How Kamlesh Pattni and Ketan Somaia drove Marshalls down the drain

Once upon a time, in 1937, a settler farmer in Subukia had a vision of building one of Africa’s largest motor vehicle companies – but in between, and later on, the company was acquired by a now convicted thief, Ketan Somaia and the Goldenberg fraudster Kamlesh Pattni, who drove it down the drain.

This week the remaining shareholders of Marshalls East Africa approved its exit from Nairobi Securities Exchange (NSE), hoping to revive its fortunes and drive it back to profitability.

In the next few weeks, the company will stop being a listed company and become a private enterprise – and we may not hear any more about the tales and intrigues that have bedevilled this firm.

The story of Marshalls is the story of motoring and politics in Kenya.

Once upon a time, Marshalls East Africa was synonymous with the Peugeot brand with its lion trademark.

COFEE BOOM

Not any more. Nairobi oldies tell me that there was a time when owning the French-manufactured Peugeot was the in-thing for local respectables and any middle-class pretender in Kenya – and that during the coffee boom of the 1970s many farmers acquired the Peugeot 504 Coupe and the subsequent Pick-Up which dominated the matatu industry before the entry of the 14-seater Toyota and Nissan brands.

It was this competition that forced Peugeot to close down its Kenyan plant and relocate to Nigeria. Now, Peugeot is back in Kenya with a manufacturing plant – but this is not about them.

There was a time, thanks to Marshalls, that Peugeot was also the official police car – besides the legendary Land Rover.

But the adoption of Peugeot as the police car followed questions in parliament in 1964 on why the government was still buying Land Rovers – even for city runs – when there were cheaper Peugeot models in the market.

WOOING MINISTERS

Before DT Dobie started wooing ministers with their Mercedes models, Marshalls used to provide cabinet ministers with the official cars.

Let me digress, a bit.

The era of extravagance and avarice began when Nairobi Mayor Charles Rubia sought to buy a Rolls Royce in 1966 for Sh200,000, provoking the wrath of Parliament at a time when Parliament thought he should have gone to Marshalls and bought a Peugeot 404.

It is an interesting story though. When Ronald Ngala raised the matter in Parliament, he said he was “thoroughly fed up and disgusted by the Nairobi City Council and the government” for approving that purchase of a Rolls Royce.

“This expenditure is a gross, careless squandering of public money… the money could feed seven people for 120 years…. the money could feed 50 people for 32 years… it could buy a helicopter for the use of the country,” said Mr Ngala.

MATERIAL HAPPINESS

“I would advise Alderman Rubia to read and study Roman history including the story of Emperor Nero and Julius Caesar. These people wanted material happiness, and used threats and misused public funds. In so doing, they destroyed their own empires.”

Parliament was being told that in other countries, mayors were driving Mercedes cars which cost Sh40,000.

Said Mr Ngala: “If the Mayor of London, from where we get our loans, is not so pompous and wasteful, how dare you allow this.”

Mr Ngala also asked the minister for Local Government, Mr Lawrence Sagini, to resign after he claimed to have been forced to sign the deal for the Rolls Royce.

“I think this is a serious scandal… is the minister being ruled by the mayor? I challenge him to resign if he was pressed against his will, either by the Mayor or the President of Kenya… the government is starting a very dangerous precedent, this is daylight robbery of taxpayers money.”

GATES OF EXTRAVAGANCE

Members suggested that the government should go to Marshalls and buy the Mayor a Peugeot 404 since the ministers had already bought Mercedes, advice that was not heeded.

That is how the gates of extravagance were opened.

Back to Marshalls, the company had been founded as a food company in 1937 in Croydon, England – perhaps the reason at one time they had an interesting subsidiary – Kenya Orchards Ltd which is a fruit and vegetable canning company still listed in Nairobi.

That was before Fred Harris, the Subukia farmer, approached a fellow British MP and serial investor Sydney Marshall and asked him to put in capital and they started what became Marshalls East Africa.

The company was to only serve the settler community and that is why its first branch was opened in 1948 in Nyahururu (then Thompson Falls) where they specialised in selling German-made Hanomag farm tractors before getting the franchise to sell Peugeot 202.

EPIC TRACTORS

Some shells of these epic tractors are still found in some Rift Valley farms – a reminder of the pioneer days of Marshalls when Mr Harris was the face of the company.

The company expanded to Nairobi and they built their new headquarters – Marshalls House, the building along Nairobi’s Harambee Avenue and next to Police Headquarters.

The firm also opened new showrooms in Kitale, Mombasa and Nanyuki.

In the 1970s, it also gave birth to a new company, Doughty Limited which was handling the Honda franchise.

These were the days when firms enjoyed monopolies and only authorised dealers would import motor vehicle spare parts.

LIVING AS MECHANICS

But even with that, mechanics in Nairobi’s Kirinyaga Road had opened backyard shops of motor vehicle components to the chagrin of the likes of Marshalls.

Some of these mechanics had a history and had been dumped here – in what was known as City Carton - after World War II.

They started to eke a living as mechanics there and made the modern-day Kirinyaga Road the hub of motor vehicle dealers.

But Kirinyaga Road, then Grogan East Road, was more than that.

All stolen vehicles in Nairobi ended up here where they were dismantled for spare parts.

It was only after independence that Charles Njonjo, then Attorney General, tried to close down all those “Grogan Road” garages in 1964 by introducing the Motor Vehicles Components and Accessories Bill.

