With each and every passing day Mwalimu Mati's Mars Group continues to tarnish its own name and his by peddling lies and propaganda.

Almost a month or two ago they published wild allegations against Treasury in which they claimed the fiscal body could not account for Kenya Shilling 714 billion.

Sh 714 billion????? Yeah right. Next I'm sure they will tell us that Treasury has even lost its name. Probably even its offices.

How can someone make such wild allegations and get away with it? Are they donning their 'civil society' name to get away with lies?

On Wednesday they continued this trend of making wild allegations by claiming that the budget has a Sh 251 billion mathematical error.

What's worse is that guys ate up this lie.

This group either knows nothing about finance and accounting or it is deliberately trying to fill us with lies.

How can you cook up an explanation concerning deficits and surpluses if you know nothing about them.

Who said you cannot have a deficit and a surplus within the same budget?

It is a simple matter of basic budgeting theory.

The Budget has two components, namely recurrent expenditure and development expenditure.

Recurrent expenditure is the money set aside for wages, salaries, and emoluments and for running and maintenance of already existing government institutions.

Development expenditure outlines expenditure on new capital and social infrastructure.

Finance minister Uhuru Kenyatta proposed to spend Sh1,155 billion on both recurrent and development expenditure during the fiscal year 2011/12.

Of the total budgeted expenditure, Sh754.4 billion will go to recurrent expenditure.

The remaining Sh398.6 billion will be for development expenditure.

These two components of expenditure have to be funded or sourced from somewhere.

The main sources of government revenue consist of direct taxes on individual and corporate incomes, taxes on goods and services, capital gains tax, inheritance tax, among others.

From these sources the minister expects to raise 787.6 billion shillings.

Simple arithmetic will tell you that he intends to spend more on the two components of expenditure than his estimated revenue collection.

After making provisions for other adjustments such as debt servicing, redemptions etc, this leaves him with a total deficit of Sh236.2 billion.

It is important to distinguish between the Operating Balance and the Fiscal Balance.

The operating Balance is composed of recurrent spending and current taxation.

the fiscal balance adds development spending on public infrastructure to the operating balance.

So looking at the current budget, you will find that government revenue more than covers the recurrent expenditure.

In fact in the unlikely scenario where the minister decided to spend nothing on development, he would have balanced his books at the first level and left with a cool Sh33 billion.

This forms part of the budget surplus that Mwalimu Mati would have us believe is erroneous.

The figures in the annex of estimates of revenues for state corporations presented to Parliament shows that there will be a total income of Sh610 billion.

With such conservative estimates of revenues the budget surplus could theoretically be even larger than the Sh87 billion indicated in the annex.

This will largely be determined by what KRA actually collects as opposed to what it has forecast to collect.

By spending another Sh399 billion on capital expenditure the budget ends up having a deficit.

His claim of there not being a surplus in the budget but a Sh163.8 billion deficit is erroneous in both structure and theory.

The deficit exists hand in hand with the recurrent expenditure surplus.

Logically one spends his income on consumption and his borrowing for development.

It would be unwise to spend borrowed money on day to day items and that is why tax revenue is preferred in financing recurrent expenditure.

It would not be good if any part of the recurrent expenditure was going to be funded through borrowing.

Capital expenditure is not necessary but it is wise to spend on development.

In fact in the unlikely scenario where the minister decided to spend nothing on development, he would have balanced his books at the first level and ended up with a
surplus in our national coffers.

We cannot afford not to set aside capital investments because we need development projects to grow our economy and create jobs.

Now according to Mati it is impossible to have both a surplus and a deficit in the same budget.

From the above it is obvious that Mwalimu Mati is wrong and knows nothing about the budgeting process.

It is a typical mistake made by those not schooled in economic theory but Mwalimu Mati has taken it too far.

To add insult to injury Mati goes on to point his finger at the KenRen saga which is almost as old as the Minister for Finance.

Those who have been around for sometime now know that the story began long before this budget.

Actually the Government under Moi tried to defy these creditors and failed.

In fact it failed to stop these payments before various courts.

Now Mwalimu Mati has personalized the budget preparation by ascribing it solely to the Finance Minister and all this in an effort to vilify the Minister.

