How British, Israeli firms ended plans to build KICC phase two

The Sunday Nation can now reveal British-Israeli tender war that marred the planned construction of phase II of the Kenyatta International Conference Centre in 1969.

The lucrative contract pitted Solel Boneh, which was owned by the Israeli labour organisation Histadrut, against Kenya Construction Company (KCC) which was a 50-50 partnership between Kanu and John Howard Ltd of Britain.

The founder of John Howard Ltd was Sir John Alfred Golding Howard, an Australian-born British civil engineer and a conservative politician, who was once described by a leading British newspaper as “one of the last great construction pioneers”.

His company was involved in the construction of some of Britain’s most iconic bridges, and in Kenya its subsidiary, John Howard Africa Ltd, was the main contractor for the Kahawa Barracks project in the early 60s.

BOARD MEMBER

On its board was Humphry Berkeley, another British conservative politician known for his strong support for the legalisation of homosexuality and his vast business interests in Africa.

He could smell business opportunities from far and hobnobbed with African nationalists, among them Patrice Lumumba, with the aim of getting contracts when their countries eventually attained independence.

However, when he hosted Kenneth Kaunda in London at a time when Zambia was still under Sir Roy Welensky, who was trying to establish a federation, he was forced to resign from the board of John Howard Africa for almost two years before he was reinstated when Zambia got independence.

In Kenya, Berkley befriended Joseph Murumbi, the Kanu Treasurer and a former minister and Vice-President, who he convinced to join him the board of the newly created KCC.

PHASE TWO FUNDING

His influence was evident when, after the completion of Phase I - which had been undertaken by Solel Boneh - President Jomo Kenyatta personally wrote to KCC to submit tender for phase II of the architectural marvel.

Berkley, although representing John Howard on the board of KCC, hoped to raise funds for this project through his own company, Investeco Ltd, which he had formed to invest in Africa and on whose board he had also appointed Murumbi.

It is also worth adding that Investeco also created a subsidiary called Kenyavillas, which provided fully furnished beach villas to tourists on the Kenyan Coast.

Back to the KICC project in which Berkeley had already found a lender who was ready to put in £1.7 million at a rate of 8.5 per cent over 25 years, and hoped to raise an additional £500,000 from locally represented British banks at similar rates.

REVENUE

On this basis he claimed that Kanu investment trust, which was to own KICC, would net approximately £160,000 a year after repayment of interest and principal.

These estimates were strongly disputed by officials at the Kenyan Treasury, who argued that the government would be forced to rent office space at inflated rates.

Officials from the Ministry of Public Works and an independent local valuer had both produced assessments, which showed that the estimates would result in insufficient gross revenue to meet amortisation costs.

James Hyland, the local manager of the KCC, attempted to refute this conclusion but his defence suffered setback when the original lender who had agreed to give £1.7 million withdrew the offer.

It was feared that in case it was reinstated then it would be at a higher interest rate.

While the negotiations were still ongoing, the Israelis made a counter-offer for the project through James Gichuru - the Minister for Finance who had become one of their pointmen.

COUNTER-OFFER

With a worth of around £2.5 million, according to the British estimates, the KICC contract was not only lucrative to the KCC, but also beneficial to Britain since £750,000 were to be British exports.

So there was no way its directors were going to let the rug to be pulled from under their feet.

They requested the British Foreign and Commonwealth Office to step in, arguing that their own offer was better and that acceptance of the Israeli proposal would be purely politically motivated since Solel Boneh already had substantial contracts in Kenya.

To this end, Lord Robert Stewart, the British Foreign Secretary, telegrammed the British High Commission in Nairobi:

“We undertook to let you know of the development and to ask you to lend their local manager, Mr James Hyland, who will be getting in touch with you, any advice and assistance you think proper.”

Consequently, Mr R.W. Munro, the Deputy British High Commissioner, met Hyland and advised that UK Export Finance Government Agency should be consulted and financial proposals raised as quickly as possible to achieve the most favourable terms to counter the Israeli offer.

LOBBYING

It was also considered most important that maximum UK content should be included in the financing offer.

Although this had initially been put to £750,00, it was now being estimated in the tune of over £1 million

Munro further advised that “maximum pressure be exerted by the local Directorate of Kanu Investment Trust to have the Israeli offer brought in the open and discussed”.

Acting on the advice, Murumbi wrote a letter to then Vice-President Daniel Arap Moi urging that a final decision on the contract should be reached as soon as possible.

But while this letter was being delivered on July 3, 1969, an Israeli delegation was found sitting in Moi's boardroom.

This delegation was led by Israeli Foreign Minister Abba Eban who had arrived in Nairobi under the guise of a three-day goodwill visit but with the definite aim of lobbying for Solel Boneh.

With the fate of KCC almost sealed, its directors made attempts to reach Gichuru, but he couldn’t be located.

MBOYA KILLED

Two days later, Tom Mboya, who had opposed the KCC, was assassinated in Nairobi.

Although it might be farfetched to link his assassination to the tender war, the presence of Solel Boneh in Kenya could be linked to his honeymoon in Israel in January 1962, when he entered into an agreement with Israel on the formation of a construction company which was to bear almost a similar name.

The company, which was to be called the Kenya National Construction Company, was to be a joint venture between the Kenya Federation of Labour, which was to own 51 per cent, and Solel Boneh, which was to own 49 per cent.

The aim of the company, as stated in a memorandum of agreement prepared in 1962, was:

“To strengthen the economy of the country, to help solve the housing problem, whilst at the same time aiming to improve the standard of skill and technique as well as economic and social conditions of African labour in the building and civil engineering fields in Kenya, particularly taking into account the imminent establishment of Kenya as an independent state, …. and without competing with small contractors or undertaking contracts usually undertaken by such small contractors.”

MBOYA TRIP

Mboya would later return to Israel in August 1962 on the same mission during which he sat with officials of Histadrut from night until the early morning of August 11, to put the finishing touches on the final agreement.

However, with his exit from the trade union movement, and as a result of the internal politics within Kanu and the involvement of the British, the idea fizzled out.

The quick formation of the KCC by John Howard and some KANU officials just after the Israelis had finished the construction of phase I, was part of a wider plot by the British to lock out Israeli companies as both countries manoeuvred for business opportunities in Kenya.

This was captured in a confidential letter written on Jan 29, 1969 by the British High Commissioner to Kenya Sir Eric Norris that read:

“Given that the Israelis often set in a manner detrimental to our interests when they infiltrate into African countries, our aim should be to hold them as far as we can to their present position in Kenya.”