these efforts, and is working to sell off both properties in order to recoup some of the unpaid loans.
The Brick wall
The Kenya Deposit Insurance Corporation (KDIC) was chasing after Mr Jirongo’s debts when they hit a brick wall. They found out that the land in Ruai actually belonged to the Nairobi Water and Sewerage Company (NWSC), but the title deed had somehow been transferred to Mr Jirongo and his network of companies. This created a problem for the KDIC, as they were not able to recover the debts that Mr Jirongo owed.
In 1986, the Kenyan government owned 13,000 acres of land in the town of Ruai, with the intention of expanding the Nairobi Water and Sewerage Company’s treatment plant. The goal was to help the plant keep up with the city’s rapidly growing population. The land was subdivided and registered to Nairobi Water in 1996, but almost immediately thereafter, most of it was transferred to well-connected individuals, leaving the company with only 3,000 acres. Consequently, the treatment plant has not been able to keep up with the city’s needs, leading to widespread water shortages.
In 2018, Mr Jirongo signed a Sh15 billion deal with Sheikh Rakadh Group, a firm associated with the UAE royal family, to put up a city on the Ruai land. The deal, however, fell through after Mr Jirongo asked the Dubai royals for Sh1 billion to pay the Postbank Credit loan and recover the title deed.
The Mukuru kwa Reuben land is also owned by Nairobi County and hosts AEF Reuben Primary School, a police station, a maternity clinic and a vocational centre. But the title deed is registered to Mr Jirongo’s Kuza Farms and Allied Ltd.
The Catholic Church founded AEF Reuben Primary in 1986, on a piece of property that military boss Augustine Cheruiyot would later acquire the title deed for. In 1990, Cheruiyot sold the land to Mr Jirongo’s Kuza Farms and Allied for an undisclosed sum. However, just three years later, Kuza Farms handed the title deed over to Postbank Credit as security for a Sh1.65 billion loan that Jirongo’s other company, Sololo Outlets, had applied for – but failed to repay. As a result, the future of the school sits in jeopardy, as the property it is located on may be repossessed.
The Out-of-court deal
In Mukuru kwa Reuben, all was silent until 2014 when Mr Jirongo sued the school and City Hall, claiming ownership of the 2.5-acre land. He based his claim on the fact that his father had bought the land in 1967 and that he had been paying ground rent ever since.
Despite the fact that Mr Jirongo did not have the title deed, in 2016 City Hall reached an out-of-court deal with the politician that would see him get a Sh250 million one-off payment for the land. The details of the deal caused uproar, with residents accusing the city of selling off public land to a private individual.
But the deal had conditions. Mr Jirongo was to clear any encumbrances on the land, including loans. He was then to ensure that the title deed was formally transferred to City Hall.
In 2019, Mr Jirongo sued City Hall to demand that the Sh250 million be released. But the Postbank Credit loan still remained unpaid, and the title deed was still with the KDIC and registered to Kuza Farms and Allied.
High Court judge Samson Okong’o dismissed the suit and ordered Mr Jirongo to either transfer the title deed to City Hall or get no money.
The Kenya Deposit Insurance Corporation (KDIC) was not involved in the dealings between Mr Jirongo and City Hall. Ordinarily, any money made from dealings with the land should have gone to the KDIC to clear the outstanding loan, which has grown to more than Sh18 billion.
However, after Mr Jirongo got the City Hall payout, he sent money to several influential individuals: Cotu Secretary-General Francis Atwoli (Sh60 million), Pan-African Parliament MP representing South Sudan Albino Aboug (Sh38 million), Mr Murathe (Sh25 million), former Vihiga Senator George Khaniri (Sh5 million) and Mr Marende (Sh3 million).
The Cotu boss held that he received part payment for a friendly loan advanced to Mr Jirongo, which is part of a court-ordered award. He had advanced Mr Jirongo a Sh100 million loan that the latter was unable to repay, prompting a court case that Mr Atwoli won.
EACC summoned Mr Murathe to explain the purpose of Sh25 million he received from Mr Jirongo on July 23, 2020.
Mr Murathe denied knowledge of the land deals that have put Mr Jirongo in trouble and maintained that the funds he received were to settle a debt the former Lugari MP owed him.
The 2020 payment that Mr Murathe explained was part of a Sh 60 million debt that Mr Jirongo owed him. Mr Marende said that the funds he received were in relation to legal fees for a client that he represented. Before the 1993 loan, Mr Jirongo had obtained a Sh50m loan from Postbank Credit in 1992.
At the time, the politician was buying a piece of land from another company, Soy Developers. He had paid Sh10 million, half the price, as a deposit and presented the land’s title deed to Postbank Credit and borrowed Sh 50 million. Mr Jirongo defaulted and Postbank Credit’s receiver manager auctioned the land to ASL Ltd.
In 2013, two women attempted to file a criminal complaint against Kenyan politician Cyrus Jirongo for sexual assault. However, their case was thwarted by the Kenyan Supreme Court, which ruled that there had been an unnecessary delay by authorities in bringing a criminal case. The court ruled that Jirongo would be disadvantaged in defending the suit because several crucial documents had since been lost.