Why is Mwalimu Mati trying to turn the KenRen issue into a personal problem of the sitting Finance Minister when it is a matter the government has already gone to court for?

If only the likes of Mwalimu Mati could divorce their political scheming from the serious budgetary issues the country must face regardless of who they support for the Presidency.

Let no one be deceived. This is about politics and not about the budget. Mwalimu Mati is just a pawn receiving money from someone to tarnish the name of Uhuru because of his 2012 Presidential ambitions.

How else can you explain the fact that according to Mati and his Mars Group, Treasury has now misappropriated Sh 714 billion in May, Sh 251 billion in June and some other billions here and there?

Logically all these amounts sum up to more than a trillion shillings. Sh 1 trillion. Sh 1,000,000,000,000. Now this is just stretching the truth too far.

Barclays Bank which in my view is the leading bank in Kenya is holding customer deposits that amount to Sh 124 billion.

Where then is all this money that Mati is referring to stashed?

How come world renowned auditing firms such as PWC, Deloitte, KPMG and Ernst & Young never saw these errors when they analysed the budget?

Is Mwalimu Mati financially superior to these accounting powerhouses?

Is Mati's Mars Group more professional than these international auditors?

Where is Mati's analysis? What analysis did he do? Are there even any credible financial institutions that are backing his claims?

Mati's credibility is fast waning. I personnaly feel that he actually has none left.

He has peddled us with lies over the last three or so years and hasn't relented even after the Finance Minister was cleared by Parliamentary Committees of wrong doing.

Lobby groups are meant to fight for the rights of citizens and not engage in degredatory partisan politics by peddling lies.

If the likes of Mars Group are the ones lying to us then who will ever tell us the truth?

Mwalimu Mati and his Mars Group have no shame whatsoever.

I think it is high time that such reckless behavior is punished. Someone should sue Mwalimu Mati and his Mars Group just to teach him that under law defamation and libel are crimes.

I am not the one who was aggrieved.

Kenren allocation????>....indeed hot air!!!!

....when is UK sueing him???

Since you are fond of copy pasting without giving us a link to show us how sharp you are see this

Here is a taste of your own medicine

http://shiundu2010.blogs...just-plain-blatant.html

Read through to the end , the same way you have made us to do


This KenRen thing is just plain, blatant theft of taxpayers' money
Folks, bear with me. I am a journalist and ought to have picked the payments to KenRen moments after the Budget was read. I did not.

It is a story I have covered in the hearings of the Public Accounts Committee report on the government accounts in the fiscal year 2007/2008. So this is going to take long to read, but if you want to understand the real issue, be my guest (in a good way).

Since then, I have followed it keenly, trying to see exactly if the shameless theft of money under President Kibaki's government will go on. Thank God for people like Mwalimu Mati for pointing that out to me.

We met at Parliament's County Hall where he'd come before the Budget Committee, to really tell them about the theft of public funds. It is an item under Public Debt in the Consolidated Fund Services. Just check page 16 on this Treasury link and confirm that this guy knows, a lot of times, what he's talking about.

So, when I asked him, how come I couldn't pick it up, he said, well, you just have to be patient, because "these things are always hidden in there."

The truth of the matter is that the KenRen deal was hatched in 1975. The fertiliser factory was meant to be built in Changamwe in Mombasa. But up to now, it does not exist. KenRen itself went under and because the government had guaranteed loans, well, it was put in problems.

The PAC chaired by the bullfighter MP Boni Khalwale raised these issues. But this is what I will tell you, President Moi, for a whole 24 years refused to pay these people. But then, when he was about to leave power, things happened, and as it turned out, well, we'll be paying the money until 2015.

My beef is that the Treasury, against a House resolution to have the payments stopped, has gone ahead to include the payments in this year’s Budget, even as it emerges that the government has already been ripped of Sh1 billion. Just check the PAC report.

“It is not a breach of contract. This is a case similar to the Angloleasing case. If we don’t punish the people who brought us into this mess, then we won’t have a new beginning,” said Mr Mati, urging the government to stop the theft.

