Confusion reigned at the Kenya Tourism Development Corporation after Tourism Minister Najib Balala sacked its board and appointed a new one last week.

The upheaval followed shortly after its chairman, Charles Wachira Ngundo, queried the conduct of the corporation’s chief executive, Obondo Kajumbi, who is said to have actively participated in attempts to sell off some of the corporation’s equity to a Kuwaiti company.

Mr Ngundo had reportedly sought a meeting with Mr Balala to discuss the matter.

Documents made available to The EastAfrican reveal that Mr Balala’s action — which is yet to be formally announced in the Kenya Gazette — came after Mr Ngundo queried not just the conduct of Mr Obondo but also his continued helsmanship at the state corporation while he is allegedly a retired civil servant.

We can also reveal that there appears to have been a tug-of-war between Mr Balala and the KTDC board over its operations. For instance, Mr Balala had overruled a decision made by the board not to buy shares that the Commonwealth Development Corporation (CDC) wanted to sell in an umbrella company that owns the famous Mountain Lodge in Nyeri.

The lodge is owned by the Kenya Safari Lodges & Hotels in which KTDC owns 63 per cent equity, CDC 19 per cent, Mountain Lodges Ltd 17 per cent and the Kenya Wildlife Service one per cent.

When CDC wanted to offload its shares in Kenya Safari Lodges & Hotels, it offered them to KTDC, which has pre-emptive rights. But when its board met on March 12 to deliberate on the matter, it decided not to buy the shares.

This is evidenced in a letter written by Mr Kajumbi on March 31 in which he said, “We held a full board meeting… on March 12, 2008 at which we resolved, as a Board, that the company would not exercise its pre-emptive right to buy the CDC shares in Kenya Safari Lodges Ltd.”

But three months later, Mr Balala was to overturn this decision when he wrote to Actis — a private equity company with links to CDC.

Addressed to Michael Turner of Actis, Mr Balala’s letter says he is aware that KTDC did not exercise its pre-emptive rights when CDC shares were put on offer.

“Belatedly, the government for strategic reasons would like to purchase these shares entirety (sic).”

Mr Balala has now launched a new board. Named on the new board are Farouk Dagar, Abdulalim Swaleh, Amina Kasinga, Said Abdlala, Danga Jafar, Beatrice Gambo and Buyuka Obonyo.

His action is seen as part of a major realignment of the state corporations under his ministry, since he has also constituted new boards at the Kenya Tourism Board, the Kenyatta International Conference Centre and Bomas of Kenya (which is wholly owned by KTDC).

What is not clear is whether by doing this Mr Balala is acting within the law that governs the operations of state corporations. Ordinarily, the heads of the boards of such corporations are presidential appointees while several past circulars from the head of civil service Francis Muthaura gave parastatals a measure of autonomy.

And in an interesting twist to the saga, The EastAfrican has received documents that indicate that the frosty relationship between the KTDC board and its chief executive hinges on the safety of public assets and equity estimated to be worth between Ksh6 billion ($90.9 million) and Ksh7 billion ($10.6 million).

KTDC, one of the country’s richest development finance institutions, was established in 1965 following the enactment of the KTDC Act. It is mandated with providing long-term financing for tourism development on concessionary terms.

Over the years, KTDC has accumulated substantial assets through the construction of its own hotels and lodges and acquisition of shares in international hotel chains.

Today, such assets include Bomas of Kenya and Utalii College and Hotel in Nairobi. Others are Sunset Hotel in Kisumu, Kabarnet Hotel, Kakamega Hotel, Buffalo Springs Lodge, and Mt Kenya Safari Lodges and Hotels Ltd.

KTDC also owns Voi Lodge, Ngulia Lodge and Mombasa Beach Hotel among others. It also owns 34 per cent and 33.8 per cent shares in Hilton Hotel and Intercontinental Hotels in Nairobi respectively. The two are among the most famous and posh hotels in the country and are run separately through International Hotels Kenya Ltd and Kenya Hotel Properties Ltd, respectively.