OUTLAW GARAGES

He wanted to outlaw those garages because they had become a den of car thieves and some of them operated at night.

Njonjo earned the support of the Assistant minister for Internal Security and Defence, Dr Munyua Waiyaki, who told the House that if the country didn’t tame the proliferation of these informal garages, car thefts would spiral out of control in this country.

“If you miss your car at about 10 o’clock this evening and you wake up very early and borrow somebody else’s car and drive to Grogan Road you will meet your car being driven (there)… I have tried to prosecute both the thieves and the receivers and it has become almost impossible because it is a thriving trade and both the receivers and the thieves are working in concert,” Njonjo told the House.

But Njonjo had other interests too in the motor vehicle industry and together with other senior government officials including Bruce Mackenzie, the minister for Agriculture, they had become boardroom boys and shareholders of the British-owned motor companies.

SPARE PART BUSINESS

They also had shares in companies such as Cooper Motors Corporation, later CMC.

That could explain why 50 years ago, Njonjo wanted to make it difficult for the second-hand spare part business to thrive and all garages were to close at 6.30 pm and open at 6.30 am.

The garage owners and the mechanics were also accused of being “responsible” for the many thefts of car parts in Nairobi.

Then Nairobi North-West MP Fitz Remedios de Souza said as much. “They do not steal themselves, but because of the ready market they provide to the thieves they are in fact responsible for the theft of motor-cars and accessories.”

Parliament discussed Njonjo’s Bill for four months.

WATERED DOWN

It was however watered down at the Senate which said it would be cumbersome to register every piece of nut and bolt and that in some special cases of emergency, spare parts could be sold after 6.30 pm.

In order to protect the big companies such as Marshalls, the government decided to demolish the shanty City Carton villages by the banks of the Nairobi River and as a sympathetic gesture, they decided to give them plots in what became known as Huruma.

But the business never died and although Parliament had passed the Motor Vehicle Components and Accessories Act of 1965 which had given the minister powers to declare what car parts could not be sold at night, there was little effort to stop the business.

Marshalls like other major companies thrived on government tenders earning hundreds of millions by supplying government vehicles.

BIGGEST MOTORING COMPANIES

It was at one point one of the biggest motoring companies in the region.

In 1985, Marshalls Universal PLC decided to sell the company for Sh55 million to a Nairobi businessman Sadrudin Alibhai, best known for his Golden biscuits enterprise.

By this time the company held several franchises: Volvo, Honda and Peugeot.

Alibhai had a dream. By 1987, he reported that the Peugeot models were still in high demand and that Volvo trucks were being affected by import license shortages.

But then the World Bank and IMF started pushing for the liberalisation of the economy and Asian businesses were becoming the “target of extortion by politicians” according to historian Charles Hornsby.

POWERFUL PS

It is not surprising that in 1988, Alibhai sold his company to Ketan Somaia, a 26-year-old Kisumu shopkeeper who was being used as a front by Hezekiah Oyugi, the powerful permanent secretary for Internal Security.

Mr Oyugi’s father had been employed as a “houseboy” in Somaia’s family.

That is how Marshalls ended up in the hands of Somaia through the Dolphin Group which was winning tenders to supply vehicles to the military.

Some of these were the Peugeots bought for military officers – earning him a fortune.

At one point, British tycoon, Tiny Rowland – who owned the Lonhro Motors – complained to Moi that Mr Somaia had shown him signed procurement forms with the spaces for the prices left blank for him to put the figures.

ENTERED INTO DEAL

That same year, he entered into a deal with the government to revive Miwani Sugar after the exit of the Hindocha family.

Somaia had arrived in Miwani in 1988 with a classic tale of how he would settle the Hindocha debts to AFC. But interestingly, he did not pay a cent.

From the eighth floor of Dubai’s Arbift Tower, a 23-storey building facing Dubai creek and now known as Al Masraf Tower, Somaia managed his Kenyan acquisitions including Marshalls.

Here, he lured British-billionaire Murli Mirchandani who gave him Sh2.3 billion without any paperwork.

It was part of the money that was to be invested in Miwani’s revival – and it was the deal that saw him jailed in the UK.

POLITICALLY CONNECTED

He and Kamlesh Pattni, a fellow politically connected con - had lured an Indian Shipping magnate Swapan Sadhan Bose, popularly known as Tutu Bose to put some money into their outfits.

The two had used Marshalls as a conduit to transact dubious transactions using its shares to get money from banks in complex transactions that intrigued other shareholders.

At one point, Mr Pattni, who is the architect of the Goldenberg scandal, transferred shares worth Sh50 million that he held at Marshalls through his company, Marshalls Investment Ltd, and left Oriental Commercial Bank holding worthless ownership documents.

Both Somaia and Pattni had taken a loan from the bank in 1990 and left without paying.

FINANCIAL LOSSES

When this was happening, the firm which has 14.3 million shares issued continued to lose its franchises and started making financial loses. The exit of Peugeot was informed by these dynamics and at the moment, it only handles the Indian brands Tata.

With its exit from the public arena, Marshalls story is part of this country’s motoring history and politics. And when the epitaph is written, if it will one day be, two friends – Somaia and Pattni – will share the blame.

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Last week, I made an error by saying that Rachel Shebesh was the daughter of former Nairobi Mayor Nathan Kahara. Mrs Shebesh, the Jubilee Woman Rep for Nairobi, is the daughter of former Mayor Samuel Mbugua. My apologies to Mrs Shebesh and her family.

[email protected] @johnkamau1