In 1975, the Kenya Government entered into a joint venture with an American firm known as N-Ren to establish KenRen Chemical and Fertilizers Limited which was to manufacture fertiliser for domestic and export markets. KenRen entered into several financing and equipment procurement contracts with Austrian and Belgian banks and suppliers with Government of Kenya as the guarantor.

The banks involved were Banque Bruxelles Lambert (BBL) and Office of National Du Ducroire of Belgium and Bank Fur Arbeit Und Wirtschaft (BAWAG) of Austria.


The suppliers were Coppee Lavalin of Belgium and Voest Alpine of Austria. No equipment was delivered to KenRen except for some crates whose contents were not verified. The project collapsed and KenRen went into liquidation in 1978.

Though no goods or services were supplied, the foreign banks involved claimed to have paid the suppliers in full and were therefore owed money by KenRen as per the signed financing agreements. As KenRen never actually commenced business, the government as the guarantor became liable for the debt.

The banks and suppliers sued the Kenya Government in the International Chamber of Commerce Court of Arbitration. A total of five cases were filed in London, Paris and Cyprus.
The London courts ruled that “Kenya was a victim of deceit” by Voest, one of the suppliers, and awarded the government USD 3 million (Sh240 million).

Voest declined to pay and rushed to a Cyprus court where it obtained a ruling in its favour that was to see the government pay Sh2.4 billion (Austrian Schilling 300 million). The government panicked and rushed to Brussels to August 2000 to work out an amicable solution to the court cases.

The question on this matter is why the government saw it fit to cut a deal on the Cyprus ruling yet it was not an appeal on the London ruling. What the Treasury could not explain –and what Parliament keeps wondering—is why Kenya was paying the money yet it had won a suit cushioning it from paying the supplier.

*****************

In 1988, the Belgium financiers, Banque Bruxelles Lambert (BBL), and Office National Du Ducroire (OND) instituted proceedings at the International Chamber of Commerce (ICC) against the Government of Kenya for failing to honour its obligations as the guarantor of the loans. The Plaintiffs were claiming USD.42 million (Kshs.2.9 billion) from the government.

Five other court cases were instituted against the government in London, Paris and Cyprus. In one of the London court cases, the court ruled that Kenya Government was a victim of deceit by one of the suppliers, Voest, and awarded the Government USD.3 million which Voest declined to pay.

In Cyprus, Voest was awarded ATS.300 million. In an attempt to work out an amicable solution to the court cases, a Government of Kenya delegation held discussions in Vienna on 23rd to 25thAugust, 2000 at which some proposals were agreed on. Subsequently, Lazard Frere was retained by the Government to assist in the negotiations. GoK commissioned Freshfields, a UK firm of lawyers to defend it in court cases.

In the year 2000, the Government of Kenya faced economic difficulties and approached the Paris Club creditors for debt rescheduling. The Austrian Government, a member of the Paris Club intervened and insisted that an amicable solution be reached and signed before the Paris Club could consider Kenya’s request for debt rescheduling.

An agreement for Euro.16,635,156.16 rescheduling was signed between Kenya and Austria whose terms among others were that the loan be repaid over 11 years commencing in the year 2003 at an annual interest rate of 1.5%;

On 6th November 2002, the ICC Court of Arbitration gave an award in favour of BBL and OND for EURO 21,181,992.00 (close to Kshs.72 billion) against the Government of Kenya. In addition, the Government was to pay BBL USD.87,500.00 (close to Kshs.6, 825,000.00) being reimbursement of arbitration costs.

A Kenyan government delegation travelled to Belgium on 23rd October 2003 to negotiate for restructuring the terms of the debt. The outstanding amount inclusive of accrued interest was Euro.34,837,548.00 plus the USD. 87,500.00 legal fees.

The terms of the negotiation were as follows:-

• 20% reduction amounting to EURO.2,732,512.00 thus effectively reducing the amount to EURO 32,207,210;

• An up-front payment of EURO.1,500,000.00 plus US.$87,500 before 31st December 2003;

• Balance of EURO 30,707,210.00 to be rescheduled over a repayment term of 13 years including 3 years grace period;

• Applicable interest rate was Euribor 6 months plus 0.5% margin to be fixed after every six months.