However, some previous directors of KTDC told The EastAfrican that there are real fears that the assets and equity of the state corporation may no longer be safe.

One of them, who declined to be named, said that there is a standing directive from Treasury for KTDC to offload its tourist facilities and equity as it prepares itself to become a fully-fledged development finance institution.

But he was apprehensive that with the irregular goings on, the impending privatisation may not be handled properly unless Treasury moves to stamp its authority over the matter.

Our attempts to contact Mr Kajumbi were unsuccessful. The EastAfrican called Mr Kajumbi several times on his cellphone. On several of the occasions, we left messages with a man who answered our calls. We also sent e-mail messages to him, through KTDC’s public relations officer Claire Gatheru, with no success.

However, documents in our possession show that Mr Kajumbi spiritedly denied allegations that he was participating in a behind-the-scenes attempt to offload KTDC’s shares in the Intercontinental Hotel. This denial is contained in a letter he wrote to the Permanent Secretaries of Treasury, the Tourism Ministry, and the Ministry of Environment & Mineral Resources as well as to the Attorney General on July 25.

The letter reads, “…the same report alleges that the top management of KTDC was involved in discreet discussions to quietly dispose of the Hotel Intercontinental to Kuwaitis… this is absolutely baseless and without an iota of the truth.”

He continued, “Neither myself nor any member of the senior management has engaged with Kuwaitis or any other foreign investor with a view to selling KTDC equity in Kenya Hotel Properties Ltd.”

Mr Kajumbi was reacting to a report published by The EastAfrican on deliberations between officials of the Intercontinental Hotel Group (one of the partners who jointly own the Intercontinental Hotel) and KTDC’s top management over the sale of the parastatal’s equity in the posh hotel. But since the report was published, Mr Kajumbi has come out to deny knowledge of such discussions.

Nevertheless, we can report that Mr Kajumbi had indeed actively participated in the deliberations on the sale of KTDC’s equity in Kenya Hotel Properties Ltd (KHPL). For instance, according to a letter the latter wrote to the hotel’s director of operations, Karl Hala, on May 26, Mr Kajumbi had indicated that he was willing to table the matter of the sale of the equity before KTDC’s Board.

He wrote, “To enable us to table the matter before our board for consideration, we would appreciate if a meeting is arranged for purposes of affording the participating shareholders/directors the opportunity to discuss the matter with the prospective purchaser.”

His letter bears reference number TDC/4/3 and is copied to Grace Kipyator of Sovereign Trust, Victor Kidiwa of Development Bank of Kenya and Charles Ngundo, the former chairman of KTDC.

The EastAfrican is also in possession of other documents that show Mr Kajumbi had also written to Mr Hala at an earlier date (June 4) telling him that KTDC was willing to sell the shares. The letter reads, “In summary, KTDC is ready to sell its shares (in KHPL).”

KHPL is the umbrella company that owns the prestigious Intercontinental Hotel in Nairobi. Its partners are KTDC, the Intercontinental Hotel Group, Development Bank of Kenya and Sovereign Trust. KTDC owns 34 per cent shares in KHPL

But now, there is a move championed by Mr Hala to have other shareholders offload their shares to a Kuwaiti company, Al Khalafi Group, that has expressed interest in buying the hotel. Seemingly, the board of KHPL — which Mr Kajumbi had been chairing — had met on April 22 to deliberate on the matter.

This is alluded to in Mr Hala’s letter of May 16, which reads, “At the last board meeting held on April 22, 2008, it was agreed that the directors would present the divestment of the shares to their respective boards and come back to us.”

The letter also gives the profile of Al Khalafi Group, saying that besides having a turn over in excess of $3.6 billion, it is owned by Nasser Al Khalafi, who is said to be the 52nd richest man in the world with a fortune of $11.5 billion.

“The Al Khalafi Group is one of the largest general contracting companies in the Middle East (with) businesses (that) range from construction and manufacturing to investment, commerce, tourism and travel,” Mr Hala says.