Regarding the Austrian part of the debt, the Government of Austria intervened to ensure that the debt was recognized as part of the 2000 rescheduling under the IMF/World Bank administered PRGF program, which the Government of Kenya was implementing. With regard to the Belgium portion of the loan, the award was through an Arbitration Tribunal and subsequent negotiation to restructure the debt by the Government reduced the initial award.

The government was of the view that it had been defrauded in this matter and that’s why it had initially refused to pay. However, since valid agreements had been entered into and Arbitration Tribunals had ruled in favour of plaintiffs, the government had no choice but to pay.

*******

*FROM THE TREASURY OF KENYA

That is what the Treasury will tell you. It is what it told Parliament. Now you know. What are you doing about it?

Complex. But from what I get the GOK(Guarantor for Ken Ren) got into contracts with suppliers and financiers.The financiers claim to have paid the suppliers in full. Suppliers supplied noting but pocketed the money anyway. Financier rush to court to get their money back. MO1 says ngo' silipi.Fast foward to Kibaki Era. GOK agrees to pay. But one of the suppliers refuses to refund the money. If the suppleirs can refuse to refund why can't GOK also simply kaa ngumu or also try to go after their money?. It stinks to the high heavens.

To other matters? Why did treasury pay Ksh 147 million on some anglo leasing deals. And the payment was not receipted anywhere? A whole 147 m!!!!

There's a hole in the bucket, dear Liza, dear Liza,
There's a hole in the bucket, dear Liza,
There's a hole.

Then fix it dear Henry, dear Henry, dear Henry,
Then fix it dear Henry, dear Henry, fix it.

With what should I fix it, dear Liza, dear Liza,
With what should I fix it, dear Liza, with what?

With a straw, dear Henry, dear Henry, dear Henry,
With a straw, dear Henry, dear Henry, with a straw.

But the straw is too long, dear Liza, dear Liza,
The straw is too long, dear Liza, too long.

Then cut it dear Henry, dear Henry, dear Henry,
Then cut it dear Henry, dear Henry, cut it!

With what shall I cut it, dear Liza, dear Liza,
With what shall I cut it, dear Liza, with what?

With an ax, dear Henry, dear Henry, dear Henry,
With an ax, dear Henry, an ax.

But the ax is too dull, dear Liza, dear Liza,
The ax is too dull, dear Liza, too dull.

Then, sharpen it, dear Henry, dear Henry, dear Henry,
Then sharpen it dear Henry, dear Henry, sharpen it!

With what should I sharpen it, dear Liza, dear Liza,
With what should I sharpen, dear Liza, with what?

With a stone, dear Henry, dear Henry, dear Henry,
With a stone, dear Henry, dear Henry, a stone.

But the stone is too dry, dear Liza, dear Liza,
The stone is too dry, dear Liza, too dry.

Then wet it, dear Henry, dear Henry, dear Henry,
Then wet it dear Henry, dear Henry, wet it.

With what should I wet it, dear Liza, dear Liza,
With what should I wet it, dear Liza, with what?

With water, dear Henry, dear Henry, dear Henry,
With water, dear Henry, dear Henry, with water.

But how shall I get it?, dear Liza, dear Liza,
But how shall I get it?, dear Liza, with what?

In the bucket, dear Henry, dear Henry, dear Henry,
In the bucket, dear Henry, dear Henry, in the bucket!

But there's a hole in the bucket, dear Liza, dear Liza,
There's a hole in the bucket, dear Liza, a hole.
There's a hole.

Yesterday I tried to explain to guys here on wazua that I felt Mwalimu Mati and his Mars Group are peddling lies but guys tried to explain away my explanation. Here is the response from Treasury. Now try to explain it away.

http://www.scribd.com/do...ertion-by-the-Mars-Group

Kenya 1 - Sudan 2

we lost but it was a good game.

http://www.scribd.com/do...ertion-by-the-Mars-Group

No, @Impunity, watch your language.

@Njugunajohn has given evidence to prove his point and your response is to insult him. Now tell me who is the sick one!

Another one from Marsgroup...linking UMK with Moongeeki

http://blog.marsgroupkenya.org/?p=2932